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Table of Contents

As filed with the Securities and Exchange Commission on May 23, 2018.

Registration No. 333-               


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



FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933

APTINYX 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)
  45-4626057
(I.R.S. Employer
Identification Number)



909 Davis Street, Suite 600
Evanston, IL 60201
(847) 871-0377
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Norbert G. Riedel
Chief Executive Officer and President
909 Davis Street, Suite 600
Evanston, IL 60201
(847) 871-0377
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Mitchell S. Bloom, Esq.
Caitlin L. Murray, Esq.
Goodwin Procter LLP
100 Northern Avenue
Boston, Massachusetts 02210
(617) 570-1000

 

Ashish Khanna
Chief Financial Officer and
Chief Business Officer
Aptinyx Inc.
909 Davis Street, Suite 600
Evanston, IL 60201
(847) 871-0377

 

Deanna L. Kirkpatrick, Esq.
Marcel R. Fausten, Esq.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, New York 10017
(212) 450-4000



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, as amended, 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, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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

Emerging growth company  ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  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

 

Common Stock, par value $0.01 per share

  $80,000,000   $9,960

 

(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 the offering price of shares that the underwriters may purchase pursuant to an option to purchase additional shares.



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 that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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Subject to completion, dated May 23, 2018.

The information in this preliminary 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 preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

               Shares

LOGO

Common stock

We are offering                           shares of our common stock to be sold in this offering. This is our initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. The estimated initial public offering price is between $              and $              per share. We have applied to list our common stock on The Nasdaq Global Market under the symbol "APTX."

We are an "emerging growth company" under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. These risks are described under the caption "Risk factors" that begins on page 11 of this prospectus.

 
   
   
 
 
  Per share
  Total
 

Initial public offering price

  $     $    

Underwriting discount(1)

 
$
 
$
 

Proceeds to us, before expenses

 
$
 
$
 

(1)    We have also agreed to reimburse the underwriters for certain FINRA-related expenses. See "Underwriting" for a description of all compensation payable to the underwriters.

We have granted the underwriters an option for a period of 30 days to purchase up to                           additional shares on the same terms and conditions set forth above.

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

The underwriters expect to deliver the shares to investors on                           , 2018.

J.P. Morgan   Cowen   Leerink Partners   BMO Capital Markets

                           , 2018


Table of Contents

Table of contents

 
  Page

Prospectus summary

  1

Risk factors

  11

Special note regarding forward-looking statements and market data

  67

Use of proceeds

  70

Dividend policy

  72

Capitalization

  73

Dilution

  75

Selected financial data

  78

Management's discussion and analysis of financial condition and results of operations

  80

Business

  94

Management

  156

Executive compensation

  165

Director compensation

  176

Certain relationships and related person transactions

  177

Principal stockholders

  182

Description of capital stock

  185

Shares eligible for future sale

  191

Certain material U.S. federal income and estate tax considerations to non-U.S. holders

  193

Underwriting

  197

Legal matters

  210

Experts

  210

Where you can find more information

  210

Index to financial statements

  F-1

Neither we nor the underwriters have authorized anyone to provide you with information other than that contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The information contained in this prospectus is accurate only as of the date on the front cover page of this prospectus, or other earlier date stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

We and the underwriters are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this 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 applicable to that jurisdiction.

Until                             , 2018, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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Prospectus summary

This summary highlights information contained elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included elsewhere in this prospectus, "Risk factors" and "Management's discussion and analysis of financial condition and results of operations." As used in this prospectus, unless the context otherwise requires, references to the "company," "we," "us" and "our" refer to Aptinyx Inc.

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel, proprietary, synthetic small molecules for the treatment of brain and nervous system disorders. We focus our efforts on targeting and modulating N-methyl-D-aspartate receptors, or NMDArs, which are vital to normal and effective function of the brain and nervous system. We believe leveraging the therapeutic advantages of the differentiated modulatory mechanism of our compounds will drive a paradigm shift in the treatment of disorders of the brain and nervous system.

We are currently studying our first product candidate, NYX-2925, in two Phase 2 studies in chronic pain. The first is in subjects with painful diabetic peripheral neuropathy, or DPN, and the second is in subjects with fibromyalgia. We expect to report top-line data from these studies in the first half of 2019. Our second product candidate, NYX-783, has been evaluated in Phase 1 clinical development. We intend to develop NYX-783 for the treatment of post-traumatic stress disorder, or PTSD, and plan to initiate a Phase 2 clinical study in the second half of 2018. Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an investigational new drug, or IND, application for NYX-458 in May 2018. We intend to develop NYX-458 for the treatment of cognitive impairment associated with Parkinson's disease.

Our discovery platform and approach

Our discovery platform is based on extensive original research into a novel way of modulating NMDArs, which are critical to communication between neural cells. The ability of this neural cell communication to adapt and change is known as synaptic plasticity, which plays a key role in learning and memory processes. Abnormalities in learning and memory processes are implicated in multiple disorders of the brain and nervous system, such as cognitive impairment, PTSD, chronic pain, and depression. The role of NMDArs in learning and memory, as well as in maintaining normal brain function, has made them a target of drug development for decades. These efforts have yielded therapies that work in a unidirectional manner and turn the receptors either fully "on" or "off." Unidirectional approaches, known as agonism or antagonism, have narrow therapeutic windows, substantial side effects, and limited utility. Our molecules bind in a previously uncharacterized binding domain, or "pocket," on NMDArs that is distinct from that of other NMDAr-targeted therapies. This unique binding enables normalization of NMDAr function, ultimately leading to enhanced synaptic plasticity. Through the enhancement of synaptic plasticity, we believe our molecules address abnormalities in learning and memory processes, resulting in therapeutic potential across numerous disorders of the brain and nervous system.

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Product candidates from our discovery platform

The following table summarizes our pipeline and other product candidates generated from our NMDAr modulator discovery platform, or discovery platform:

GRAPHIC

Our first product candidate, NYX-2925, is a novel, oral, small-molecule NMDAr modulator currently in Phase 2 clinical development for the treatment of chronic pain. NYX-2925 works by enhancing synaptic plasticity, a mechanism that is differentiated from that of any therapy currently used for the treatment of chronic pain. This approach is uniquely suited for treating chronic pain. It is established that, when pain becomes chronic (especially neuropathic pain), it becomes a largely centralized disorder mediated by central learning and memory pathways. The development of NYX-2925 in painful DPN has been granted Fast Track designation by the U.S. Food and Drug Administration, or FDA. We are currently studying NYX-2925 in a Phase 2 study in approximately 300 subjects with painful DPN across numerous U.S.-based sites. We are also conducting an exploratory efficacy and biomarker study of NYX-2925 in subjects with fibromyalgia. We anticipate reporting top-line data from these studies in the first half of 2019. In a Phase 1 study, NYX-2925 was well-tolerated with no drug-related serious adverse events and demonstrated a predictable, dose-dependent, and linear pharmacokinetic, or PK, profile with no accumulation after multiple daily doses. In addition, across numerous and various preclinical models of neuropathic pain, we have observed robust, rapid, and long-lasting analgesic effects of NYX-2925. Neuropathic pain affects more than 18 million people in the United States, of which we estimate DPN accounts for approximately 5.5 million. Approved therapies for neuropathic pain provide suboptimal efficacy and often come with substantial side effects and abuse liability. We estimate that fibromyalgia affects approximately 5 million people in the United States and also represents a patient population that is underserved by currently available therapies. We believe the therapeutic profile of NYX-2925 will allow us to expand the development of this molecule into multiple other chronic pain conditions.

Our second product candidate, NYX-783, is a novel, oral, small-molecule NMDAr modulator that has been evaluated in Phase 1 clinical development and we plan to initiate Phase 2 development in the second half of 2018. We intend to develop NYX-783 for the treatment of PTSD, which has been granted Fast Track designation by the FDA. To date, in the Phase 1 study, NYX-783 has been well-tolerated with no drug-related serious adverse events and demonstrates a predictable, dose-dependent, and linear PK profile with no accumulation after multiple daily doses. In preclinical models of contextual fear conditioning and

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extinction, NYX-783 appears to both accelerate fear extinction and inhibit spontaneous fear recovery, making it an ideal product candidate for the treatment of PTSD. Unlike currently used therapies, we believe NYX-783 has the potential to target the underlying cause of PTSD —learning and memory dysfunction associated with an inability to extinguish fear caused by trauma —as well as the core symptoms and comorbidities associated with the disorder. It is estimated that 8% to 10% of people that experience trauma will develop PTSD in their lifetime and we estimate approximately 8.5 million people currently suffer from PTSD in the United States. Many of these people are currently untreated or poorly treated due to the lack of safe and effective options.

Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an IND application to the FDA in May 2018 for the treatment of Parkinson's disease dementia, a subset of Parkinson's disease cognitive impairment. Mechanistic rationale and compelling preclinical data in a highly relevant and translatable non-human primate model of Parkinson's disease suggest NYX-458 may be optimally suited to treat the cognitive deficits caused by the disease. We plan to initiate a single- and multiple-ascending dose Phase 1 study to evaluate safety, tolerability, and PK in the second half of 2018. We estimate that there are more than 500,000 people in the United States with Parkinson's disease cognitive impairment.

Allergan plc, or Allergan, has advanced a compound, AGN-241751, from our discovery platform through our ongoing research collaboration. On May 16, 2018, Allergan exercised its option under our collaboration to acquire the exclusive rights to develop and commercialize this compound within a specified set of indications. Allergan has disclosed its plan to advance development of AGN-241751 for the treatment of major depressive disorder.

We are also evaluating our product candidates in clinical studies designed to explore NMDAr-dependent biomarkers in healthy human subjects. Using readily and rapidly measurable markers, these studies have the potential to further demonstrate that our small-molecule compounds can engage NMDArs and downstream pathways in the human brain in a dose-dependent and predictable way. Successful biomarker studies could aid in our understanding of clinical efficacy results and optimal dosing regimens, and allow us to optimize future clinical study design.

While all of our product candidates and the other molecules from our discovery platform modulate NMDArs, each one is a distinct chemical entity with unique pharmacologic properties. We evaluate the therapeutic implications of variations in these properties by interrogating our molecules across different preclinical models of brain and nervous system disorders. The data we collect from these preclinical studies indicate which molecules are better suited for different indications and inform our development decisions accordingly.

Our company and history

We have assembled a world-class management team with highly relevant scientific, clinical, regulatory, and commercial expertise. Many members of our management team worked together for several years at Naurex Inc., or Naurex, prior to the spin out of Aptinyx in 2015 in conjunction with the acquisition of Naurex by Allergan for up to $1.7 billion in total deal value, $560 million of which it agreed to pay up front. Our Chief Scientific Officer, Joseph Moskal, Ph.D., pioneered our NMDAr modulation approach, starting in the 1990s. He discovered a peptide compound, rapastinel, which Naurex ultimately evaluated in two Phase 2 studies in subjects with major depressive disorder. The data from those studies offered clinical validation of our unique mechanism of modulating NMDArs, informing Allergan's acquisition of Naurex and its advancement of rapastinel into Phase 3 development. Rapastinel has been granted breakthrough

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therapy designation by the FDA. Naurex scientists had also developed a separate new platform for discovering small-molecule compounds that bind to and modulate NMDArs in a fashion similar to that of rapastinel. This discovery platform was spun out into Aptinyx and formed the foundation of our company.

As part of the Naurex-Allergan transaction and spin out of Aptinyx, we entered into a research collaboration with Allergan around the discovery, screening, and profiling of novel NMDAr modulators from our discovery platform. In addition to fueling our own pipeline, this collaboration has enabled Allergan to advance a product candidate from our discovery platform, AGN-241751, into clinical development for the treatment of major depressive disorder. In May 2018, Allergan exercised its option under this collaboration to acquire the exclusive intellectual property rights specific to AGN-241751. For a discussion of this collaboration, see "Business—Research collaboration agreement with Allergan."

We are backed by a group of leading institutional life science investors, including Adage Capital, Adams Street Partners, Bain Capital Life Sciences, Frazier Healthcare Partners, HBM Healthcare Investments, Longitude Capital, Nan Fung Life Sciences, New Leaf Venture Partners, Osage University Partners, Partner Fund Management, and Rock Springs Capital, among others.

Our strategy

Advance the development of NYX-2925 as a novel treatment for chronic pain conditions. We believe positive results from our ongoing studies in painful DPN and fibromyalgia will establish NYX-2925, if approved, as a high-potential therapy for chronic pain with mechanistic innovations that address significant unmet medical needs. We expect efficacy data from these studies to be available in the first half of 2019 and to form the basis for future studies for regulatory approvals in not only painful DPN and fibromyalgia, but also additional chronic and centrally-mediated pain indications.

Advance the development of NYX-783 as a novel treatment for PTSD. We believe NYX-783, if approved, could represent a transformational treatment for PTSD that addresses the underlying learning and memory dysfunction associated with an inability to extinguish fear caused by trauma, as well as the disorder's core symptoms and major comorbidities.

Advance the development of NYX-458 as a novel treatment for Parkinson's disease cognitive impairment. Based on compelling data in a highly relevant and translatable non-human primate model, we believe NYX-458, if approved, may offer substantial improvements over existing treatments for Parkinson's disease cognitive impairment by working through the synaptic plasticity mechanisms that drive cognition, including attention, learning, and memory.

Continue to expand our pipeline by leveraging our discovery platform, building on and extending our leadership in NMDAr biology. We intend to use our discovery platform to develop a broad pipeline and product portfolio across an array of disorders of the brain and nervous system. Our pipeline is fueled by our library of over 800 unique, synthesized, small-molecule NMDAr modulators derived through our extensive original research and the discovery of a novel binding domain that we believe could allow for safe and effective enhancement of synaptic plasticity. We also plan to identify and use NMDAr-dependent biomarkers to expedite and inform the development of our current and future product candidates.

Optimize the development and commercial potential of our product candidates. Our primary strategy is to independently pursue the development and commercialization of our product candidates. As we continue to build and develop our product portfolio, we may opportunistically pursue strategic partnerships that maximize the value of our pipeline.

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Risks associated with our business

Our ability to implement our business strategy is subject to numerous risks, as more fully described in the section entitled "Risk factors" immediately following this prospectus summary. These risks include, among others, that:

We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future. Even if this offering is successful, we will need to raise additional funding to advance NYX-2925 through Phase 3 clinical studies, and such funding may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

We are heavily dependent on our discovery platform and the successful development of product candidates discovered through such discovery platform, including NYX-2925, NYX-783, and NYX-458, which are in the early stages of preclinical and clinical development. We cannot give any assurance that we will continue to create a pipeline of product candidates or that our product candidates will receive regulatory approval.

We have concentrated our research and development efforts on the treatment of disorders of the brain and nervous system, a field that has seen limited success in drug development. Further, our product candidates are based on new approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

Our product candidates may cause serious adverse events or other undesirable side effects that could delay their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following market approval, if any.

Failures or delays in the commencement or completion of, or ambiguous or negative results from, our ongoing or planned clinical studies of our product candidates could result in increased costs to us and could delay, prevent, or limit our ability to generate revenue and continue our business.

We depend on our collaboration with Allergan and may depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

We rely, and expect to continue to rely, on third parties to conduct any clinical studies for our product candidates, on third-party suppliers to manufacture our clinical drug supplies for our product candidates, and on single-source suppliers for some of the components and materials used in our product candidates. If these third parties do not successfully carry out their contractual or legal duties or meet expected deadlines, we may not receive regulatory approval and our business could be substantially harmed.

Our executive officers, directors, principal stockholders, and their affiliates represent beneficial ownership, in the aggregate, of approximately         % of our outstanding common stock and will, acting together, be able to exercise significant control over our company after the initial public offering, which will limit the ability of our other stockholders to influence corporate matters, could delay or prevent a change in corporate control, and may adversely affect the market price of our common stock.

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Implications of being an emerging growth company

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an "emerging growth company," we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's discussion and analysis of financial condition and results of operations" and "Selected financial data" disclosure;

reduced disclosure about our executive compensation arrangements;

no non-binding advisory votes on executive compensation or golden parachute arrangements; and

exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an "emerging growth company." We will continue to remain an "emerging growth company" until the earliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; (ii) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.07 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult. Additionally, because we have taken advantage of certain reduced reporting requirements, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

Company and other information

We were incorporated under the laws of the State of Delaware in June 2015. Our principal executive office is located at 909 Davis Street, Suite 600, Evanston, IL 60201, and our telephone number is (847) 871-0377. Our website address is https://www.aptinyx.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus.

We own various U.S. federal trademark applications and unregistered trademarks, including our company name. All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Allergan® and its design are trademarks of Allergan, Inc. and are being used with permission in this prospectus. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the symbols ® and ™, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

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The offering

Common stock offered by us                 shares.

Common stock to be outstanding immediately after this offering

 

              shares (              shares if the underwriters exercise their option to purchase additional shares in full).

Underwriters' option to purchase additional shares

 

We have granted a 30-day option to the underwriters to purchase up to an aggregate of              additional shares of common stock from us at the public offering price, less the underwriting discount, on the same terms as set forth in this prospectus.

Use of proceeds

  We estimate that we will receive net proceeds from the sale of              shares of our common stock in this offering of approximately $              million, or $              million if the underwriters exercise their option to purchase              additional shares in full, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discount and estimated offering expenses payable by us. We anticipate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents:

to fund our two ongoing Phase 2 clinical studies of NYX-2925 in subjects with painful DPN and subjects with fibromyalgia through completion;

to advance NYX-783 for the treatment of PTSD through completion of Phase 1 clinical development and our planned Phase 2 clinical study;

to advance NYX-458 for the treatment of Parkinson's disease cognitive impairment through completion of our planned Phase 1 clinical development and into our planned Phase 2 clinical study; and

the remainder, if any, to explore NMDAr-dependent biomarkers, to further develop any additional product candidates that we select, and for working capital and other general corporate purposes. For additional information, see "Use of proceeds."


Proposed Nasdaq Global Market symbol

 

"APTX"

Risk factors

 

You should carefully read the "Risk factors" section of this prospectus for a discussion of factors that you should consider before deciding to invest in our common stock.

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The number of shares of our common stock to be outstanding after this offering is based on 721,002,675 shares of our common stock (which includes 41,141,489 shares of restricted common stock) outstanding as of March 31, 2018, and gives effect to the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 560,180,239 shares of our common stock upon the completion of this offering, and excludes:

90,356,401 shares of common stock issuable upon the exercise of stock options outstanding as of March 31, 2018 under our 2015 Stock Option and Grant Plan, or the 2015 Plan, at a weighted-average exercise price of $0.14 per share;

17,703,802 shares of common stock reserved for future issuance as of March 31, 2018 under our 2015 Plan, which will cease to be available for issuance at the time that our 2018 Stock Option and Incentive Plan, or the 2018 Plan, becomes effective;

              additional shares of our common stock that will become available for future issuance under our 2018 Plan, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part; and

              additional shares of our common stock that will become available for future issuance under our 2018 Employee Stock Purchase Plan, or the 2018 ESPP, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part.

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

the filing and effectiveness of our amended and restated certificate of incorporation upon the closing of this offering and the effectiveness of our amended and restated bylaws upon the effectiveness of the registration statement of which this prospectus is a part;

the conversion of all outstanding shares of convertible preferred stock into an aggregate of 560,180,239 shares of common stock upon the closing of this offering;

no exercise of outstanding options after March 31, 2018;

a one-for-              reverse split of our common stock effected on                           , 2018; and

no exercise by the underwriters of their option to purchase up to                           additional shares of common stock in this offering.

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Summary financial data

You should read the following selected financial data together with the section captioned "Management's discussion and analysis of financial condition and results of operations" and our financial statements and the related notes appearing at the end of this prospectus. We have derived the statement of operations data for the years ended December 31, 2016 and 2017 and the balance sheet data as of December 31, 2017 from our audited financial statements appearing at the end of this prospectus. We have derived the statement of operations data for the three months ended March 31, 2017 and 2018 and the balance sheet data as of March 31, 2018 from our unaudited financial statements appearing at the end of this prospectus. The unaudited financial statements have been prepared on the same basis as our audited financial statements and include, in the opinion of management, all adjustments that management considers necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of our future results and our interim results are not necessarily indicative of results to be expected for a full fiscal year or any other interim period.

 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 

Collaboration and grant revenue

  $ 9,792   $ 4,962   $ 1,145   $ 2,464  

Operating expenses:

                         

Research and development

    22,743     31,644     8,662     12,224  

General and administrative

    4,766     5,551     1,232     2,049  

Total operating expenses

    27,509     37,195     9,894     14,273  

Loss from operations

    (17,717 )   (32,233 )   (8,749 )   (11,809 )

Other income

    2,239     165     52     137  

Net loss and comprehensive loss

  $ (15,478 ) $ (32,068 ) $ (8,697 ) $ (11,672 )

Net loss per share attributable to common stockholders, basic and diluted

  $ (0.11 ) $ (0.22 ) $ (0.06 ) $ (0.08 )

Weighted-average number of common shares outstanding, basic and diluted

    135,252     143,336     140,287     148,357  

Pro forma net loss per share, basic and diluted (unaudited)

        $ (0.07 )       $ (0.02 )

Pro forma weighted-average common shares outstanding, basic and diluted (unaudited)

          464,297           708,538  

(1)    See statement of operations and Note 13 to our financial statements appearing at the end of this prospectus for further details on the calculation of net loss per share, basic and diluted, attributable to common stockholders and weighted-average number of common shares used in the computation of the per share amounts and unaudited pro forma information.

 
  As of March 31, 2018  
(in thousands)
  Actual
  Pro forma(2)
  Pro forma
as adjusted(3)

 

Balance sheet data:

                   

Cash and cash equivalents

  $ 82,350   $ 82,350   $    

Working capital(1)

    79,477     79,477        

Total assets

    88,810     88,810        

Convertible preferred stock

    132,386            

Total stockholders' (deficit) equity

    (50,866 )   81,520        

(1)    We define working capital as current assets less current liabilities. See our financial statements for further details regarding our current assets and current liabilities.

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(2)    Pro forma balance sheet data give effect to the automatic conversion of all outstanding shares of convertible preferred stock.

(3)    The pro forma as adjusted balance sheet data give further effect to our issuance and sale of                           shares of our common stock in this offering, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $               million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us. An increase (decrease) of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets, and total stockholders' equity by approximately $               million, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discount and estimated offering expenses payable by us.

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Risk factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this prospectus, including our financial statements and related notes, before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition, or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of the money you paid to buy our common stock. Certain statements below are forward-looking statements. See "Special note regarding forward-looking statements and market data" in this prospectus.

Risks related to our business, financial position, and need for additional capital

We are a clinical-stage biopharmaceutical company with a very limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are a clinical-stage biopharmaceutical company with a limited operating history, focused on developing therapeutics for disorders of the brain and nervous system. We were incorporated in June 2015, have no products approved for commercial sale, and have not generated any revenue from product sales. Our operations to date have been limited primarily to organizing and staffing our company, raising capital, and conducting research and development activities for our product candidates.

To date, we have not obtained marketing approval for any product candidates, manufactured, on our own or through a third party, a commercial scale product, or conducted sales and marketing activities necessary for successful product commercialization. Our short operating history as a company makes any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties. If we do not address these risks and difficulties successfully, our business will suffer.

We have incurred significant operating losses since our inception and anticipate we will incur continued losses for the foreseeable future.

We have funded our operations to date through proceeds from collaborations, grants, and sales of convertible preferred stock. From our inception through March 31, 2018, we had received net proceeds of $155.6 million from such transactions. As of March 31, 2018, our cash and cash equivalents were $82.4 million. We have incurred net losses in each year since our inception, and we have an accumulated deficit of $63.9 million as of March 31, 2018.

Substantially all of our operating losses have resulted from costs incurred in connection with general and administrative costs associated with our operations, and our research and development programs, including for our preclinical and clinical product candidates and our N-methyl-D-aspartate receptor, or NMDAr, modulator platform. We expect to incur increasing levels of operating losses over the next several years and for the foreseeable future. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders' deficit and working capital. We expect our research and development expenses to significantly increase in connection with our clinical studies of our product candidates. In addition, if we obtain marketing approval for our product candidates, we will incur significant sales and marketing, legal, and outsourced-manufacturing expenses. Once we are a public company, we will incur additional costs associated with operating as a public company. As a result, we

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expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Drug development is a highly uncertain undertaking and involves a substantial degree of risk. We have never generated any revenue from product sales, and we may never generate revenue or be profitable.

Our ability to become profitable depends upon the ability of our product candidates to generate revenue. To date, we have not generated any revenue from our product candidates and we do not know when, or if, we will do so. We do not expect to generate significant revenue unless and until we obtain marketing approval of, and begin to sell, our current or future product candidates. Our ability to generate revenue depends on a number of factors, including, but not limited to:

successfully completing preclinical and clinical development of our product candidates;

identifying, assessing, and/or developing new product candidates from our NMDAr modulator discovery platform, or discovery platform;

developing a sustainable and scalable manufacturing process for our product candidates, as well as establishing and maintaining commercially viable supply relationships with third parties that can provide adequate products and services to support clinical activities and commercial demand for our product candidates;

negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;

obtaining regulatory approvals and marketing authorizations for product candidates for which we successfully complete clinical development;

launching and successfully commercializing product candidates for which we obtain regulatory and marketing approval, either by establishing a sales, marketing, and distribution infrastructure or collaborating with a partner;

negotiating and maintaining an adequate price for our product candidates, both in the United States and in foreign countries where our products are commercialized;

obtaining market acceptance of our product candidates as viable treatment options;

building out new facilities or expanding existing facilities to support our ongoing development activity;

addressing any competing technological and market developments;

maintaining, protecting, expanding, and enforcing our portfolio of intellectual property rights, including patents, trade secrets, and know-how; and

attracting, hiring, and retaining qualified personnel.

Because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of our expenses, or when we will be able to generate any meaningful revenue or achieve or maintain profitability, if ever. In addition, our expenses could increase beyond our current expectations if we are required by the U.S. Food and Drug Administration, or FDA, or foreign

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regulatory agencies, to perform studies in addition to those that we currently anticipate, or if there are any delays in any of our or our future collaborators' clinical studies or the development of any of our product candidates. Even if one or more of our product candidates is approved for commercial sale, absent our entering into a collaboration or partnership agreement, we anticipate incurring significant costs associated with commercializing any approved product candidate and ongoing compliance efforts.

Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the ability to get reimbursement at any price, and whether we own the commercial rights for that territory. The precise number of people with painful diabetic peripheral neuropathy, or DPN, fibromyalgia, post-traumatic stress disorder, or PTSD, and Parkinson's disease cognitive impairment is unknown. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our drug candidates, are based on estimates. If the number of addressable patients is not as significant as we anticipate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice, or treatment guidelines, we may not generate significant revenue from sales of our product candidates, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates, or continue our operations and cause a decline in the value of our common stock, all or any of which may adversely affect our viability.

Due to the significant resources required for the development of our discovery platform and pipeline, and depending on our ability to access capital, we must prioritize development of certain product candidates. Moreover, we may fail to expend our limited resources on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We currently have three lead product candidates, NYX-2925, NYX-783, and NYX-458, which are at various stages of preclinical and clinical development. We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively advancing product candidates, such as NYX-2925 and NYX-783, and ensuring replenishment of our portfolio.

In July 2015, we entered into a research collaboration agreement with Allergan plc, or Allergan, pursuant to which we and Allergan have research, development, and commercial rights to compounds discovered using our discovery platform. Under the research collaboration, both we and Allergan have the right, exercisable during a specified period, to select an eligible compound for further investigation. Due to the terms of the collaboration agreement, we may not have the opportunity to select a desired eligible compound. We may also choose not to select an eligible compound based on the preliminary information available to us. As a result of such incomplete information or incorrect analysis by us, we may select an eligible compound that later proves to have less commercial potential than an alternative or none at all.

Due to the significant resources required for the development of our product candidates, we must focus on specific diseases and disease pathways and decide which product candidates to pursue and advance and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management, and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial product and may divert

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resources away from better opportunities. If we make incorrect determinations regarding the viability or market potential of any of our product candidates or misread trends in the biopharmaceutical industry, in particular for disorders of the brain and nervous system, our business, financial condition, and results of operations could be materially adversely affected. As a result, we may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights.

Even if this offering is successful, we will need to raise additional funding to advance NYX-2925 through Phase 3 clinical studies, which funding may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other operations.

As of March 31, 2018, our cash and cash equivalents were $82.4 million. We estimate that the net proceeds from this offering will be approximately $               million, assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and offering expenses payable by us. Based on our current plans, we expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to fund our operations through                           . We will require additional funding to advance NYX-2925 through Phase 3 clinical studies. Our ability to secure this additional funding may be adversely impacted by negative or ambiguous results in our Phase 2 clinical development of NYX-2925, our Phase 1 clinical development of NYX-783, or our preclinical, or planned Phase 1 study of NYX-458.

We are currently advancing our product candidates through clinical development, with one product candidate in Phase 2 clinical development, one product candidate in Phase 1 clinical development, one product candidate in preclinical development, and several other potential product candidates in early-stage discovery and screening. The clinical development of a product candidate is lengthy, complicated, and expensive. In particular, conducting a Phase 3 clinical study is a complex process that differs from clinical studies conducted in earlier phases. While some of our employees have conducted Phase 3 clinical studies in the past while employed at different companies, we, as a company, have not conducted Phase 3 clinical studies before, and as a result, may require more time and incur greater costs than we anticipated. Moreover, developing small-molecule products is expensive, and we expect our discovery, research, and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance our product candidates in clinical studies. We may also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for our product candidates or otherwise expand more rapidly than we presently anticipate.

In addition, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and, if approved, to commercialize our product candidates. Raising funds in the current economic environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

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Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and, if approved, commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidate or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay, or discontinue one or more of our research or development programs or the commercialization of any product candidate or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, and results of operations.

Risks related to product development and commercialization

Research and development of biopharmaceutical products is inherently risky.

We are at an early stage of development of the product candidates currently in our pipeline and are continuing to discover additional potential product candidates leveraging our discovery platform. To date, we have devoted substantially all of our efforts and financial resources to identify, secure intellectual property for, and develop our discovery platform and our product candidates, including conducting multiple preclinical and clinical studies, and providing general and administrative support for these operations. Our business depends heavily on the successful preclinical and clinical development, regulatory approval, and commercialization of our lead product candidates, NYX-2925 which is in Phase 2 clinical development, NYX-783 which is in Phase 1 clinical development, and NYX-458 which is in preclinical development. None of our product candidates have advanced into late-stage development or a pivotal clinical study and it may be years before any such study is initiated, if at all. NYX-2925, NYX-783, and NYX-458 will require substantial additional clinical development, testing, and regulatory approval before we are permitted to commence their commercialization. Further, we cannot be certain that any of our product candidates will be successful in clinical studies.

Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:

our product candidates may not successfully complete preclinical or clinical studies;

a product candidate may, upon further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

our competitors may develop therapeutics that render our product candidates obsolete or less attractive;

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our competitors may develop platform technologies that render our platform technology obsolete or less attractive;

the product candidates that we develop and our discovery platform may not be sufficiently covered by intellectual property for which we hold exclusive rights;

the market for a product candidate may change so that the continued development of that product candidate is no longer reasonable or commercially attractive;

a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;

we may not be able to establish manufacturing capabilities or arrangements with third-party manufacturers for clinical and, if approved, commercial study;

even if a product candidate obtains regulatory approval, we may be unable to establish sales and marketing capabilities, or successfully market such approved product candidate, to gain market acceptance; and

a product candidate may not be accepted as safe or effective by patients, the medical community or third-party payors, if applicable.

If any of these events occur, we may be forced to abandon our development efforts for a product candidate or candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. For instance, if we observe harmful side effects or other characteristics that indicate one product candidate is unlikely to be effective or otherwise does not meet applicable regulatory criteria, these findings may implicate the discovery platform as a whole.

We may not be successful in our efforts to further develop our discovery platform technology and current product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Each of our product candidates is in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.

The nonclinical and clinical studies for our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States, and in other countries where we intend to test and, if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must, among other requirements, demonstrate through preclinical studies and clinical studies that the product candidate is safe and effective for use in each target indication. Drug development is a long, expensive, and uncertain process, and delay or failure can occur at any stage of any of our clinical studies. This process can take many years and may include post-marketing studies and surveillance, which will require the expenditure of substantial resources beyond the proceeds we raise in this offering. Of the large number of drugs in development in the United States, only a small percentage will successfully complete the FDA regulatory approval process and will be commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and preclinical studies and clinical studies, we cannot assure you that any of our product candidates will be successfully developed or commercialized.

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If any of our product candidates successfully complete clinical studies, we generally plan to seek regulatory approval to market our product candidates in the United States, the European Union, or EU, and in additional foreign countries where we believe there is a viable commercial opportunity and significant patient need. We have never commenced, compiled, or submitted an application seeking regulatory approval to market any product candidate. We may never receive regulatory approval to market any product candidates even if such product candidates successfully complete clinical studies, which would adversely affect our viability. To obtain regulatory approval in countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing, and distribution of our product candidates. We may also rely on collaborators or partners to conduct the required activities to support an application for regulatory approval, and to seek approval, for one or more of our product candidates. We cannot be sure that any collaborators or partners will conduct these activities or do so within the timeframe we desire. Even if we (or any collaborators or partners) are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations could be negatively affected.

Even if we receive regulatory approval to market any of our product candidates, we cannot assure you that any such product candidate will be successfully commercialized, widely accepted in the marketplace or more effective than other commercially available alternatives.

Investment in biopharmaceutical product development involves significant risk that any product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We cannot provide any assurance that we will be able to successfully advance any of our product candidates through the development process or, if approved, successfully commercialize any of our product candidates.

We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products. If we fail to successfully identify and develop additional product candidates, our commercial opportunity may be limited.

One of our strategies is to identify and pursue clinical development of additional product candidates. We currently have several compounds in the research, discovery, screening, and preclinical stages of development. Identifying, developing, obtaining regulatory approval, and commercializing additional product candidates for the treatment of disorders of the brain and nervous system will require substantial additional funding beyond the net proceeds of this offering and is prone to the risks of failure inherent in drug development. We cannot provide you any assurance that we will be able to successfully identify or acquire additional product candidates, advance any of these additional product candidates through the development process, successfully commercialize any such additional product candidates, if approved, or assemble sufficient resources to identify, acquire, develop or, if approved, commercialize additional product candidates. If we are unable to successfully identify, acquire, develop, and commercialize additional product candidates, our commercial opportunity may be limited.

We may not be able to conduct, or contract others to conduct, animal testing in the future, which could harm our research and development activities.

Certain laws and regulations relating to drug development require us to test our product candidates on animals before initiating clinical studies involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by

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disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted or delayed.

We have concentrated our research and development efforts on the treatment of disorders of the brain and nervous system, a field that has seen limited success in drug development. Further, our product candidates are based on new approaches and novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval.

We have focused our research and development efforts on addressing disorders of the brain and nervous system, including painful DPN, PTSD, and Parkinson's disease cognitive impairment. Efforts by biopharmaceutical companies in the field of disorders of the brain and nervous system have seen limited successes in drug development. There are few effective therapeutic options available for patients with painful DPN, PTSD, or Parkinson's disease cognitive impairment. Our future success is highly dependent on the successful development of our discovery platform technology and our product candidates for treating disorders of the brain and nervous system. Developing and, if approved, commercializing our product candidates for treatment of disorders of the brain and nervous system subjects us to a number of challenges, including engineering product candidates and obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.

Our approach to targeting the NMDAr is different from other antagonist and agonist agents currently being developed. Our proprietary compounds are designed to subtly modulate NMDArs. This strategy may not prove to be successful. We cannot be sure that our approach will yield satisfactory therapeutic products that are safe and effective, scalable, or profitable.

Moreover, public perception of drug safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the willingness of subjects to participate in clinical studies, or if approved, of physicians to prescribe our products.

We may encounter difficulties in enrolling subjects in our clinical studies, thereby delaying or preventing development of our product candidates.

There is no precise method of establishing the actual number of people with disorders of the brain and nervous system in any geography over any time period. We estimate that neuropathic pain affects approximately 18 million people in the United States, and approximately 5.5 million of those suffer from painful DPN. It is estimated that over 8.5 million people suffer from PTSD. If the actual number of people with disorders of the brain and nervous system is lower than we believe, we may experience difficulty in enrolling subjects in our clinical studies, thereby delaying development of our product candidates. Furthermore, we may experience difficulties in subject enrollment in our clinical studies for a variety of other reasons, including:

the subject eligibility criteria defined in the protocol, including biomarker-driven identification and/or certain highly-specific criteria related to stage of disease progression, which may limit the patient populations eligible for our clinical studies to a greater extent than competing clinical studies for the same indication that do not have biomarker-driven patient eligibility criteria;

eligibility requirements mandated by regulatory agencies which may limit the number of eligible patients in a given disorder;

the size of the study population required for analysis of the study's primary endpoints;

the proximity of subjects to a study site;

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the design of the study;

our use of academic sites, which are less accustomed to running clinical studies and managing enrollment;

public perception of drug safety issues;

our ability to recruit clinical study investigators with the appropriate competencies and experience;

competing clinical studies for similar therapies or targeting patient populations meeting our patient eligibility criteria;

clinicians' and patients' perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies and product candidates;

our ability to obtain and maintain patient consents; and

the risk that subjects enrolled in clinical studies will not complete such studies, for any reason.

For instance, we have experienced and may continue to experience slower than what may be considered typical durations for subject enrollment as a result of our strict enrollment criteria in our painful DPN and fibromyalgia studies. If we are unable to successfully enroll subjects in a timely way for the clinical studies for our product candidates, our clinical studies could be significantly delayed, which could materially affect our financial condition and results of operations.

Our clinical studies may fail to demonstrate adequate safety and efficacy of our product candidates, which would prevent, delay, or limit the scope of regulatory approval and commercialization.

Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must, among other requirements, demonstrate through lengthy, complex, and expensive preclinical studies and clinical studies that our product candidates are both safe and effective for use in each target indication. Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of preclinical studies of our product candidates may not be predictive of the results of early-stage or later-stage clinical studies, and results of early-stage clinical studies of our product candidates may not be predictive of the results of later-stage clinical studies. The results of clinical studies in one set of subject or disease indications may not be predictive of those obtained in another. In some instances, there can be significant variability in safety or efficacy results between different clinical studies of the same product candidate due to numerous factors, including changes in study procedures set forth in protocols, differences in the size and type of the patient populations, changes in and lack of adherence to the dosing regimen and other clinical study protocols, and the rate of dropout among clinical study participants. Product candidates in later stages of clinical studies may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical studies. A number of companies in the biopharmaceutical industry have suffered significant setbacks in later-stage clinical studies due to lack of efficacy or safety issues, notwithstanding promising results in early-stage studies. This is particularly true in disorders of the brain and nervous system, where failure rates historically have been higher than in other disease areas. Most product candidates that begin clinical studies are never approved by regulatory authorities for commercialization.

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We have limited experience in designing clinical studies and may be unable to design and execute a clinical study to support marketing approval. We cannot be certain that our current clinical studies or any other future clinical studies will be successful. Additionally, any safety concerns observed in any one of our clinical studies in our targeted indications could limit the prospects for regulatory approval of our product candidates in those, and other indications, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, even if such clinical studies are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more studies could be required before we submit our product candidates for approval. To the extent that the results of the studies are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional studies in support of potential approval of our product candidates. Even if regulatory approval is secured for any of our product candidates, the terms of such approval may limit the scope and use of our product candidates, which may also limit their commercial potential.

Our product candidates may cause serious adverse events or other undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Serious adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical studies, and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities.

Further, clinical studies by their nature utilize a sample of the potential patient population for a limited duration of exposure. Rare and severe side effects of a product candidate may only be uncovered with a significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates (or any other similar products) after such approval, a number of potentially significant negative consequences could result, including:

regulatory authorities may suspend, withdraw, or limit their approval of such products;

regulatory authorities may require the addition of labeling statements, such as a "boxed" warning or a contraindication;

we may be required to change the way such products are distributed or administered;

we may be required to conduct additional post-marketing studies and surveillance;

we may be required to implement a risk evaluation and mitigation strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

we may be subject to regulatory investigations and government enforcement actions;

subjects in a clinical study may experience severe or unexpected drug-related side effects;

we may decide, or regulatory authorities may require us, to conduct additional clinical studies or abandon product development programs;

we may decide to remove such products from the marketplace;

we could be sued and held liable for injury caused to individuals exposed to or taking our products;

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the product may become less competitive; and

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates, could substantially increase the costs of commercializing our product candidates, and could significantly impact our ability to successfully commercialize our product candidates and generate revenues.

Failures or delays in the commencement or completion of, or ambiguous or negative results from, our ongoing or planned clinical studies of our product candidates could result in increased costs to us and could delay, prevent, or limit our ability to generate revenue and continue our business.

We do not know whether any of our ongoing or planned clinical studies will begin or be completed on schedule, if at all, as the commencement and completion of clinical studies can be delayed or prevented for a number of reasons, including, among others:

the FDA or other regulatory bodies may not authorize us or our investigators to commence our planned clinical studies or any other clinical studies we may initiate, or may suspend our clinical studies, for example, through imposition of a clinical hold;

delays in filing or receiving approvals of additional investigational new drug, or IND, applications that may be required;

lack of adequate funding to continue our clinical studies and preclinical studies;

negative results from our ongoing preclinical studies;

delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and study sites;

inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical studies, for example delays in the manufacturing of sufficient supply of finished drug product;

difficulties obtaining ethics committee or Institutional Review Board, or IRB, approval to conduct a clinical study at a prospective site or sites;

challenges in recruiting and enrolling subjects to participate in clinical studies, the proximity of subjects to study sites, eligibility criteria for the clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease, and competition from other clinical study programs for similar indications;

severe or unexpected drug-related side effects experienced by subjects in a clinical study;

we may decide, or regulatory authorities may require us, to conduct additional clinical studies or abandon product development programs;

delays in validating, or inability to validate, any endpoints utilized in a clinical study;

the FDA may disagree with our clinical study design and our interpretation of data from clinical studies, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical studies;

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reports from preclinical or clinical testing of other NMDAr-dependent therapies that raise safety or efficacy concerns; and

difficulties retaining subjects who have enrolled in a clinical study but may be prone to withdraw due to rigors of the clinical studies, lack of efficacy, side effects, personal issues, or loss of interest.

Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical study may be suspended or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a clinical study, a data and safety monitoring board, or DSMB, overseeing the clinical study at issue or other regulatory authorities due to a number of factors, including, among others:

failure to conduct the clinical study in accordance with regulatory requirements or our clinical protocols;

inspection of the clinical study operations or study sites by the FDA or other regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including in response to the imposition of a clinical hold;

unforeseen safety issues, including any that could be identified in our ongoing preclinical or clinical studies, adverse side effects or lack of effectiveness;

changes in government regulations or administrative actions;

problems with clinical supply materials; and

lack of adequate funding to continue clinical studies.

Changes in regulatory requirements, FDA guidance, or unanticipated events during our nonclinical studies and clinical studies of our product candidates may occur, which may result in changes to nonclinical or clinical study protocols or additional nonclinical or clinical study requirements, which could result in increased costs to us and could delay our development timeline.

Changes in regulatory requirements, FDA guidance, or unanticipated events during our nonclinical studies and clinical studies may force us to amend nonclinical studies and clinical study protocols or the FDA may impose additional nonclinical studies and clinical study requirements. Amendments or changes to our clinical study protocols would require resubmission to the FDA and IRBs for review and approval, which may adversely impact the cost, timing, or successful completion of clinical studies. Similarly, amendments to our nonclinical studies may adversely impact the cost, timing, or successful completion of those nonclinical studies. If we experience delays completing, or if we terminate, any of our nonclinical studies or clinical studies, or if we are required to conduct additional nonclinical or clinical studies, the commercial prospects for our product candidates may be harmed and our ability to generate product revenue will be delayed.

If, in the future, we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market any product candidates we may develop, we may not be successful in commercializing those product candidates if and when they are approved.

We do not currently have an infrastructure for the sales, marketing, and distribution of pharmaceutical products. In order to market our product candidates, if approved by the FDA or any other regulatory body, we must build our sales, marketing, managerial, and other non-technical capabilities, or make arrangements with third parties to perform these services. There are risks involved with both establishing our own commercial capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force or reimbursement specialists is expensive and

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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 and other commercialization 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 commercialization personnel.

If we enter into arrangements with third parties to perform sales, marketing, commercial support, and distribution services, our product revenue or the profitability of product revenue may be lower than if we were to market and sell any products we may develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may 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. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates if approved.

If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition, and prospects will be materially adversely affected.

Even if we receive marketing approval for our product candidates, our product candidates may not achieve broad market acceptance by physicians, patients, healthcare payors, or others in the medical community, which would limit the revenue that we generate from their sales.

The commercial success of our product candidates, if approved by the FDA or other applicable regulatory authorities, will depend upon the awareness and acceptance of our product candidates among the medical community, including physicians, patients, and healthcare payors. If any of our product candidates are approved but do not achieve an adequate level of acceptance by physicians, patients, healthcare payors, and others in the medical community, we may not generate sufficient revenue to become or remain profitable. Market acceptance of our product candidates, if approved, will depend on a number of factors, including, among others:

the safety, efficacy, and other potential advantages of our approved product candidates compared to other available therapies;

limitations or warnings contained in the labeling approved for our product candidates by the FDA or other applicable regulatory authorities;

any restrictions on the use of our products together with other medications;

the prevalence and severity of any adverse effects associated with our product candidates;

inability of certain types of patients to take our products;

the clinical indications for which our product candidates are approved;

availability of alternative treatments already approved or expected to be commercially launched in the near future;

the potential and perceived advantages of our approved product candidates over current treatment options or alternative treatments, including future alternative treatments;

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the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

the strength of marketing and distribution support and timing of market introduction of competitive products;

publicity concerning our products or competing products and treatments;

pricing and cost effectiveness;

the effectiveness of our sales and marketing strategies;

our ability to increase awareness of our product candidates through sales and marketing efforts;

our ability to obtain sufficient third-party payor coverage or reimbursement; or

the willingness of patients to pay out-of-pocket in the absence of third-party payor coverage.

If our product candidates are approved but do not achieve an adequate level of acceptance by patients, physicians, and payors, we may not generate sufficient revenue from our product candidates to become or remain profitable. Before granting reimbursement approval, healthcare payors may require us to demonstrate that our product candidates, in addition to treating these target indications, also provide incremental health benefits to patients. Our efforts to educate the medical community and third-party payors about the benefits of our product candidates may require significant resources and may never be successful.

Even if we obtain regulatory approval for our product candidates, our products will remain subject to extensive regulatory scrutiny.

Even if we receive marketing approval for our product candidates, regulatory authorities may still impose significant restrictions on our product candidates, indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies. If any of our product candidates are approved, they will be subject to ongoing regulatory requirements, including for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-marketing information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities.

Manufacturers and manufacturers' facilities are required to comply with extensive requirements imposed by the FDA and comparable foreign regulatory authorities, including, for example, ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practice, or cGMP, regulations. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any new drug application, or NDA, or comparable marketing approval. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

The FDA has significant post-marketing authority, including, for example, the authority to require labeling changes based on new safety information and to require post-marketing studies or clinical studies to evaluate serious safety risks related to the use of a drug. The FDA also has the authority to require, as part of an NDA or post-approval, the submission of a REMS. Many chronic pain therapies have been recognized as drugs of abuse and require REMS. While NYX-2925 has been well tolerated in clinical studies to date and has shown low abuse potential in preclinical drug discrimination studies, the FDA may still

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determine that NYX-2925 requires a REMS program. Any REMS required by the FDA may lead to increased costs to assure compliance with new post-approval regulatory requirements and potential requirements or restrictions on the sale of approved products, all of which could lead to lower sales volume and revenue.

Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a REMS), or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities. Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance. The FDA and other agencies, including the U.S. Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved label. As such, we may not promote our products for indications or uses for which they do not have approval. The holder of an approved NDA or comparable marketing approval must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing studies or clinical studies to verify the safety and efficacy of our products in general or in specific patient subsets.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

issue warning or untitled letters that would result in adverse publicity;

impose civil or criminal penalties;

suspend or withdraw regulatory approvals;

suspend any of our ongoing clinical studies;

refuse to approve pending applications or supplements to approved applications submitted by us;

impose restrictions on our operations, including closing our contract manufacturers' facilities;

seize or detain products; or

request that we initiate a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

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We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer, more advanced, or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.

The development and commercialization of new drug products is highly competitive. Moreover, treating brain and nervous system disorders is characterized by strong and increasing competition, with a strong emphasis on intellectual property. We may face competition with respect to any product candidates that we seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. 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.

Companies that we are aware are developing NMDAr-targeted therapies include large companies with significant financial resources, such as Adamas Pharmaceuticals Inc., Allergan plc, AmKor Pharma, Inc., Avanir Pharmaceuticals Inc., Axsome Therapeutics, Inc., Biohaven Pharmaceutical Holding Co. Ltd., Cadent Therapeutics, Inc., Cerecor Inc., Eli Lilly and Company, Genentech Inc., Immune Pharmaceuticals Inc., Intra-Cellular Therapies, Inc., Janssen Pharmaceuticals, Inc., NeuroRx, Inc., Newron Pharmaceuticals S.p.A., Otonomy, Inc., Relmada Therapeutics, Inc., Sage Therapeutics, Inc., UCB S.A., and Vistagen Therapeutics, Inc.

Many of our current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology 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 competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered to have application for treatment of disorders of the brain and nervous system indications, which could give such products significant regulatory and market timing advantages over any of our product candidates. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours and may obtain orphan product exclusivity from the FDA for indications our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.

In addition, we could face litigation or other proceedings with respect to the scope, ownership, validity and/or enforceability of our patents relating to our competitors' products and our competitors may allege that our products infringe, misappropriate, or otherwise violate their intellectual property. The availability

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of our competitors' products could limit the demand, and the price we are able to charge, for any products that we may develop and commercialize. See "Risks related to our intellectual property rights."

Even if we receive marketing approval for our product candidates in the United States, we may never receive regulatory approval to market our product candidates outside of the United States.

In order to market any product outside of the United States, we must establish and comply with the numerous and varying safety, efficacy, and other regulatory requirements of other countries. Approval procedures vary among countries and can involve additional product candidate testing and additional administrative review periods. The time required to obtain approvals in other countries might differ from that required to obtain FDA approval. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside of the United States, products must receive pricing and reimbursement approval before the product can be commercialized. Obtaining this approval can result in substantial delays in bringing products to market in such countries. Marketing approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the regulatory process in others. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair our ability to market our product candidates in such foreign markets. Any such impairment would reduce the size of our potential market, which could have a material adverse impact on our business, results of operations, and prospects.

Risks related to regulatory approval and other legal compliance matters

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue and our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical studies, and depends upon numerous factors, including the type, complexity, and novelty of the product candidates involved. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. Moreover, the FDA or other regulatory authorities may fail to approve companion diagnostics that we contemplate using with our therapeutic product candidates. We have not submitted for, or obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

the FDA or comparable foreign regulatory authorities may disagree with the design, implementation, or results of our clinical studies;

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the FDA or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective, or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use;

the population studied in the clinical program may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;

the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical studies;

the data collected from clinical studies of our product candidates may not be sufficient to support the submission of an NDA or other submission, or to obtain regulatory approval in the United States or elsewhere;

we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a product candidate's risk-benefit ratio for its proposed indication is acceptable;

the FDA or comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes, test procedures and specifications, or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

This lengthy approval process, as well as the unpredictability of the results of clinical studies, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations, and prospects.

We are subject to healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings.

Although we do not currently have any products on the market, once we begin commercializing our products, we may be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal government and the states and foreign governments in which we conduct our business. Healthcare providers, physicians, and others will play a primary role in the recommendation and prescription of our product candidates, if approved. Our future arrangements with third-party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our product candidates, if we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

the federal Anti-Kickback Statute, or AKS, prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order, or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

the federal False Claims Act imposes criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented,

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the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information;

the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact, or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services;

the federal transparency requirements, sometimes referred to as the "Sunshine Act," under the Patient Protection and Affordable Care Act, or the ACA, require manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children's Health Insurance Program to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and

analogous state laws and regulations, such as state anti-kickback and false claims laws and transparency laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing.

Ensuring that our future business arrangements with third parties comply with applicable healthcare laws and regulations could be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities to be conducted by our sales team, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, and exclusion from government funded healthcare programs, such as Medicare and Medicaid, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs.

If any of our product candidates obtain regulatory approval, additional competitors could enter the market with generic versions of such drugs, which may result in a material decline in sales of affected products.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic copy of an approved, small-molecule innovator product. Under the Hatch-Waxman Act, a manufacturer may also submit an NDA, under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act that references the FDA's prior approval of the small-molecule innovator product. A 505(b)(2) NDA product may be for a new or improved version of the original innovator product. The Hatch-Waxman Act also provides for certain periods of regulatory exclusivity, which preclude FDA approval (or in some

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circumstances, FDA filing and reviewing) of an ANDA or 505(b)(2) NDA. These include, subject to certain exceptions, the period during which an FDA-approved drug is subject to orphan drug exclusivity. For example, a drug that is granted regulatory approval may be eligible for five years of marketing exclusivity in the United States following regulatory approval if that drug is classified as a new chemical entity, or NCE. A drug can be classified as a NCE if the FDA has not previously approved any other drug containing the same active moiety. While we believe there is a likelihood that the FDA would grant NCE status to both NYX-2925 and NYX-783 if both are granted regulatory approval, NYX-2925 and NYX-783 have the same structural formula but differ in spatial orientation, i.e., are separate stereoisomers of each other, and there can be no assurance that both will be granted NCE exclusivity.

In addition to the benefits of regulatory exclusivity, an innovator NDA holder may have patents claiming the active ingredient, product formulation or an approved use of the drug, which would be listed with the product in the FDA publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," known as the "Orange Book." If there are patents listed in the Orange Book, a generic or 505(b)(2) applicant that seeks to market its product before expiration of the patents must include in the ANDA a "Paragraph IV certification," challenging the validity or enforceability of, or claiming non-infringement of, the listed patent or patents. Appropriate notice of the certification must be given to the innovator, too, and if within 45 days of receiving such notice the innovator sues to protect its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if any of our product candidates are approved, competitors could file ANDAs for generic versions of our small-molecule drug products or 505(b)(2) NDAs that reference our small-molecule drug products, respectively. If there are patents listed for our small-molecule drug products in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent. We cannot predict which, if any, patents in our current portfolio or patents we may obtain in the future will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license. Moreover, if any of our owned or in-licensed patents that are listed in the Orange Book are successfully challenged by way of a Paragraph IV certification and subsequent litigation, the affected product could immediately face generic competition and its sales would likely decline rapidly and materially. See "Risks related to our intellectual property rights."

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found to have improperly promoted off-label uses, we may become subject to significant liability.

The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as NYX-2925, NYX-783, and NYX-458, if approved. In particular, a product may not be promoted for uses 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 NYX-2925 as a treatment for painful DPN, physicians may nevertheless prescribe NYX-2925 to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. 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. 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 cannot successfully

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manage the promotion of our product candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

Even if approved, reimbursement policies could limit our ability to sell our product candidates.

Market acceptance and sales of our product candidates will depend on reimbursement policies and may be affected by healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for those medications. Cost containment is a primary concern in the U.S. healthcare industry and elsewhere. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for our product candidates and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of, our product candidates. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates.

In some foreign countries, particularly in Canada and European countries, the pricing of prescription pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we may be required to conduct a clinical study that compares the cost-effectiveness of our product candidates with other available therapies. If reimbursement for our product candidates is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical studies, or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

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. In March 2010, President Obama signed into law the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

Among the provisions of the ACA of importance to our product candidates are the following:

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected;

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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

expansion of healthcare fraud and abuse laws, including the False Claims Act and the AKS, which include, among other things, new government investigative powers and enhanced penalties for non-compliance;

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;

extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals, thereby potentially increasing manufacturers' Medicaid rebate liability;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

the requirements under the federal open payments program and its implementing regulations;

a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

Since its enactment, some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial, congressional, and executive challenges. As a result, there have been delays in the implementation of, and action taken to repeal or replace, certain aspects of the ACA. The U.S. Supreme Court has upheld certain key aspects of the legislation, including a tax-based shared responsibility payment imposed on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly known as the requirement that all individuals maintain health insurance coverage or pay a penalty, referred to as the "individual mandate." However, as a result of tax reform legislation passed in late December 2017, the individual mandate has been eliminated effective January 1, 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise.

Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the cost-sharing subsidies, or CSR, that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. The loss of the CSR

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payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. In addition, the Centers for Medicare & Medicaid Services, or CMS, has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results. We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year through 2027. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for approved products. In addition, there have been several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare and reform government program reimbursement methodologies for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA's approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent labeling and post-marketing testing and other requirements.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing health care legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations, and other health care payors of to contain or reduce costs of health care may adversely affect the demand for any product candidates for which we may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for a product, our ability to generate revenue and achieve or maintain profitability; and the level of taxes that we are required to pay.

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Our future growth may depend, in part, on our ability to commercialize our product candidates in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability may depend, in part, on our ability to commercialize our product candidates in foreign markets for which we may rely on collaboration with third parties. If we commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:

our customers' ability to obtain reimbursement for our product candidates in foreign markets;

our inability to directly control commercial activities because we are relying on third parties;

the burden of complying with complex and changing foreign regulatory, tax, accounting, and legal requirements;

different medical practices and customs in foreign countries affecting acceptance in the marketplace;

import or export licensing requirements;

longer accounts receivable collection times;

longer lead times for shipping;

language barriers for technical training;

reduced protection of intellectual property rights in some foreign countries;

the existence of additional potentially relevant third-party intellectual property rights;

foreign currency exchange rate fluctuations; and

the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions, and changes in tariffs.

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

In order to market any product outside of the United States, however, we must establish and comply with the numerous and varying safety, efficacy, and other regulatory requirements of other countries. Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA or other comparable foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical studies as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States, as well as other risks. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale

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in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in certain countries. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair our ability to market our product candidates in such foreign markets. Any such impairment would reduce the size of our potential market, which could have a material adverse impact on our business, results of operations, and prospects.

Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless, and negligent conduct that fails to: comply with the laws of the FDA and other comparable foreign regulatory authorities; provide true, complete and accurate information to the FDA and other comparable foreign regulatory authorities; comply with manufacturing standards we have established; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, sales, marketing, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by employees and third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties.

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We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, or FCPA, and other worldwide anti-bribery laws.

We are subject to the FCPA, which prohibits companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. We have an ongoing relationship with Sai Life Sciences Ltd., or Sai, a non-U.S. company, as a third-party supplier of custom chemical synthesis of the compounds used in our product candidates such as spiro-beta lactam. Our significant reliance on a foreign supplier demands a high degree of vigilance in preventing our employees and consultants from participation in corrupt activity, because this supplier could be deemed our agent, and we could be held responsible for its actions. The FCPA and similar anti-bribery laws to which we may be subject are complex and far-reaching in nature, and, as a result, we cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, and involve significant costs and expenses, including legal fees. We could also suffer severe penalties, including criminal and civil penalties, disgorgement, and other remedial measures.

Risks related to collaborations with third parties

We depend on our collaboration with Allergan and may depend on collaborations with third parties for the research, development, and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

In July 2015, we entered into a research collaboration agreement with Allergan, focused on the research and discovery of small molecules that modulate NMDArs. Under the research collaboration agreement, Allergan and we may exercise the right to pick certain product candidates from a pool of eligible compounds (which were selected based upon the results of a mutually agreed set of screening assays of molecules from our drug discovery platform) in alternating fashion. On May 16, 2018, Allergan exercised its option to acquire the compound designated AGN-241751, triggering payment of a $1.0 million option fee in connection with such exercise. Allergan may also exercise its option to acquire up to two more of its selected compounds and must pay an option exercise fee for each such compound. The collaboration involves a complex allocation of rights. Under this agreement, each time Allergan exercises its option right with respect to a particular compound, Allergan will exclusively own the intellectual property rights specific to such compound and we will not be permitted to develop or commercialize such compound. When Allergan exercises one of its options with respect to a particular compound, we will not be entitled to any milestones, royalties, or other downstream revenue with respect to that compound other than the $1.0 million exercise fee. When Allergan exercises its option on a compound that ultimately generates any revenue, we are not entitled to receive any of the resulting revenue from such product candidate and, as a result, may not realize the economic benefits of a compound we generated from our discovery platform. We cannot provide any assurance that this collaboration will enhance our business or that we will achieve significant benefits from the collaboration. Moreover, we cannot provide any assurance with respect to the success of the collaboration. See "Business—Research collaboration agreement with Allergan" for more detail.

We may seek third-party collaborators for the research, development, and commercialization of certain of the product candidates we plan to develop. Our likely collaborators for any other collaboration arrangements include large and mid-size pharmaceutical companies, biotechnology companies, or academic institutions. If we enter into any such arrangements with any third parties, we will likely have shared or

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limited control over the amount and timing of resources that our collaborators dedicate to the development or potential commercialization of any product candidates we may seek to develop with them. Our ability to generate revenue from these arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration that we enter into.

Collaborations involving our research programs, or any product candidates we may develop, pose the following risks to us:

collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example, under our collaboration agreement with Allergan, Allergan funds a certain amount for costs associated with our medicinal chemistry, screening, and profiling efforts;

collaborators may not properly obtain, maintain, enforce, or defend intellectual property or proprietary rights relating to our product candidates or research programs or may use our proprietary information in such a way as to expose us to potential litigation or other intellectual property related proceedings, including proceedings challenging the scope, ownership, validity, and enforceability of our intellectual property;

collaborators may own or co-own intellectual property covering our product candidates or research programs that results from our collaboration with them, and in such cases, we may not have the exclusive right or any right to commercialize such intellectual property or such product candidates or research programs;

we may need the cooperation of our collaborators to enforce or defend any intellectual property we contribute to or that arises out of our collaborations, which may not be provided to us;

disputes may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization of our product candidates or research programs or that result in costly litigation or arbitration that diverts management attention and resources;

collaborators may decide not to pursue development and commercialization of any product candidates we develop or may elect not to continue or renew development or commercialization programs based on clinical study results, changes in the collaborator's strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

collaborators may delay clinical studies, provide insufficient funding for a clinical study program, stop a clinical study or abandon a product candidate, repeat or conduct new clinical studies, or require a new formulation of a product candidate for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates or research programs if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

collaborators with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the marketing and distribution of such product candidates;

we may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of control;

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collaborators may undergo a change of control and the new owners may decide to take the collaboration in a direction which is not in our best interest;

collaborators may become bankrupt, which may significantly delay our research or development programs, or may cause us to lose access to valuable technology, know-how, or intellectual property of the collaborator relating to our products, product candidates, or research programs;

key personnel at our collaborators may leave, which could negatively impact our ability to productively work with our collaborators;

collaborations may require us to incur short and long-term expenditures, issue securities that dilute our stockholders, or disrupt our management and business;

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates or our discovery platform; and

collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our development or commercialization program under such collaboration could be delayed, diminished, or terminated.

In addition, the terms and conditions of collaboration agreements, including our research collaboration with Allergan, involve complex legal, business and scientific issues, and certain provisions may be susceptible to multiple interpretations. As with any complex contractual arrangement, disputes may arise between us and our collaborators regarding the terms and conditions of these agreements, including with respect to the scope of rights granted to, or restrictions placed on, each party under these agreements. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights under the agreement, or increase what we believe to be our obligations under the relevant agreement, either of which could materially harm our business, financial condition, results of operations, and prospects.

Moreover, we may face significant competition in seeking appropriate collaborations. Recent business combinations among biotechnology and pharmaceutical companies have resulted in a reduced number of potential collaborators. In addition, the negotiation process is time-consuming and complex, and we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop product candidates or bring them to market and generate product revenue.

If we enter into collaborations to develop and potentially commercialize any product candidates, we may not be able to realize the benefit of such transactions if we or our collaborator elects not to exercise the rights granted under the agreement or if we or our collaborator are unable to successfully integrate a product candidate into existing operations and company culture. In addition, if our agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that

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collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates utilizing the collaborator's technology or intellectual property or require us to stop development of those product candidates completely. We may also find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development programs may be delayed or the perception of us in the business and financial communities could be adversely affected. Many of the risks relating to product development, regulatory approval, and commercialization described in this "Risk factors" section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.

Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator's evaluation of a number of factors. Those factors may include the design or results of clinical studies, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.

In addition, any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect us financially and could harm our business reputation.

Exclusivity and other governance provisions within our agreements with Allergan may prevent us from pursuing alternative product candidates and exercising complete control over our product candidates' development.

Pursuant to our research collaboration agreement with Allergan, during the research term defined therein, we cannot, directly or indirectly, whether alone, or with a third party, engage in any activities to identify, generate, discover, or develop small-molecule compounds that modulate NMDArs, including any collaboration compounds, except as set forth in the agreement. In addition, during the exclusivity period defined in the research collaboration agreement, we may not alone, or with a third party, directly or indirectly engage in (a) the research or preclinical development of any compound or any product for the purpose of the treatment, prevention or diagnosis of any disorders or conditions in a specified field, which

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is defined as any therapeutic, prophylactic, or diagnostic use for certain delineated psychiatric or neurocognitive disorders or conditions, and which we refer to as Allergan's Field, (b) the clinical development of any compound or any product for the treatment, prevention or diagnosis of any disorders and conditions in Allergan's Field, or the manufacture of such compound or product for such purpose, or (c) the commercialization of any compound or any product labelled, or approved or licensed by any regulatory authority, for the treatment, prevention, or diagnosis of any disorders or conditions in Allergan's Field, or the manufacture of such compound or product. We are bound by a similar set of restrictions on our research, development, and commercialization activities with respect to compounds and products in Allergan's Field under an asset contribution agreement that we entered into with Allergan in connection with Allergan's acquisition of Naurex. Except with respect to the compounds for which Allergan exercises its option under the Allergan Collaboration Agreement, Allergan is not precluded under the Allergan Collaboration Agreement or the asset contribution agreement from competing with us outside of Allergan's Field.

Further, our collaboration with Allergan is supervised by a joint steering committee, or JSC. Subject to limitations specified in the agreement, if the JSC is unable to make a decision by consensus and the parties are unable to resolve the issue after referring the matter to designated executive officers of the parties, then such disputed matter shall remain deadlocked until mutual agreement, provided that each party will have the right to make the final decision with respect to any matter concerning its respective selected compounds. These exclusivity and governance provisions may inhibit our development efforts and may materially harm our business, financial condition, results of operations, and prospects.

Risks related to our reliance on third parties

We rely, and expect that we will continue to rely, on third parties to conduct any clinical studies for our product candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We do not have the ability to independently conduct clinical studies. We rely on medical institutions, clinical investigators, contract laboratories, and other third parties, such as CROs, to conduct clinical studies on our product candidates. For example, we have entered into a sponsored research agreement with Northwestern University, or Northwestern, through which Northwestern furnishes the laboratory facilities and equipment necessary to conduct certain research projects and related clinical studies. We enter into agreements with third-party CROs to provide monitors for and to manage data for our ongoing clinical studies. We rely heavily on these parties for execution of clinical studies for our product candidates and control only certain aspects of their activities. As a result, we have less direct control over the conduct, timing, and completion of these clinical studies and the management of data developed through clinical studies than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may:

have staffing difficulties;

fail to comply with contractual obligations;

experience regulatory compliance issues;

undergo changes in priorities or become financially distressed; or

form relationships with other entities, some of which may be our competitors.

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These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical studies and may subject us to unexpected cost increases that are beyond our control. Nevertheless, we are responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific requirements and standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with regulations and guidelines, including Good Clinical Practices, or GCPs, for conducting, monitoring, recording, and reporting the results of clinical studies to ensure that the data and results are scientifically credible and accurate, and that the study patients are adequately informed of the potential risks of participating in clinical studies. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA enforces GCP regulations through periodic inspections of clinical study sponsors, principal investigators and study sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical studies may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical studies before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical studies comply with GCPs. In addition, our clinical studies must be conducted with product candidates produced under cGMP regulations and will require a large number of test patients. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

Although we do design our clinical studies for our product candidates, CROs conduct all of the clinical studies. As a result, many important aspects of our drug development programs are outside of our direct control. In addition, the CROs may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements, but we remain responsible and are subject to enforcement action that may include civil penalties and criminal prosecution for any violations of FDA laws and regulations during the conduct of our clinical studies. If the CROs do not perform clinical studies in a satisfactory manner, breach their obligations to us, or fail to comply with regulatory requirements, the development and commercialization of our product candidates may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs devote to our program or our clinical products. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical studies and this could significantly delay commercialization and require significantly greater expenditures.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. For example, the sponsored research agreement with Northwestern may be terminated by either party upon 60 days' written notice to the other party. If our collaboration is delayed or terminated or our ability to continue to use the current research space is terminated as a result of conflicts of interest, we may not be able to continue our planned research projects and related clinical studies on the expected timeline and may need to spend significant time and efforts to secure alternative lab facilities and equipments. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical studies such CROs are associated with may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

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The manufacture of our product candidates, particularly those that utilize our discovery platform, is complex and we may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, or fail to meet rigorously enforced regulatory standards, our ability to provide supply of our product candidates for clinical studies or our products for patients, if approved, could be delayed or stopped, or we may be unable to maintain a commercially viable cost structure.

The processes involved in manufacturing our drug product candidates, particularly those that utilize our discovery platform, are complex, expensive, highly-regulated, and subject to multiple risks. Further, as product candidates are developed through preclinical studies to late-stage clinical studies towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of planned clinical studies or other future clinical studies.

In addition, the manufacturing process for any products that we may develop is subject to FDA and other comparable foreign regulatory authority approval processes and continuous oversight, and we will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory authority requirements, including, for example, complying with cGMPs, on an ongoing basis. If we or our third-party manufacturers are unable to reliably produce products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product candidates, there is no assurance that either we or our contract manufacturers 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. Any of these challenges could delay completion of clinical studies, require bridging clinical studies or the repetition of one or more clinical studies, increase clinical study costs, delay approval of our product candidate, impair commercialization efforts, increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations, and growth prospects.

We rely completely on third-party suppliers to manufacture our clinical drug supplies for our product candidates, and we intend to rely on third parties to produce preclinical, clinical, and commercial supplies of any future product candidates.

We do not currently have, nor do we plan to acquire, the infrastructure or capability to internally manufacture our clinical drug supply of our product candidates, or any future product candidates, for use in the conduct of our preclinical studies and clinical studies, and we lack the internal resources and the capability to manufacture any product candidates on a clinical or commercial scale. The facilities used by our contract manufacturers to manufacture the active pharmaceutical ingredient and final drug product must complete a pre-approval inspection by the FDA and other comparable foreign regulatory agencies to assess compliance with applicable requirements, including cGMPs, after we submit our NDA or relevant foreign regulatory submission to the applicable regulatory agency.

We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers to comply with cGMPs for manufacture of both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no direct control over our contract manufacturers' ability to maintain adequate quality control, quality assurance, and qualified personnel. Furthermore, all of our contract manufacturers are

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engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. For example, our product candidates are spiro-beta lactams which may require our manufacturers to manufacture them in specifically isolated facilities. If our contract manufacturers cannot successfully manufacture material, such as spiro-beta lactams, that conforms to our specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. As a result, failure to satisfy the regulatory requirements for the production of those materials and products may affect the regulatory clearance of our contract manufacturers' facilities generally. If the FDA or an applicable foreign regulatory agency determines now or in the future that these facilities for the manufacture of our product candidates are noncompliant, we may need to find alternative manufacturing facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market our product candidates. Our reliance on contract manufacturers also exposes us to the possibility that they, or third parties with access to their facilities, will have access to and may appropriate our trade secrets or other proprietary information.

We do not have long-term supply agreements in place with our contractors, and each batch of our product candidates is individually contracted under a quality and supply agreement. If we engage new contractors, such contractors must complete an inspection by the FDA and other applicable foreign regulatory agencies. We plan to continue to rely upon contract manufacturers and, potentially, collaboration partners to manufacture commercial quantities of our product candidates, if approved. Our current scale of manufacturing is adequate to support all of our needs for preclinical studies and clinical study supplies.

We are dependent on single-source suppliers for some of the components and materials used in, and the processes required to develop, our product candidates.

We currently depend on single-source suppliers for our active ingredients used in, and processes required to develop, our product candidates. In particular, we rely on Sai to produce custom chemical synthesis of the compounds used in our product candidates such as spiro-beta lactam. We cannot ensure that our suppliers will remain in business, have sufficient capacity or supply to meet our needs, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to work with us. Our use of single-source suppliers of raw materials, components, key processes, and finished goods exposes us to several risks, including disruptions in supply, price increases, or late deliveries. There are, in general, relatively few alternative sources of supply for substitute components. In particular, given our use of the compound spiro-beta lactam, Sai will need to comply with certain regulatory and contractual requirements which significantly limit our ability to find alternative sources of supply. There are a limited number of suppliers that have the requisite facilities that comply with the required regulatory standards, which may lead to a supply gap in the unexpected event that Sai is unable to provide our products. These new vendors may be unable or unwilling to meet our future demands for our clinical studies or commercial sale. Any disruption in supply from Sai or any other single-source supplier or service provider could lead to supply delays or interruptions which would damage our business, financial condition, results of operations, and prospects. If we have to switch to a replacement supplier, the manufacture and delivery of our compounds could be interrupted for an extended period, adversely affecting our business.

Establishing additional or replacement suppliers for the components or processes used in our product candidates, if required, may not be accomplished quickly. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. For example, the FDA could require additional supplemental data and clinical study data if we rely upon a new supplier for the compounds used in our product candidates. While we seek to maintain adequate inventory of the single-source components and materials used in our

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products, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders.

In addition, as part of the FDA's approval of our product candidates, submission of manufacturing information and a satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where our product candidates are produced is required to assess compliance with cGMPs and assure that the facilities, methods, and controls are adequate to preserve the product candidates' identity, strength, quality, and purity. Such inspections may include inspection of the manufacturers of the individual components of our process, which include the manufacturing processes and facilities of our single-source suppliers. Our current single-source suppliers have not undergone this process nor have they had any components included in any product approved by the FDA.

Our reliance on single-source suppliers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:

delays to the development timelines for our product candidates;

interruption of supply resulting from modifications to or discontinuation of a supplier's operations;

delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier's variation in a component;

a lack of long-term supply arrangements for key components with our suppliers;

inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;

difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;

production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;

delay in delivery due to our suppliers prioritizing other customer orders over ours;

damage to our reputation caused by defective components produced by our suppliers;

increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and

fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.

If any of these risks materialize, costs could significantly increase and our ability to meet demand for our products could be impacted.

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Risks related to our intellectual property rights

If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect our product candidates, others could compete against us more directly by developing and commercializing products similar or identical to ours, which would have a material adverse impact on our business, results of operations, financial condition, and prospects.

Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection in the United States and other countries for commercially important technology, inventions, and know-how related to our business, defend and enforce our patents, should they issue, preserve the confidentiality of our trade secrets, and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking patents intended to cover our products and compositions, their methods of use, and any other inventions that are important to the development of our business. Our owned patents and patent applications relate to NYX-2925, NYX-783, NYX-458, and other NMDAr modulators. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

We currently have no issued patents covering our clinical-stage product candidate NYX-458. We cannot provide any assurances that any of our pending patent applications will mature into issued patents in any particular jurisdiction and, if they do, that such patents will include claims with a scope sufficient to protect our product candidates or otherwise provide any competitive advantage. The patent application and approval process is expensive, complex, and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. If we are unable to obtain or maintain patent protection with respect to any of our proprietary products and technology we develop, our business, financial condition, results of operations, and prospects could be materially harmed.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, which in recent years have been the subject of much litigation, and, therefore, the issuance, scope, validity, enforceability, and commercial value of any patent claims that we may obtain cannot be predicted with certainty. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. 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. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.

Patent applications are generally maintained in confidence until publication. In the United States, for example, patent applications are typically maintained in secrecy for up to 18 months after their filing. Similarly, publication of discoveries in scientific or patent literature often lags behind actual discoveries. Consequently, we cannot be certain that we were the first to file patent applications on our product candidates. There is also no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which could be used by a third party to challenge the validity of our patents, should they issue, or prevent a patent from issuing from a pending patent application. Any of the foregoing could harm our competitive position, business, financial condition, results of operations, and prospects.

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Moreover, our patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented in the United States and abroad. U.S. patents and patent applications may also be subject to interference, derivation, ex parte reexamination, post-grant review, or inter partes review proceedings, supplemental examination and challenges in district court. Patents may also be subjected to opposition, post-grant review, or comparable proceedings lodged in various foreign, both national and regional, patent offices or courts. An adverse determination in any such proceeding could result in either loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. In addition, such proceedings may be costly. Thus, any patents, should they issue, that we may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market, or otherwise commercialize our product candidates.

Furthermore, though a patent, if it were to issue, is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Even if a patent issues and is held to be valid and enforceable, competitors may be able to design around or circumvent our patents, such as using pre-existing or newly developed technology or products in a non-infringing manner. Other parties may develop and obtain patent protection for more effective technologies, designs, or methods. If these developments were to occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor's or potential competitor's product. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents, if and when issued, could put our patents at risk of being invalidated, held unenforceable, or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents, if and when issued, covering our product candidates are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted. In addition, if a court found that valid, enforceable patents held by third parties covered our product candidates, our financial position and results of operations would also be materially and adversely impacted.

We will incur significant ongoing expenses in maintaining our patent portfolio. Should we lack the funds to maintain our patent portfolio or to enforce our rights against infringers, we could be adversely impacted.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

any of our pending patent applications, if issued, will include claims having a scope sufficient to protect our product candidates or any other products or product candidates;

any of our pending patent applications will issue as patents at all;

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we will be able to successfully commercialize our product candidates, if approved, before our relevant patents expire;

we were the first to make the inventions covered by each of our patents and pending patent applications;

we were the first to file patent applications for these inventions;

others will not develop similar or alternative technologies that do not infringe our patents;

others will not use pre-existing technology to effectively compete against us;

any of our patents, if issued, will be found to ultimately be valid and enforceable;

any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

we will develop additional proprietary technologies or product candidates that are separately patentable; or

that our commercial activities or products will not infringe upon the patents or proprietary rights of others.

Moreover, some of our future owned and licensed patents may be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owner's interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us.

If we breach any of the agreements under which we license rights, we could lose license rights that are important to our business. For example, in connection with Allergan's acquisition of Naurex, we entered into a license agreement with Allergan, pursuant to which, among other things, Allergan granted us a non-exclusive license to certain intellectual property rights retained by Allergan in connection with such acquisition. In addition, we are party to a sublicense agreement with Allergan, pursuant to which Allergan granted us a sublicense for certain intellectual property rights that Allergan licenses from Northwestern. We may also need to obtain additional licenses to advance the development and commercialization of other product candidates we may develop. Our existing sublicense agreement with Northwestern imposes, and we expect that future license agreements will impose upon us various development and commercial diligence obligations, payment of milestones and/or royalties and other obligations. If we fail to comply with our obligations under certain of these agreements, we may be liable for damages, and the licensor may have the right to terminate the license, in which event we would not be able to develop, market, or otherwise commercialize products covered by the license. Our business could suffer, for example, if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position may be harmed.

We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Additionally, we rely on unpatented know-how, continuing

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technological innovation to develop, strengthen, and maintain the proprietary and competitive position of our product candidates, which we seek to protect, in part, by confidentiality agreements with our employees and our collaborators and consultants. However, trade secrets are difficult to protect. For example, we may be required to share our trade secrets with third-party licensees, collaborators, consultants, contractors, or other advisors and we have limited control over the protection of trade secrets used by such third parties. Although we use reasonable efforts to protect our trade secrets, including by entering into confidentiality agreements, our employees, consultants, contractors, outside scientific collaborators, and other advisors may unintentionally or willfully disclose our trade secrets and proprietary information to competitors and we may not have adequate remedies for any such disclosure. Enforcing a claim that a third party illegally obtained and used, disclosed, or misappropriated any of our trade secrets is difficult, expensive, and time-consuming, and the outcome is unpredictable. Furthermore, we may not obtain these agreements in all circumstances, and the employees and consultants who are parties to these agreements may breach or violate the terms of these agreements, thus we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. In addition, trade secret laws in the United States vary, and some U.S. courts as well as courts outside the United States are sometimes less willing or unwilling to protect trade secrets. Moreover, 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. Further, our trade secrets could otherwise become known or be independently discovered by our competitors or other third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees, and current employees. If our trade secrets or confidential or proprietary information is divulged to or acquired by third parties, including our competitors, our competitive position in the marketplace, business, financial condition, results of operations, and prospects may be materially adversely affected.

We may be sued for infringing the intellectual property rights of others, which may be costly and time-consuming and may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our product candidates, if approved.

Our success will depend in part on our ability to operate without infringing, misappropriating, or otherwise violating the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products, and methods do not or will not infringe the patents or other intellectual property rights of third parties. We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technologies we use in our business.

The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that our product candidates or the use of our technologies infringes or otherwise violates patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. As we continue to develop and, if approved, commercialize our current product candidates and future product candidates, competitors may claim that our technology infringes their intellectual property rights as part of business strategies designed to impede our successful commercialization. There may be third-party patents or patent applications with claims to compositions, materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because patent claims can be revised before issuance, third parties may have currently pending patent applications which may later result in issued patents that our product candidates may infringe, or which such third parties claim are infringed by our technologies. If a patent holder believes one or more of our product candidates infringes its patent

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rights, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from non-practicing entities that have no relevant drug revenue and against whom our own patent portfolio may thus have no deterrent effect.

The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. If we 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 product candidates and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were to obtain a license, it could be granted on non-exclusive terms, thereby providing our competitors and other third parties access to the same technologies licensed to us. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing our product candidates. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney's fees if we are found to be willfully infringing another party's patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced to take a license.

Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on us. There could also be public announcements of the results of the hearing, motions, or other interim proceedings or developments and if securities analysts or investors perceive those results to be negative, it could cause the price of shares of our common stock to decline. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, intellectual property litigation or claims could force us to do one or more of the following:

cease developing, selling or otherwise commercializing our product candidates;

pay substantial damages for past use of the asserted intellectual property;

obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

in the case of trademark claims, redesign, or rename, some or all of our product candidates to avoid infringing the intellectual property rights of third parties, which may not be possible and, even if possible, could be costly and time-consuming.

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Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition, and prospects.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We enter into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific collaborators, sponsored researchers, and other advisors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. The assignment of intellectual property rights under these agreements may not be automatic upon the creation of the intellectual property or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. For example, even if we have a consulting agreement in place with an academic advisor pursuant to which such academic advisor is required to assign any inventions developed in connection with providing services to us, such academic advisor may not have the right to assign such inventions to us, as it may conflict with his or her obligations to assign all such intellectual property to his or her employing institution.

Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on 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.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on our owned and in-licensed patents and patent applications are or will be due to be paid to the U.S. Patent and Trademark Office, or USPTO, in several stages and various government patent agencies outside of the United States over the lifetime of such patents and patent applications and any patent rights we may own or license in the future. We have systems in place to remind us to pay these fees, and we employ outside firms to remind us or our licensors to pay annuity fees due to foreign patent agencies on our foreign patents and pending foreign patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions over the lifetime of our owned patents and applications. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors or other third parties might be able to enter the market earlier than would otherwise have been the case and this circumstance could have a material adverse effect on our business, financial condition, results of operations, and prospects.

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

Even if our patent applications are issued, competitors and other third parties may infringe, misappropriate, or otherwise violate our patents and other intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming and divert the attention of our management and key personnel from our business operations. Furthermore, many of our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. Our ability to enforce our patent rights also depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor's or potential competitor's product.

In an infringement proceeding, a court may disagree with our allegations and 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, or may decide that a patent of ours is invalid, unenforceable or not infringed. An adverse result in any litigation, defense or post-grant proceedings could result in one or more of our patents being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. If any of our patents, if and when issued, covering our product candidates are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our involvement in litigation or interference proceedings may fail and, even if successful, may result in substantial costs, and distract our management and other employees. We may not be able to prevent infringement, misappropriation of, or other violations of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

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. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

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Issued patents covering our product candidates could be found invalid or unenforceable if challenged.

If we initiated legal proceedings against a third party to enforce a patent, if and when issued, covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. The outcome of any such proceeding is generally unpredictable.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for unenforceability assertions of a patent include allegations that someone connected with prosecution of the patent application that matured into the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution of the patent application. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions, e.g., opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have a material adverse impact on our business.

We may not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing and prosecuting patent applications, and defending patents on product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. In addition, the statutory deadlines for pursuing patent protection in individual foreign jurisdictions are based on the priority date of each of our patent applications and we may not timely file foreign patent applications. For the patent families related to NYX-458, as well as for many of the patent families that we own, the relevant statutory deadlines have not yet expired. Thus, for each of the patent families that we believe provide coverage for our lead product candidates, we will need to decide whether and where to pursue protection outside the United States. For patent families relating to NYX-2925 and NYX-783, we have chosen to pursue patent protection in only the United States, Mexico, Canada, and certain jurisdictions in Europe, Asia, Australia, and South America.

Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

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The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biotechnology or pharmaceuticals. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of or marketing of competing products in violation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we do not obtain additional protection under the Hatch-Waxman Act and similar foreign legislation by extending the patent terms and obtaining data exclusivity for our product candidates, our business may be materially harmed.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date in its chain of priority. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from competitive medications, including generic medications. Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

Depending upon the timing, duration, and specifics of FDA marketing approval of our product candidates, one or more of the U.S. patents we own may be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain a patent term extension or the term of any such extension is less than we request, the duration of patent protection we obtain for our product candidates may not provide us with any meaningful commercial or competitive

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advantage, our competitors may obtain approval of competing products earlier than they would otherwise be able to do so, and our ability to generate revenues could be materially adversely affected.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming, and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation: the Leahy-Smith America Invents Act. The America Invents Act includes a number of significant changes to U.S. patent law. After March 2013, under the America Invents Act, the United States transitioned to a first-inventor-to-file system in which, assuming that other requirements for patentability are met, the first-inventor-to-file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The America Invents Act also includes provisions that affect the way patent applications will be prosecuted and that may also affect patent litigation. It is not yet clear what, if any, impact the America Invents Act will have on the operation of our business. 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 any patents that may issue from our patent applications, all of which could have a material adverse effect on our business and financial condition.

In addition, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. The full impact of these decisions is not yet known. For example, on March 20, 2012, in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc. , the Court held that several claims drawn to measuring drug metabolite levels from patient samples and correlating them to drug doses were not patentable subject matter. The decision appears to impact diagnostics patents that merely apply a law of nature via a series of routine steps and it has created uncertainty around the ability to obtain patent protection for certain inventions. Additionally, on June 13, 2013, in Association for Molecular Pathology v. Myriad Genetics, Inc. , the Court held that claims to isolated genomic DNA are not patentable, but claims to complementary DNA molecules are patent eligible because they are not a natural product. The effect of the decision on patents for other isolated natural products is uncertain. However, on March 4, 2014, the USPTO issued a memorandum to patent examiners providing guidance for examining claims that recite laws of nature, natural phenomena or natural products under the Myriad and Prometheus decisions. This guidance did not limit the application of Myriad to DNA but rather applied the decision to other natural products.

In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on these and other decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce any patents that may issue in the future.

We may be subject to damages resulting from claims that we or our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers.

Our employees have been previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We also engage advisors and consultants who are concurrently employed at universities or who perform services for other entities.

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Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, and although we are not aware of any claims currently pending against us, we may be subject to claims that we or our employees, advisors, or consultants have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third party. We have and may in the future also be subject to claims that an employee, advisor, or consultant performed work for us that conflicts with that person's obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our product candidates, which would materially adversely affect our commercial development efforts.

Numerous factors may limit any potential competitive advantage provided by our intellectual property rights.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:

others may be able to develop and/or practice technology that is similar to our technology or aspects of our technology but that is not covered by the claims of patents, should such patents issue from our patent applications;

we might not have been the first to make the inventions covered by a pending patent application that we own;

we might not have been the first to file patent applications covering an invention;

others may independently develop similar or alternative technologies without infringing our intellectual property rights;

pending patent applications that we own or license may not lead to issued patents;

patents, if issued, that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;

third parties may compete with us in jurisdictions where we do not pursue and obtain patent protection;

we may not be able to obtain and/or maintain necessary or useful licenses on reasonable terms or at all;

third parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising exclusive rights over that intellectual property;

we may not develop or in-license additional proprietary technologies that are patentable; and

the patents of others may have an adverse effect on our business.

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Should any of these events occur, they could significantly harm our business and results of operations.

General company-related risks

We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

As of March 31, 2018, we had 60 full-time employees and no part-time employees, and in connection with becoming a public company, we expect to increase our number of employees and the scope of our operations. To manage our anticipated development and expansion, 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. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees, and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of our product candidates. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our product candidates, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

Our future success depends on our ability to retain our management team and to attract, retain, and motivate qualified personnel.

Our ability to compete in the highly competitive biotechnology and biopharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific, and medical personnel. In order to induce valuable employees to continue their employment with us, we have provided stock options that vest over time. The value to employees of stock options that vest over time is significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies.

We are highly dependent on our management, scientific and medical personnel, including our Chief Executive Officer, Norbert G. Riedel, Ph.D. Despite our efforts to retain valuable employees, members of our management, scientific, and development teams may terminate their employment with us on short notice. The loss of the services of any of our executive officers, including Dr. Riedel, other key employees and other scientific and medical advisors, and an inability to find suitable replacements could result in delays in product development and harm our business. Pursuant to their employment arrangements, each of our executive officers, and other employees may voluntarily terminate their employment at any time, with or without notice. Our success also depends on our ability to continue to attract, retain, and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.

We may not be able to attract or retain qualified management and scientific personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical, biotechnology, pharmaceutical, and other businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles,

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and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we may be able to offer. We also experience competition for the hiring of scientific personnel from universities and research institutions. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize product candidates will be limited.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

The use of our product candidates in clinical studies and the sale of our product candidates, if approved, exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, or others selling or otherwise coming into contact with our product candidates. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

withdrawal of subjects from our clinical studies;

substantial monetary awards to patients or other claimants;

decreased demand for our product candidates or any future product candidates following marketing approval, if obtained;

damage to our reputation and exposure to adverse publicity;

increased FDA warnings on product labels;

litigation costs;

distraction of management's attention from our primary business;

loss of revenue; and

the inability to successfully commercialize our product candidates or any future product candidates, if approved.

We maintain product liability insurance coverage for our clinical studies with a $5.0 million annual aggregate coverage limit. Nevertheless, our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approval for our product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability

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claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business, and prospects could be materially adversely affected.

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

As a public company, and particularly after we are no longer an "emerging growth 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 of 2002, or the Sarbanes-Oxley Act, and rules subsequently implemented by the SEC and The Nasdaq Stock Market have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. 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.

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remain an "emerging growth company," we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could result in sanctions or other penalties that would harm our business.

After the completion of this offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of The Nasdaq Global Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Commencing with our fiscal year ending the year after this offering is completed, we must perform system and process design evaluation and testing of the effectiveness of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts. Prior to this offering, we have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

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We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

In order to satisfy our obligations as a public company, we will need to hire additional qualified accounting and financial personnel with appropriate public company experience.

As a newly public company, we will need to establish and maintain effective disclosure and financial controls and make changes in our corporate governance practices. We will need to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and maintain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts.

Changes in tax law, including the recently passed comprehensive tax reform bill, could adversely affect our business and financial condition.

The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the TCJA, which significantly reforms the Internal Revenue Code of 1986, as amended, or the Code. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for net interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions generally referred to as "orphan drugs"). We continue to examine the impact this tax reform legislation may have on our business. However, the effect of the TCJA on our business, whether adverse or favorable, is uncertain, and may not become evident for some period of time. We urge investors to consult with their legal and tax advisers regarding the implications of the TCJA and other changes in tax laws on an investment in our common stock.

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Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

As of December 31, 2017, we had federal and state net operating loss, or NOL, carryforwards of $48.8 million and $4.6 million, respectively, which begin to expire in 2027. Under Section 382 of the Code changes in our ownership may limit the amount of our net operating loss carryforwards and research and development tax credit carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and research and development tax credit carryforwards before they expire. The completion of this offering, together with private placements and other transactions that have occurred since our inception, may trigger such an ownership change pursuant to Section 382. Any such limitation, whether as the result of this offering, prior private placements, sales of our common stock by our existing stockholders, or additional sales of our common stock by us after this offering, could have a material adverse effect on our results of operations in future years. We have not yet completed a Section 382 analysis, and therefore, there can be no assurances that the NOL is already not limited. In addition, the reduction of the corporate tax rate under the TCJA may cause a reduction in the economic benefit of our NOL carryforwards and other deferred tax assets available to us.

Unfavorable global economic conditions could adversely affect our business, financial condition, or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the recent global financial crisis, could result in a variety of risks to our business, including, weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

We, or the third parties upon whom we depend, may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition, and prospects. If a natural disaster, power outage, or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers and suppliers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

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

Despite the implementation of security measures, our internal computer systems and those of our third-party 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 programs. For example, the loss of clinical study data for 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 results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.

We may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

We may acquire additional businesses or products, form strategic alliances, or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing, and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot provide assurance that, following any such acquisition, we will achieve the synergies expected in order to justify the transaction.

Risks related to our common stock

Market volatility may affect our stock price and the value of your investment.

Following this offering, the market price for our common stock is likely to be volatile, in part because our common stock has not been previously traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

plans for, progress of, or results from preclinical studies and clinical studies of our product candidates;

the failure of the FDA to approve our product candidates;

announcements of new products, technologies, commercial relationships, acquisitions, or other events by us or our competitors;

the success or failure of other therapies for disorders of the brain and nervous system;

regulatory or legal developments in the United States and other countries;

failure of our product candidates, if approved, to achieve commercial success;

fluctuations in stock market prices and trading volumes of similar companies;

general economic, industry, and market conditions and overall fluctuations in U.S. equity markets;

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variations in our quarterly operating results or those of companies that are perceived to be similar to us;

changes in our financial guidance or securities analysts' estimates of our financial performance;

changes in accounting principles;

our ability to raise additional capital and the terms on which we can raise it;

sales of large blocks of our common stock, including sales by our executive officers, directors, and significant stockholders;

additions or departures of key personnel;

discussion of us or our stock price by the press and by online investor communities;

market conditions in the pharmaceutical and biotechnology sectors; and

other risks and uncertainties described in these risk factors.

In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. Following periods of such volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources from our business.

An active trading market for our common stock may not develop, and you may not be able to resell your shares at or above the initial public offering price.

Prior to this offering, there has been no public market for shares of our common stock. Although we anticipate that our common stock will be approved for listing on The Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price of our common stock will be determined through negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our common stock after this offering. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the initial public offering price or at the time that they would like to sell.

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

You will suffer immediate and substantial dilution in the net tangible book value of the common stock you purchase in this offering. Assuming an initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, purchasers of common stock in this offering will experience immediate dilution of $              per share in net tangible book value of the common stock. In addition, investors purchasing common stock in this offering will contribute         % of the total amount invested by stockholders since inception but will only own         % of the shares of common stock

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outstanding. In the past, we issued securities to acquire common stock at prices significantly below the initial public offering price. To the extent these outstanding securities are ultimately exercised, investors purchasing common stock in this offering will sustain further dilution. See "Dilution" for a more detailed description of the dilution to new investors in the offering.

Our executive officers, directors, principal stockholders, and their affiliates will continue to exercise significant control over our company after this offering, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control.

Immediately following the completion of this offering, and disregarding any shares of common stock that they purchase in this offering, the existing holdings of our executive officers, directors, principal stockholders, and their affiliates, including investment funds affiliated with Bain Capital Life Sciences, Adams Street, New Leaf Ventures, Longitude, and Frazier, will represent beneficial ownership, in the aggregate, of approximately         % of our outstanding common stock, assuming no exercise of the underwriters' option to acquire additional common stock in this offering and assuming we issue the number of shares of common stock as set forth on the cover page of this prospectus. As a result, these stockholders, if they act together, will be able to influence our management and affairs and control the outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets. These stockholders acquired their shares of common stock for substantially less than the price of the shares of common stock being acquired in this offering, and these stockholders may have interests, with respect to their common stock, that are different from those of investors in this offering and the concentration of voting power among these stockholders may have an adverse effect on the price of our common stock. In addition, this concentration of ownership might adversely affect the market price of our common stock by:

delaying, deferring, or preventing a change of control of us;

impeding a merger, consolidation, takeover, or other business combination involving us; or

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

See "Principal stockholders" in this prospectus for more information regarding the ownership of our outstanding common stock by our executive officers, directors, principal stockholders and their affiliates.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the market price of our common stock could decline. Based upon the number of shares of common stock, on an as-converted basis, outstanding as of March 31, 2018, upon the completion of this offering, we will have outstanding a total of                           shares of common stock, assuming no exercise of the underwriters' option to purchase additional shares. Of these shares, as of the date of this prospectus, approximately                           shares of our common stock, plus any shares sold upon exercise of the underwriters' option to purchase additional shares, will be freely tradable, without restriction, in the public market immediately following this offering, assuming that current stockholders do not purchase shares in this offering.

The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. The lock-up agreements contain important exceptions that govern their applicability. After the lock-up

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agreements expire, based upon the number of shares of common stock, on an as-converted basis, outstanding as of March 31, 2018 up to an additional                           shares of common stock will be eligible for sale in the public market,                           of which shares are held by directors, executive officers, and other affiliates and will be subject to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. The representatives of the underwriters, however, may, in their sole discretion, permit our officers, directors, and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

In addition, as of March 31, 2018,                           shares of common stock that are either subject to outstanding options or reserved for future issuance under our equity incentive plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.

After this offering, the holders of approximately                           shares of our common stock will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the market our common stock.

We have broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

We will have considerable discretion in the application of the net proceeds of this offering. We intend to use the net proceeds from this offering together with our existing cash and cash equivalents, to fund our ongoing Phase 2 clinical study of NYX-2925 in subjects with painful DPN through completion, to fund our ongoing Phase 2 exploratory clinical study of NYX-2925 in subjects with fibromyalgia through completion, to advance NYX-783 for the treatment of PTSD through completion of Phase 1 clinical development and our planned Phase 2 clinical study, to advance NYX-458 for the treatment of Parkinson's disease cognitive impairment through completion of our planned Phase 1 clinical development and into our planned Phase 2 clinical study, and to fund clinical studies designed to explore NMDAr-dependent biomarkers, to further develop any additional product candidates that we select, and for working capital and other general corporate purposes, which will include expanding our internal research and development capabilities, hiring of additional personnel, capital expenditures and the costs of operating as a public company. As a result, investors will be relying upon management's judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

After the completion of this offering, we may be at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, even one that may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders, and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. 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, which is responsible for appointing the members of our management.

Our bylaws contain an exclusive forum provision, which may limit a stockholder's ability to bring a claim in a judicial forum it finds favorable and may discourage lawsuits with respect to such claims.

Our amended and restated bylaws, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part, will provide that the United States District Court for the Northern District of Illinois will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. In addition, our amended and restated bylaws will provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions. We have chosen the United States District Court for the Northern District of Illinois as the exclusive forum for such causes of action because our principal executive offices are located in Evanston, Illinois. Some companies that have adopted similar federal district court forum selection provisions are currently subject to a suit in the Court of Chancery of the State of Delaware brought by stockholders who assert that the federal district court forum selection provision is not enforceable. We recognize that the federal district court forum selection clause may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Illinois. Additionally, the forum selection clauses in our amended and restated bylaws may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us. Alternatively, if the federal district court forum selection provision is found inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have an adverse effect on our business, financial condition or results of operations. The United States District Court for the Northern District of Illinois may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

We are an "emerging growth company," and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not

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limited to, not being required to comply with the auditor attestation requirements of Section 404, 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. If we choose not to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, our auditors will not be required to attest to the effectiveness of our internal control over financial reporting. As a result, investors may become less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other deficiencies in our internal controls go undetected may increase. If we choose to provide reduced disclosures in our periodic reports and proxy statements while we are an "emerging growth company," investors would have access to less information and analysis about our executive compensation, which may make it difficult for investors to evaluate our executive compensation practices. We cannot predict if investors will find our common stock less attractive because we will 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 be more volatile. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We will continue to remain an "emerging growth company" until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering, (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.07 billion, (3) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years, or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

In addition, as an "emerging growth company" the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividend on our common stock and do not currently intend to do so in the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business, and do not anticipate declaring or paying any cash dividends in the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them.

If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate, or unfavorable research about us, our business or our market, our stock price, and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us, our business, our market, or our competitors. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts cover our company, the trading price and volume of our stock would likely be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

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Special note regarding forward-looking statements and market data

This prospectus, including the sections entitled "Prospectus summary," "Risk factors," "Management's discussion and analysis of financial condition and results of operations," and "Business," contains express or implied forward-looking statements that are based on our management's belief and assumptions and on information currently available to our management. These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about :

the timing, progress, and results of preclinical studies and clinical studies for NYX-2925, NYX-783, NYX-458, and any future product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the studies will become available, and our research and development programs;

undesirable side effects or other properties relating to our product candidates that could delay or prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences following any potential marketing approval;

the potential for our identified research priorities to advance our technologies;

the potential benefits of, and our ability to maintain our collaboration with, Allergan plc, and establish or maintain future collaborations or strategic relationships or obtain additional funding;

the potential for substantial delays in our clinical studies or our failure to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities;

our ability to obtain and maintain regulatory approval of our product candidates, NYX-2925, NYX-783, NYX-458, and any other future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering NYX-2925, NYX-783, NYX-458, and any additional product candidates we may develop, and our ability not to infringe, misappropriate, or otherwise violate any third-party intellectual property rights;

our ability and the potential to successfully manufacture our product candidates for clinical studies and for commercial use, if approved;

our ability to commercialize our products in light of the intellectual property rights of others;

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

our plans to research, develop, and commercialize our product candidates;

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our ability to attract collaborators with development, regulatory, and commercialization expertise;

the size and growth potential of the markets for our product candidates and our ability to serve those markets;

the rate and degree of market acceptance and clinical utility of NYX-2925, NYX-783, NYX-458, and any future product candidates we may develop, if approved;

the pricing and reimbursement of NYX-2925, NYX-783, NYX-458, and any future product candidates we may develop, if approved;

regulatory developments in the United States and foreign countries;

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

the success of competing therapies that are or may become available;

our ability to retain the continued service of our key professionals and to identify, hire, and retain additional qualified professionals;

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

the impact of laws and regulations;

our expectations related to the use of proceeds from this offering; and

our expectations regarding the time during which we will be an "emerging growth company" under the Jumpstart Our Business Startups Act.

In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under "Risk factors" and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events, or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

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The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms, or other independent sources that we believe to be reliable sources. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section titled "Risk factors" and elsewhere in this prospectus. Some data are also based on our good faith estimates.

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Use of proceeds

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

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our net proceeds to us from this offering by $               million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us. An increase of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) our net proceeds from this offering by $               million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of one million shares in the number of shares offered by us together with a concomitant $1.00 increase in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase the net proceeds to us from this offering by $               million after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Conversely, a decrease of one million shares in the number of shares offered by us together with a concomitant $1.00 decrease in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would decrease the net proceeds to us from this offering by $               million after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.

We are undertaking this offering in order to access the public capital markets and to increase our liquidity. We anticipate that we will use the net proceeds received by us in this offering, together with our existing cash and cash equivalents, as follows:

approximately $              to fund our ongoing Phase 2 clinical study of NYX-2925 for the treatment of painful DPN through completion;

approximately $              to fund our ongoing Phase 2 exploratory clinical study of NYX-2925 in subjects with fibromyalgia through completion;

approximately $              to advance NYX-783 for the treatment of PTSD through completion of Phase 1 clinical development and through completion of our planned Phase 2 clinical study;

approximately $              to advance NYX-458 for the treatment of Parkinson's disease cognitive impairment through completion of our planned Phase 1 clinical development and into our planned Phase 2 clinical study; and

the remainder, if any, to fund clinical studies designed to explore NMDAr-dependent biomarkers, to further develop any additional product candidates that we select, and for working capital and other general corporate purposes, which will include expanding our internal research and development

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Based on our current plans, we believe our cash and cash equivalents, together with the net proceeds to us from this offering, will be sufficient to fund our operations through                           . We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We will need to raise substantial additional funds to complete registration trials for NYX-2925 and NYX-783, and before we can expect to commercialize any products, if approved. We will also require additional funds to complete development of NYX-458 for the treatment of Parkinson's disease cognitive impairment, including for the completion of our planned Phase 2 clinical study, the amounts of which will depend on the ultimate clinical development paths we pursue. We may satisfy our future cash needs through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches.

The expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from preclinical studies or clinical studies we may commence in the future, as well as our existing collaboration with Allergan and any other collaborations that we may enter into with third parties for NYX-2925, NYX-783, NYX-458, or any future product candidates or business development opportunities we may engage in for our programs 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 these uses, we intend to invest the net proceeds in high-quality, investment-grade, short-term fixed income instruments, which include corporate, financial institution, federal agency or U.S. government obligations, or hold them in cash.

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Dividend policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects, then applicable contractual restrictions, and any other factors deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.

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Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2018:

on an actual basis;

on a pro forma basis to give effect to:

the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 560,180,239 shares of common stock upon the completion of this offering; and

the filing and effectiveness of our amended and restated certificate of incorporation upon the closing of this offering; and

on a pro forma as adjusted basis to give further effect to our issuance and sale of                           shares of common stock in this offering at an assumed initial public offering price of $              per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the following table together with "Selected financial data," "Management's discussion and analysis of financial condition and results of operations," "Description of capital stock," and the financial statements and related notes appearing elsewhere in this prospectus.

 
   
   
   
 
 
  As of March 31, 2018
 
(in thousands, except per share data)
  Actual
  Pro forma
  Pro forma
as adjusted

 

Cash and cash equivalents

  $ 82,350   $ 82,350        

Convertible preferred stock—Series A-1, $0.01 par value, 151,773 shares authorized, issued and outstanding; no shares authorized, issued or outstanding, pro forma (unaudited) and pro forma as adjusted

    22,650            

Convertible preferred stock—Series A-2, $0.01 par value, 173,453 shares authorized, issued and outstanding; no shares authorized, issued or outstanding, pro forma (unaudited) and pro forma as adjusted

    39,979            

Convertible preferred stock—Series B, $0.01 par value, 234,955 shares authorized, issued and outstanding; no shares authorized, issued or outstanding, pro forma (unaudited) and pro forma as adjusted

    69,757            

Stockholders' (deficit) equity:

                   

Common stock, $0.01 par value, 900,000 shares authorized, 149,388 issued and outstanding;              shares authorized, 709,569 shares issued and outstanding, pro forma (unaudited) ;              shares authorized,              shares issued and outstanding, pro forma as adjusted

    1,494     7,096        

Additional paid-in capital

    11,569     138,353        

Accumulated deficit

    (63,929 )   (63,929 )      

Total stockholders' (deficit) equity

  $ (50,866 ) $ 81,520        

Total capitalization

  $ 81,520   $ 81,520        

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The actual, pro forma, and pro forma as adjusted information set forth in the table excludes:

90,356,401 shares of common stock, issuable upon the exercise of stock options outstanding as of March 31, 2018, at a weighted-average exercise price of $0.14 per share;

17,703,802 shares of common stock reserved for future issuance under our 2015 Plan as of March 31, 2018, which will cease to be available for issuance at the time that our 2018 Plan becomes effective;

              additional shares of common stock reserved for future issuance under our 2018 Plan, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part; and

              additional shares of common stock reserved for future issuance under our 2018 ESPP, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part.

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Dilution

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

Our historical net tangible book value (deficit) as of March 31, 2018 was $(50.9) million, or $(0.34) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and convertible preferred stock, which is not included within our stockholders' (deficit) equity. Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the number of shares of our common stock outstanding as of March 31, 2018.

Our pro forma net tangible book value (deficit) as of March 31, 2018 was $(              ) million, or $              per share of our common stock. Pro forma net tangible book value (deficit) represents the amount of our total tangible assets less our total liabilities, after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 560,180,239 shares of common stock upon the completion of this offering. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total number of shares outstanding as of March 31, 2018, after giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 560,180,239 shares of our common stock upon the completion of this offering.

After giving further effect to our sale of              shares of common stock in this offering 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, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2018 would have been approximately $               million, or approximately $              per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $              to our existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value per share of approximately $              to new investors purchasing common stock in this offering. Dilution per share to new investors purchasing common stock in this offering is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

 
   
   
 

Assumed initial public offering price per share

  $          

Historical net tangible book value (deficit) per share as of March 31, 2018

        $ (0.34 )

Increase in historical net tangible book value (deficit) per share attributable to pro forma adjustments described above

             

Pro forma net tangible book value (deficit) per share as of March 31, 2018

  $          

Increase in pro forma as adjusted 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 this offering

  $          

Dilution per share to new investors purchasing shares in this offering

  $          

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma

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as adjusted net tangible book value per share after this offering by $              per share and the dilution to new investors purchasing common stock in this offering by $              per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us. An increase of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase the pro forma as adjusted net tangible book value per share after this offering by $              and decrease the dilution per share to new investors participating in this offering by $              , assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions. A decrease of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by $              and increase the dilution per share to new investors participating in this offering by $              , assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions.

If the underwriters exercise their option to purchase additional shares of common stock in this offering in full at the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover of this prospectus and assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book value per share after this offering would be $              per share, and the dilution in pro forma as adjusted net tangible book value per share to new investors purchasing common stock in this offering would be $              per share.

The following table summarizes, on a pro forma as adjusted basis, as of March 31, 2018, the number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by new investors in this offering 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, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
   
   
   
   
   
 
 
  Shares purchased   Total consideration   Average
price per
share

 
 
  Number
  Percent
  Amount
  Percent
 

Existing stockholders

          %   $       %   $    

New investors

                               

Total

          100%   $       100%   $    

The table above assumes no exercise of the underwriters' option to purchase additional shares in this offering. If the underwriters' option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to         % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors participating in the offering would be increased to         % of the total number of shares outstanding after this offering.

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $               million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by               percentage points and, in the case

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of a decrease, would decrease the percentage of total consideration paid by new investors by               percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase (decrease) of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $               million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by               percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by               percentage points, assuming no change in the assumed initial public offering price.

The tables above do not include:

90,356,401 shares of common stock issuable upon the exercise of stock options outstanding as of March 31, 2018, at a weighted-average exercise price of $0.14 per share;

17,703,802 shares of common stock reserved for future issuance under our 2015 Plan as of March 31, 2018, which will cease to be available for issuance at that time that our 2018 Plan becomes effective;

              additional shares of common stock reserved for future issuance under our 2018 Plan, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part; and

              additional shares of common stock reserved for future issuance under our 2018 ESPP, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part.

To the extent that outstanding options are exercised or shares are issued under our 2018 Plan or 2018 ESPP, you will experience further dilution. In addition, we may choose to raise additional capital 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 additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.

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Selected financial data

You should read the following selected financial data below together with our financial statements and the related notes appearing at the end of this prospectus and the "Management's discussion and analysis of financial condition and results of operations" section of this prospectus. The selected financial data in this section are not intended to replace the financial statements and are qualified in their entirety by the financial statements and related notes appearing at the end of this prospectus. We have derived the statement of operations data for the years ended December 31, 2016 and 2017 and the balance sheet data as of December 31, 2016 and 2017 from our audited financial statements appearing at the end of this prospectus. We have derived the statement of operations data for the three months ended March 31, 2017 and 2018 and the balance sheet data as of March 31, 2018 from our unaudited financial statements appearing at the end of this prospectus. The unaudited financial statements have been prepared on the same basis as our audited financial statements and include, in the opinion of management, all adjustments that management considers necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of our future results and our interim results are not necessarily indicative of results to be expected for a full fiscal year or any other interim period.

 
   
   
   
   
 
 
  Years ended December 31,   Three months ended
March 31,
 
(in thousands, except per share data)
  2016
  2017
  2017
  2018
 

Statements of operations data:

                         

Collaboration and grant revenue

  $ 9,792   $ 4,962   $ 1,145   $ 2,464  

Operating expenses:

                         

Research and development

    22,743     31,644     8,662     12,224  

General and administrative

    4,766     5,551     1,232     2,049  

Total operating expenses

    27,509     37,195     9,894     14,273  

Loss from operations

    (17,717 )   (32,233 )   (8,749 )   (11,809 )

Other income

    2,239     165     52     137  

Net loss and comprehensive loss

  $ (15,478 ) $ (32,068 ) $ (8,697 ) $ (11,672 )

Net loss per share attributable to common stockholders, basic and diluted

  $ (0.11 ) $ (0.22 ) $ (0.06 ) $ (0.08 )

Weighted-average number of common shares outstanding, basic and diluted

    135,252     143,336     140,287     148,357  

Pro forma net loss per share, basic and diluted (unaudited)

        $ (0.07 )       $ (0.02 )

Pro forma weighted-average common shares outstanding, basic and diluted (unaudited)

          464,297           708,538  

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  As of December 31,   As of
March 31,
 
(in thousands)
  2016
  2017
  2018
 

Balance sheet data:

                   

Cash and cash equivalents

  $ 16,180   $ 92,136   $ 82,350  

Working capital(1)

    12,726     90,661     79,477  

Total assets

    18,646     97,322     88,810  

Convertible preferred stock

    22,650     132,386     132,386  

Total stockholders' deficit

    (8,551 )   (39,718 )   (50,866 )

(1)    We define working capital as current assets less current liabilities. See our financial statements for further details regarding our current assets and current liabilities.

A $1.00 increase (decrease) in the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, total assets, and total stockholders' (deficit) equity by approximately $               million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us. An increase (decrease) of one million shares 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' (deficit) equity by approximately $               million, assuming the assumed initial public offering price of $              per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discount and estimated offering expenses payable by us.

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Management's discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected financial data" and our financial statements and related notes appearing in this prospectus. Some of the information contained in this management's discussion and analysis of financial condition and results of operations or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See "Special note regarding forward-looking statements and market data." As a result of many factors, including those factors set forth in the "Risk factors" section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel, proprietary, synthetic small molecules for the treatment of brain and nervous system disorders. We focus our efforts on targeting and modulating N-methyl-D-aspartate receptors, or NMDArs, which are vital to normal and effective function of the brain and nervous system. We believe leveraging the therapeutic advantages of the differentiated modulatory mechanism of our compounds will drive a paradigm shift in the treatment of disorders of the brain and nervous system.

We are advancing a pipeline of distinct product candidates derived from our NMDAr modulator discovery platform, or discovery platform. This platform enables us to discover compounds that have the potential to modulate NMDArs optimally. We are currently studying our first product candidate, NYX-2925, in two Phase 2 studies in chronic pain. The first is in subjects with painful diabetic peripheral neuropathy, or DPN, and the second is in subjects with fibromyalgia. We expect to report top-line data from these studies in the first half of 2019. Our second product candidate, NYX-783, has been evaluated in Phase 1 clinical development. We intend to develop NYX-783 for the treatment of post-traumatic stress disorder, or PTSD, and plan to initiate a Phase 2 clinical study in the second half of 2018. Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an investigational new drug, or IND, application to the U.S. Food and Drug Administration, or FDA, in May 2018. We plan to initiate a Phase 1 study with NYX-458 in the second half of 2018. We intend to develop NYX-458 for the treatment of cognitive impairment associated with Parkinson's disease.

Since our inception in June 2015, we have devoted substantially all of our resources to: identifying and developing our product candidate portfolio; organizing and staffing our company; raising capital; developing manufacturing capabilities; conducting clinical studies; and providing general and administrative support for these operations. To date, we have primarily financed our operations through the issuance and sale of our convertible preferred stock. From our inception through March 31, 2018, we have raised an aggregate of $135 million of gross proceeds from sales of our convertible preferred stock. As of March 31, 2018, we had cash and cash equivalents in the amount of $82.4 million.

Since inception, we have never generated revenue from the sale of our products and have incurred significant net losses. Our revenue has been primarily derived from a research collaboration agreement with Allergan plc, or Allergan, a development services agreement with Allergan, and research and development grants from the U.S. government. There are no repayment or royalty obligations with respect

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to such grants. Our net losses were $15.5 million and $32.1 million for the years ended December 31, 2016 and 2017, and $8.7 million and $11.7 million for the three months ended March 31, 2017 and 2018, respectively. As of March 31, 2018, we had an accumulated deficit of $63.9 million. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

advance the clinical development of our lead product candidates;

continue the research and development of our preclinical product candidates;

seek to identify and develop additional product candidates;

seek marketing approvals for any of our product candidates for which we successfully complete clinical development;

develop and expand our sales, marketing, and distribution capabilities for our product candidates for which we obtain marketing approval;

scale up our manufacturing processes and capabilities to support our ongoing preclinical activities and clinical studies of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

maintain, expand, and protect our intellectual property portfolio;

expand our operational, financial, and management systems and increase personnel, including personnel to support our clinical development, manufacturing, and commercialization efforts; and

increase our product liability and clinical trial insurance coverage as we initiate our clinical studies and commercialization efforts.

We believe that our available funds will be sufficient to fund our operations for at least the next                  , without giving effect to any anticipated proceeds from this offering. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate or enter into collaborative agreements with third parties, which we expect will take a number of years and the outcome of which is uncertain. To fund our current and future operating plans, we will need additional capital, which we may obtain through one or more equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our preclinical and clinical development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

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Financial operations overview

Collaboration and grant revenue

We have not generated any revenue from product sales. Our revenue to date has been primarily derived from a research collaboration agreement with Allergan; a development services agreement with Allergan, which was put in place to continue certain development activities for a pre-determined period of time following Allergan's acquisition of Naurex, as agreed to by both parties; and research and development grants from the U.S. government which have no repayment or royalty obligations. The development services agreement with Allergan was terminated in October 2016. Therefore, we have not generated any revenues under this agreement since October 2016 and do not expect to generate revenues in the future under this agreement.

Operating expenses

Research and development expenses

Research and development activities account for a significant portion of our operating expenses. We expense research and development costs as incurred. Research and development expense consists of costs incurred in connection with the development of our product candidates, including:

fees paid to consultants, sponsored researchers, and CROs, including in connection with our preclinical and clinical studies, and other related clinical study fees, such as for investigator grants, patient screening, laboratory work, clinical study database management, clinical study material management, and statistical compilation and analysis;

costs related to acquiring clinical study materials;

costs related to compliance with regulatory requirements; and

costs related to salaries, bonuses, and other compensation for employees in research and development functions.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our products, if approved. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty related to:

future clinical study results; the scope, rate of progress, and expense of our ongoing as well as any additional preclinical studies, clinical studies and other research and development activities;

clinical study enrollment rate or design;

the manufacturing of our product candidates;

our ability to obtain and maintain intellectual property protection for our product candidates;

significant and changing government regulation;

the timing and receipt of any regulatory approvals; and

the risks disclosed in the section entitled "Risk factors" beginning on page 11 of this prospectus.

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A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing, and viability associated with the development of that product candidate.

We expect our research and development expenses to increase over the next several years as we continue to implement our business strategy, which includes advancing our product candidates into and through clinical development, expanding our research and development efforts, seeking regulatory approvals for any product candidates for which we successfully complete clinical studies, accessing and developing additional product candidates, and hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies. As such, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation. General and administrative expenses also include rent as well as professional fees for legal, consulting, accounting, and audit services.

In the future, we expect that our general and administrative expenses will increase as we increase our headcount to support our continued research and development and the potential commercialization of our product candidates, if approved. We also anticipate that we will incur increased accounting, audit, legal, tax, regulatory, compliance, and director and officer insurance costs, as well as investor and public relations expenses associated with maintaining compliance with exchange listing and SEC requirements.

Other income

Other income consists of the change in the fair value of the preferred stock tranche liability associated with our obligation to issue additional shares of Series A convertible preferred stock, and interest income earned on our cash and cash equivalents. In May 2016, we entered into a Series A convertible preferred stock purchase agreement. Under the agreement, we agreed to issue to the purchasers, and the purchasers agreed to purchase, additional shares of our Series A convertible preferred stock in multiple closings. We determined that the obligation to issue additional Series A convertible preferred stock at a future date was a freestanding financial instrument that should be accounted for as a liability. Accordingly, we recorded a preferred stock tranche liability related to this instrument at the time of the initial close in May 2016, and we remeasured the liability at fair value at each reporting period with the corresponding gain or loss from the adjustment recorded as other income until the tranche obligation either expired or was fulfilled. In January 2017, the milestone event associated with the issuance of the second and final tranche was met, and the final tranche of the Series A convertible preferred stock was issued on February 2, 2017, at which point the tranche liability was extinguished.

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Results of operations

Comparison of the three months ended March 31, 2017 and 2018

The following table summarizes our results of operations for the three months ended March 31, 2017 and 2018 (in thousands):

 
   
   
   
 
 
  Three months
ended March 31,
   
 
 
  Increase
(Decrease)

 
 
  2017
  2018
 

Collaboration and grant revenue

  $ 1,145   $ 2,464   $ 1,319  

Operating expenses:

                   

Research and development

    8,662     12,224     3,562  

General and administrative

    1,232     2,049     817  

Total operating expenses

    9,894     14,273     4,379  

Loss from operations

    (8,749 )   (11,809 )   3,060  

Other income

    52     137     85  

Net loss and comprehensive loss

  $ (8,697 ) $ (11,672 ) $ 2,975  

Collaboration and grant revenue

Revenue was $1.1 million for the three months ended March 31, 2017, compared to $2.5 million for the three months ended March 31, 2018. The net increase of $1.3 million was primarily driven by an increase in research and development costs incurred under our grants from the U.S. government primarily associated with preclinical studies towards NYX-458 during the first quarter of 2018. This trend is not expected to continue since our grants are nearing completion, and accordingly, we do not expect to generate significant incremental grant-related revenues in the future.

Research and development expenses

The following table summarizes our research and development expenses incurred during the three months ended March 31, 2017 and 2018 (in thousands):

 
   
   
   
 
 
  Three months
ended March 31,
   
 
 
  Increase
(Decrease)

 
 
  2017
  2018
 

NYX-2925

  $ 3,151   $ 4,794   $ 1,643  

NYX-783

    1,159     1,430     271  

NYX-458

    74     1,002     928  

Preclinical research and discovery programs

    1,774     1,827     53  

Personnel and related costs

    1,914     2,476     562  

Other expenses

    590     695     105  

Total research and development expenses

  $ 8,662   $ 12,224   $ 3,562  

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Research and development expenses were $8.7 million for the three months ended March 31, 2017, compared to $12.2 million for the three months ended March 31, 2018. The increase of $3.6 million was primarily due to the following:

approximately $1.6 million increase for clinical, regulatory, and drug product costs related to our Phase 2 clinical study of NYX-2925 for the treatment of painful DPN, an exploratory clinical study in subjects with fibromyalgia and our two Phase 1 target pathway clinical studies that commenced in early 2018;

approximately $0.3 million increase for clinical, regulatory, and drug product costs related to our Phase 1 clinical study of NYX-783 for the treatment of PTSD;

approximately $0.9 million increase for external research and development costs, and commencement of IND enabling activities related to NYX-458 for the treatment of Parkinson's disease cognitive impairment in late 2017;

approximately $0.1 million increase for costs associated with our internal preclinical research efforts; and

approximately $0.6 million increase for costs related to employee compensation due to increased headcount.

General and administrative expenses

General and administrative expenses were $1.2 million for the three months ended March 31, 2017, compared to $2.0 million for the three months ended March 31, 2018. The increase of $0.8 million was primarily driven by $0.6 million for increased costs related to employee compensation, including $0.3 million of additional stock-based compensation expense, due to increased headcount.

Other income

We recorded $0.1 million of other income for each of the three month periods ended March 31, 2017 and 2018. This was due to interest income earned on our cash and cash equivalents.

Comparison of the years ended December 31, 2016 and 2017

The following table summarizes our results of operations for the years ended December 31, 2016 and 2017 (in thousands):

 
   
   
   
 
 
  Year ended
December 31,
   
 
 
  Increase
(Decrease)

 
 
  2016
  2017
 

Collaboration and grant revenue

  $ 9,792   $ 4,962   $ (4,830 )

Operating expenses:

                   

Research and development

    22,743     31,644     8,901  

General and administrative

    4,766     5,551     785  

Total operating expenses

    27,509     37,195     9,686  

Loss from operations

    (17,717 )   (32,233 )   14,516  

Other income

    2,239     165     (2,074 )

Net loss and comprehensive loss

  $ (15,478 ) $ (32,068 ) $ 16,590  

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Collaboration and grant revenue

Revenue was $9.8 million for the year ended December 31, 2016, compared to $5.0 million for the year ended December 31, 2017. The net decrease of $4.8 million was primarily the result of the following changes:

approximately $5.7 million decrease due to the conclusion of the development services agreement with Allergan in 2016; and

approximately $1.0 million increase due to additional research and development grants from the U.S. government in 2017 associated with preclinical studies towards NYX-458.

Research and development expenses

The following table summarizes our research and development expenses incurred during the years ended December 31, 2016 and 2017 (in thousands):

 
   
   
   
 
 
  Year ended
December 31,
   
 
 
  Increase
(Decrease)

 
 
  2016
  2017
 

NYX-2925

  $ 4,797   $ 10,257   $ 5,460  

NYX-783

    290     2,424     2,134  

NYX-458

    161     1,746     1,585  

Preclinical research and discovery programs

    5,157     6,960     1,803  

Personnel and related costs

    4,988     7,990     3,002  

Development services

    5,362         (5,362 )

Other expenses

    1,988     2,267     279  

Total research and development expenses

  $ 22,743   $ 31,644   $ 8,901  

Research and development expenses were $22.7 million for the year ended December 31, 2016, compared to $31.6 million for the year ended December 31, 2017. The increase of $8.9 million was primarily due to the following:

approximately $5.5 million increase for clinical, regulatory, and drug product costs related to our Phase 2 clinical study of NYX-2925 for the treatment of painful DPN and an exploratory clinical study in subjects with fibromyalgia;

approximately $2.1 million increase for clinical, regulatory, and drug product costs related to our Phase 1 clinical study of NYX-783 for the treatment of PTSD, which we initiated in 2017;

approximately $1.6 million increase for external research and development costs, and commencement of IND enabling activities related to NYX-458 for the treatment of Parkinson's disease cognitive impairment in late 2017;

approximately $1.8 million increase for costs associated with our internal preclinical research efforts and increase in sponsored research activities with Northwestern and other academic institutions;

approximately $3.0 million increase for costs related to employee compensation due to increased headcount; and

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approximately $5.4 million decrease due to the conclusion of the development services agreement with Allergan in 2016.

General and administrative expenses

General and administrative expenses were $4.8 million for the year ended December 31, 2016, compared to $5.6 million for the year ended December 31, 2017. The increase of $0.8 million was primarily driven by $0.7 million for increased costs related to employee compensation, including $0.4 million of additional stock-based compensation expense, due to increased headcount.

Other income

We recorded $2.2 million of other income for the year ended December 31, 2016, compared to $0.2 million of other income for the year ended December 31, 2017. The decrease of $2.0 million was primarily driven by a $2.1 million gain that was recognized in 2016 due to the remeasurement of the fair value of the preferred stock derivative liability associated with the future issuance of our Series A-2 convertible preferred stock. The liability associated with our obligation to issue an additional tranche of Series A convertible preferred stock at a future date was terminated on February 2, 2017 and, as a result, there is no gain or loss associated with remeasurement of such liability for any subsequent reporting period. Interest income was insignificant for the years ended December 31, 2016 and 2017.

Liquidity and capital resources

From our inception through March 31, 2018 we have funded our operations primarily with proceeds from the issuance and sale of our convertible preferred stock. From our inception through March 31, 2018, we have raised an aggregate of $135 million of gross proceeds from sales of our convertible preferred stock. We have generated limited revenue to date from a research collaboration agreement with Allergan, a development services agreement with Allergan, and research and development grants from the U.S. government. There are no repayment or royalty obligations with respect to such grants. As of March 31, 2018, we had cash and cash equivalents of $82.4 million. We invest our cash equivalents in highly liquid money market accounts.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months
ended March 31,
 
 
  2016
  2017
  2017
  2018
 

Net cash provided by (used in):

                         

Operating activities

  $ (19,715 ) $ (32,735 ) $ (7,407 ) $ (9,436 )

Investing activities

    (371 )   (1,577 )   (263 )   (46 )

Financing activities

    24,706     109,968     39,979     (304 )

Net increase (decrease) in cash, cash equivalents and restricted cash

  $ 4,620   $ 75,656   $ 32,309   $ (9,786 )

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Net cash used in operating activities

Net cash used in operating activities was $7.4 million during the three months ended March 31, 2017, compared to $9.4 million during the three months ended March 31, 2018. The increase of $2.0 million in cash used in operating activities was primarily due to increases in net loss of $3.0 million, adjusted quarter-over-quarter for the non-cash impact of increased stock-based compensation expense of $0.3 million. The cash used in operating activities was a result of increased expenses, particularly in research and development.

Net cash used in operating activities was $19.7 million during the year ended December 31, 2016, compared to $32.7 million during the year ended December 31, 2017. The increase of $13.0 million in cash used in operating activities was primarily due to increases in net loss of $16.6 million, adjusted year-over-year for the non-cash impact of the fair value remeasurement of the preferred stock tranche liability of $2.1 million and increased stock-based compensation expense of $0.5 million. The cash used in operating activities was a result of increased expenses, particularly in research and development.

Net cash used in investing activities

Net cash used in investing activities was $0.3 million during the three months ended March 31, 2017, compared to approximately $0.1 million during the three months ended March 31, 2018. The decrease of $0.2 million in cash used in investing activities was due to the timing of purchases of laboratory equipment and leasehold improvements.

Net cash used in investing activities was $0.4 million during the year ended December 31, 2016, compared to $1.6 million during the year ended December 31, 2017. The increase of $1.2 million in cash used in investing activities was due to purchases of laboratory equipment and leasehold improvements.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $40.0 million during the three months ended March 31, 2017, compared to net cash used in financing activities of $0.3 million during the three months ended March 31, 2018. Net cash provided by financing activities during the three months ended March 31, 2017 was due to the gross proceeds of $40.0 million received from the issuance of Series A-2 convertible preferred stock. Net cash used in financing activities during the three months ended March 31, 2018 was due to proposed initial public offering costs of $0.1 million and additional costs of $0.2 million related to our Series B financing that closed in December 2017.

Net cash provided by financing activities was $24.7 million during the year ended December 31, 2016, compared to $110.0 million during the year ended December 31, 2017. The increase in cash provided by financing activities was due to the gross proceeds of $40.0 million received from the issuance of Series A-2 convertible preferred stock and proceeds of $70.0 million from the issuance of Series B convertible preferred stock during 2017, as compared to $25.0 million from the issuance of Series A-1 convertible preferred stock in 2016.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical studies of our product candidates in development. In addition, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

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Our expenses will also increase as we:

pursue the clinical development of our most advanced product candidates;

continue the research and development of our other product candidates;

seek to identify and develop additional product candidates;

seek marketing approvals for any of our product candidates that successfully complete clinical development;

develop and expand our sales, marketing, and distribution capabilities for our product candidates for which we obtain marketing approval;

scale up manufacturing processes and capabilities to support our ongoing preclinical activities and clinical studies of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval;

maintain, expand, and protect our intellectual property portfolio;

expand our operational, financial, and management systems and increase personnel, including personnel to support our clinical development, manufacturing, and commercialization efforts; and

increase our product liability and clinical study insurance coverage as we initiate our clinical studies and commercialization efforts.

As of March 31, 2018 we had cash and cash equivalents of $82.4 million. We believe that our available funds will be sufficient to fund our operations for at least the next                       , without giving effect to any anticipated proceeds from this offering. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, or other third-party funding, including potential strategic alliances and licensing or collaboration arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

If we raise funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to third parties to develop and market our product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual obligations and other commitments

The following table summarizes our contractual obligations as of December 31, 2017 (in thousands):

 
   
   
   
   
   
 
 
  Payments due by period
 
Contractual Obligations:
  Less than
1 year

  1 to 3
years

  3 to 5
years

  More than
5 years

  Total

 

Operating leases(1)

  $ 619   $ 1,262   $ 1,077   $   $ 2,958  

Total contractual obligations

  $ 619   $ 1,262   $ 1,077   $   $ 2,958  

(1)    Operating leases include total future minimum rent payments under non-cancelable operating lease agreements.

We also enter into contracts in the normal course of business with CROs for clinical studies, preclinical research studies and testing, manufacturing, and other services and products for operating purposes. These contracts generally are cancelable at any time by us, generally upon 30 days prior written notice. These payments are therefore not included in this table of contractual obligations.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and qualitative disclosures about market risk

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Our cash and cash equivalents of $82.4 million as of March 31, 2018 consisted of cash and money market accounts. The primary objectives of our investment activities are to preserve principal, provide liquidity, and maximize income without significantly increasing risk. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition, or results of operation.

Inflation would generally affect us by increasing our cost of labor and clinical study costs. We do not believe that inflation had a material effect on our business, financial condition, or results of operations during the years ended December 31, 2016 and 2017, and during the three months ended March 31, 2017 and 2018.

Critical accounting policies and significant judgments and estimates

We prepare our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. In the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or operating results would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

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Research and development

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

CROs in connection with performing research and development services on our behalf;

investigative sites or other providers in connection with clinical studies;

vendors in connection with preclinical development activities; and

vendors related to product manufacturing, development, and distribution of clinical supplies.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical study milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued or prepaid research and development expenses.

Stock-based compensation

We measure stock-based awards granted to our employees at fair value on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue stock options and restricted stock with only service-based vesting conditions and record the expense for these awards using the straight-line method. We have historically granted stock options with exercise prices equivalent to the fair value of our common stock as of the date of grant.

The fair value of each stock option grant is estimated using the Black-Scholes option pricing model. We are a private company and lack company-specific historical and implied volatility information. Therefore, we estimate our expected volatility based on the historical volatility of a set of publicly traded peer companies and expect to continue to do so until such time as we have adequate historical data regarding the volatility of our traded stock price. The expected term of our options has been determined utilizing the "simplified method" for awards that qualify as "plain-vanilla" options. The risk-free interest rate is determined by

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reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends in the foreseeable future.

The assumptions we used to determine the fair value of stock options granted to employees are as follows, presented on a weighted-average basis:

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 

Expected volatility

    75%     75%     75%     75%  

Expected dividends

    None     None     None     None  

Expected option life

    5.79 - 6.08 Years     6.08 Years     6.08 Years     6.08 Years  

Risk-free rate

    1.36 - 2.03%     2.02 - 2.40%     2.23 - 2.40%     2.74 - 2.81%  

These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates when valuing our stock options, our stock-based compensation expense could be materially different. We recognize compensation expense for only the portion of awards that are expected to vest.

Our stock-based compensation expense associated with stock options and restricted stock was recorded as (in thousands):

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 

Research and development

  $ 171   $ 325   $ 67   $ 132  

General and administrative

    220     576     124     392  

Total stock-based compensation expense

  $ 391   $ 901   $ 191   $ 524  

Determination of the fair value of common stock

We are a privately held company with no active public market for our common stock. Therefore, the board of directors has estimated the fair value of our common stock at various dates, with input from management, considering our most recently available third-party valuations of common stock and its assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. Once a public trading market for our common stock has been established in connection with the completion of this offering, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and shares of restricted stock.

In the absence of a public trading market for our common stock, the valuations of our common stock were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. We performed these contemporaneous valuations, with the assistance of a third-party specialist, as of October 19, 2015, April 30, 2016, January 31, 2017, and December 31, 2017. The contemporaneous valuations prepared as of October 19,

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2015, April 30, 2016, January 31, 2017, and December 31, 2017 resulted in a valuation of our common stock of $0.04, $0.06, $0.09, and $0.19, respectively, as of those dates.

There are significant judgments and estimates inherent in these valuations. These judgments and estimates include assumptions regarding our future operating performance, the stage of development of our product candidates, the timing of a potential initial public offering or other liquidity event, and the determination of the appropriate valuation methodology at each valuation date. If we had made different assumptions, our stock-based compensation expense, net loss attributable to common stockholders, and net loss per share attributable to common stockholders could have been significantly different.

Valuation methodologies

In accordance with the Practice Aid, we considered the various methods for allocating the enterprise value across our classes and series of capital stock to determine the fair value of our common stock at each valuation date.

Our common stock valuations as of October 19, 2015, April 30, 2016, and January 31, 2017 were prepared using an option pricing method. Our common stock valuation as of December 31, 2017 was prepared utilizing a probability-weighted expected return method, or PWERM. Under the PWERM approach, the fair value of our common stock is determined based upon an analysis of future values for our company, and discounted to the present using a risk-adjusted discount rate. The present values of the common stock under each scenario are then weighted based on the probability of each scenario occurring to determine the value of the common stock. This method is generally considered appropriate to use when there are several distinct scenarios to be considered.

JOBS Act

Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, an "emerging growth company" can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We intend to rely on this exemption. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an "emerging growth company," we are exempt from Sections 14A(a) and (b) of the Exchange Act which would otherwise require us to (1) submit certain executive compensation matters to shareholder advisory votes, such as "say-on-pay," "say-on-frequency," and "golden parachutes;" and (2) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of our chief executive officer's compensation to our median employee compensation. We also intend to rely on an exemption from the rule requiring us to provide an auditor's attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will continue to remain an "emerging growth company" until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of this offering; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.07 billion; (3) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Recent accounting pronouncements

See Note 2 to our financial statements appearing at the end of this prospectus for a full description of recent accounting pronouncements including the respective expected dates of adoption and estimated effects, if any, on our financial statements.

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Business

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel, proprietary, synthetic small molecules for the treatment of brain and nervous system disorders. We focus our efforts on targeting and modulating N-methyl-D-aspartate receptors, or NMDArs, which are vital to normal and effective function of the brain and nervous system. We believe leveraging the therapeutic advantages of the differentiated modulatory mechanism of our compounds will drive a paradigm shift in the treatment of disorders of the brain and nervous system.

We are advancing a pipeline of distinct product candidates derived from our NMDAr modulator discovery platform, or discovery platform. This platform enables us to discover compounds that have the potential to modulate NMDArs optimally. We are currently studying our first product candidate, NYX-2925, in two Phase 2 studies in chronic pain. The first is in subjects with painful diabetic peripheral neuropathy, or DPN, and the second is in subjects with fibromyalgia. We expect to report top-line data from these studies in the first half of 2019. Our second product candidate, NYX-783, has been evaluated in Phase 1 clinical development. We intend to develop NYX-783 for the treatment of post-traumatic stress disorder, or PTSD, and plan to initiate a Phase 2 clinical study in the second half of 2018. Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an investigational new drug, or IND, application to the U.S. Food and Drug Administration, or FDA, in May 2018. We plan to initiate a Phase 1 study with NYX-458 in the second half of 2018. We intend to develop NYX-458 for the treatment of cognitive impairment associated with Parkinson's disease.

Our discovery platform is based on extensive original research into a novel way of modulating NMDArs. NMDArs are a well-established subclass of receptors for glutamate, the principal excitatory neurotransmitter in the brain. Our molecules bind in a previously uncharacterized binding domain, or "pocket", on NMDArs that is distinct from that of other NMDAr-targeted therapies. The mechanism by which our molecules modulate NMDArs triggers a cascade of activity that ultimately strengthens the synaptic connections between neural cells, resulting in stronger connections over time between these cells. The communication between neural cells is not only essential to routine function of the nervous system, but also allows the cells of the nervous system to learn, or adapt in response to external stimuli, through a process called synaptic plasticity. We believe our therapeutic approach, which modulates NMDArs to enhance synaptic plasticity, affecting learning and memory, holds great promise for alleviating multiple disorders of the brain and nervous system, such as cognitive impairment, PTSD, chronic pain, and depression.

The foundation of our proprietary discovery platform is the ability to modulate NMDArs in a highly specific and selective manner to enhance synaptic plasticity. Rather than fully turning the receptor "on" (agonist) or "off" (antagonist), we believe our approach effectively normalizes NMDAr function, enhancing communication between neural cells and avoiding the issues associated with excessive unidirectional activation or inhibition that have plagued NMDAr-targeted drug development historically.

In clinical studies, compounds generated from our discovery platform penetrate the blood-brain barrier to achieve brain concentration levels consistent with levels observed at doses that had significant effects in various preclinical animal models. These compounds are orally bioavailable, potentially suitable for once-daily dosing, and have favorable tolerability profiles that we believe may allow for wide dose ranges that are both safe and effective.

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The following table summarizes our pipeline and other product candidates generated from our discovery platform:

GRAPHIC

Our first product candidate, NYX-2925, is a novel, oral, small-molecule NMDAr modulator currently in Phase 2 clinical development for the treatment of chronic pain. NYX-2925 works by enhancing synaptic plasticity, a mechanism that is differentiated from any therapy currently used for the treatment of chronic pain. This approach is uniquely suited to treat chronic pain. It is established that, when pain becomes chronic (especially neuropathic pain), it becomes a largely centralized disorder mediated by central learning and memory pathways. The development of NYX-2925 in painful DPN has been granted Fast Track designation by the FDA. We are currently studying NYX-2925 in a Phase 2 study in approximately 300 subjects with painful DPN across numerous U.S.-based sites. We are also conducting an exploratory efficacy and biomarker study of NYX-2925 in subjects suffering from fibromyalgia. We anticipate reporting top-line data from these studies in the first half of 2019. In a Phase 1 study, NYX-2925 demonstrated a predictable, dose-dependent, and linear pharmacokinetic, or PK, profile with no accumulation after multiple daily doses and was well-tolerated with no drug-related serious adverse events. In addition, across numerous and various preclinical models of neuropathic pain, we have observed robust, rapid, and long-lasting analgesic effects following dosing with NYX-2925. Neuropathic pain affects more than 18 million people in the United States, of which DPN accounts for approximately 5.5 million. Approved therapies for neuropathic pain provide suboptimal efficacy and often come with substantial side effects and abuse liability. However, despite these limitations, nearly $19.7 billion in sales were achieved in 2016 for treatments related to pain, of which we estimate over $4 billion came from treatments related to neuropathic pain. If approved, we believe NYX-2925 will provide an attractive and effective therapeutic option for treating painful DPN. We estimate that fibromyalgia affects approximately 5 million people in the United States and also represents a patient population that is underserved by currently available therapies. We believe the therapeutic profile of NYX-2925 may allow us to expand the development of this molecule into multiple other chronic pain conditions.

Our second product candidate, NYX-783, is a novel, oral, small-molecule NMDAr modulator currently in Phase 1 clinical development and we plan to initiate Phase 2 development in the second half of 2018. We intend to develop NYX-783 for the treatment of PTSD, which has been granted Fast Track designation by the FDA. To date, in the Phase 1 study, NYX-783 has demonstrated a predictable, dose-dependent, and linear PK profile and has been well-tolerated with no drug-related serious adverse events. In preclinical

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models of contextual fear conditioning and extinction, NYX-783 appears to both accelerate fear extinction and inhibit spontaneous recurrence of fear, making it an ideal product candidate for the treatment of PTSD. Unlike currently used therapies, we believe NYX-783 has the potential to target the underlying cause of PTSD—learning and memory dysfunction associated with an inability to extinguish fear caused by trauma—as well as the core symptoms and comorbidities associated with the disorder. It is estimated that 8% to 10% of people that experience trauma will develop PTSD in their lifetime and approximately 8.5 million people currently suffer from PTSD in the United States. Many of these people are currently untreated or poorly treated due to the lack of safe and effective options. To date only two pharmacotherapies have been approved to treat PTSD and both are selective serotonin reuptake inhibitor, or SSRI, antidepressants that have limited efficacy in treating the symptoms of PTSD.

Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an IND application to the FDA in May 2018 for the treatment of Parkinson's disease dementia, a subset of Parkinson's disease cognitive impairment. Mechanistic rationale and compelling preclinical data in a model of Parkinson's disease suggest NYX-458 may be optimally suited to treat the cognitive deficits caused by the disease. This model is highly relevant and translatable, as it evaluates the compound's effects in non-human primates by employing the neurotoxin MPTP to destroy dopamine-related neural cells similar to the way Parkinson's disease does in humans and measuring cognitive function using the same battery of tests used in human clinical studies. In a study using this model, oral administration of NYX-458 resulted in a reversal of MPTP-induced cognitive impairment and, on some measures, restored cognitive function back to pre-MPTP baseline levels. NYX-458 has also shown robust and long-lasting effects in relevant rodent models, including water maze and novel object recognition models. We plan to initiate a single- and multiple-ascending dose Phase 1 study to evaluate safety, tolerability, and PK in the second half of 2018.

We are also evaluating our product candidates in clinical studies designed to explore NMDAr-dependent biomarkers in healthy human subjects. Using readily and rapidly measurable markers, these studies have the potential to further demonstrate that our small-molecule compounds can engage NMDArs and downstream pathways in the human brain in a dose-dependent and predictable way. Successful biomarker studies could aid in our understanding of clinical efficacy results and optimal dosing regimens, and allow us to optimize future clinical study design.

While all of our product candidates and the other molecules from our discovery platform modulate NMDArs, they are each distinct chemical entities with different pharmacologic properties. Each of our molecules binds uniquely within the binding domain, resulting in a variety of activity, potency, and NMDAr-subtype selectivity profiles. We evaluate the therapeutic implications of these variations by interrogating our molecules across different preclinical models of brain and nervous system disorders. The data we collect from these preclinical studies indicate which molecules are better suited for different indications and inform our development decisions accordingly.

We have secured intellectual property protection for our clinical-stage compounds and are pursuing intellectual property protection for our earlier-stage compounds. In addition, we have characterized the binding domain of our compounds on NMDArs and created a broad portfolio of chemical scaffolds and specific compounds that demonstrate NMDAr interaction and properties appropriate for drugs that target the central nervous system, or CNS. We believe the breadth and depth of our medicinal chemistry efforts are comprehensive with respect to this particular mechanism of NMDAr modulation. We have secured, or have applications to secure, the associated intellectual property protection for these compounds. We believe our intellectual property strategy and medicinal chemistry approach position us to make meaningful

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clinical advances in safety and efficacy through the enhancement of synaptic plasticity utilizing our differentiated mechanism.

Our company and history

We have assembled a world-class management team with highly relevant scientific, clinical, regulatory, and commercial expertise. Many members of our management team worked together for several years at Naurex Inc., or Naurex, prior to the spin out of Aptinyx in 2015 in conjunction with the acquisition of Naurex by Allergan for up to $1.7 billion in total deal value, $560 million of which it agreed to pay up front. Our Chief Scientific Officer, Joseph Moskal, Ph.D., pioneered our NMDAr modulation approach, beginning with his work at the National Institutes of Health, or NIH, in the 1990s and continuing across his academic career at various institutions, including Northwestern University, where he is currently a Distinguished Research Professor. Dr. Moskal discovered a peptide compound, rapastinel, which Naurex ultimately evaluated in two Phase 2 studies in subjects with major depressive disorder. The data from those studies offered clinical validation of our unique mechanism of modulating NMDArs, informing Allergan's acquisition of Naurex and its advancement of rapastinel into Phase 3 development. Rapastinel has been granted breakthrough therapy designation by the FDA. Naurex scientists had also developed a separate new platform for discovering small-molecule compounds that bind to and modulate NMDArs in a fashion similar to that of rapastinel. This discovery platform was spun out into Aptinyx and formed the foundation of our company.

As part of the Naurex-Allergan transaction and spin out of Aptinyx, we entered into a research collaboration with Allergan around the discovery, screening, and profiling of novel NMDAr modulators from our discovery platform. In addition to fueling our own pipeline, this collaboration has enabled Allergan to advance another product candidate from our discovery platform, AGN-241751. On May 16, 2018, Allergan exercised its option under our collaboration to acquire the exclusive rights to develop and commercialize this compound within its specified set of indications. In connection with the exercise of its option, Allergan triggered payment of a $1.0 million option fee as stipulated in the collaboration agreement. Allergan has disclosed its plan to advance AGN-241751 for the treatment of major depressive disorder. Under the terms of the collaboration, Allergan has options to acquire up to three molecules (including AGN-241751) from our discovery platform and to develop those molecules within a field of specified indications set out in the collaboration agreement. Each time Allergan exercises an option, it will be obligated to make a $1.0 million option fee payment and will have no further obligations to pay downstream royalties or milestones. For a discussion of this collaboration, see "Business—Research collaboration agreement with Allergan."

We are backed by a group of leading institutional life science investors, including Adage Capital, Adams Street Partners, Bain Capital Life Sciences, Frazier Healthcare Partners, HBM Healthcare Investments, Longitude Capital, Nan Fung Life Sciences, New Leaf Venture Partners, Osage University Partners, Partner Fund Management, and Rock Springs Capital, among others.

Our strategy

Our goal is to become a leading biopharmaceutical company to discover, develop, and commercialize innovative therapies for disorders of the brain and nervous system with significant unmet medical needs. Key elements of our strategy are to:

Advance the development of NYX-2925 as a novel treatment for chronic pain conditions.   We are currently studying NYX-2925 in two Phase 2 studies in subjects with chronic pain. The first is in subjects with painful DPN and the second is in subjects with fibromyalgia. We believe positive results from these studies will establish NYX-2925, if approved, as a high-potential therapy for chronic pain with

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Advance the development of NYX-783 as a novel treatment for PTSD.   We are currently evaluating NYX-783 as a potential treatment for people with PTSD. This compound has been evaluated in Phase 1 clinical development. We expect to initiate a Phase 2 study during the second half of 2018 and to report Phase 2 data during the second half of 2019. We believe NYX-783, if approved, could represent a transformational treatment for PTSD that addresses the underlying learning and memory dysfunction associated with an inability to extinguish fear caused by trauma, while also addressing the core symptoms and major comorbidities of the disorder.

Advance the development of NYX-458 as a novel treatment for Parkinson's disease cognitive impairment.   We are currently conducting preclinical studies for NYX-458, and submitted an IND application to the FDA in May 2018. Based on compelling data in a relatable, translatable model, we believe NYX-458, if approved, may offer substantial improvements over existing treatments for Parkinson's disease cognitive impairment by working through the synaptic plasticity mechanisms that drive cognition, including attention, learning, and memory.

Continue to expand our pipeline by leveraging our NMDAr modulator discovery platform, building on and extending our leadership in NMDAr biology.   We intend to use our discovery platform to develop a broad pipeline and product portfolio across an array of disorders of the brain and nervous system. Our pipeline is fueled by our library of over 800 unique, synthesized, small-molecule NMDAr modulators derived through our extensive original research and the discovery of a novel binding domain that we believe could allow for safe and effective enhancement of synaptic plasticity. All of these compounds have been designed to meet favorable CNS safety and PK criteria. We also plan to identify and use NMDAr-dependent biomarkers to expedite and inform the development of our future product candidates.

Optimize the development and commercial potential of our product candidates.   We own the worldwide commercial rights to NYX-2925, NYX-783, and NYX-458 in our selected indications. Our primary strategy is to independently pursue the development and commercialization of our product candidates. We have assembled an experienced management team that is capable of executing along the entire value chain of drug development and commercialization. As we continue to build and develop our product portfolio, we may opportunistically pursue strategic partnerships that maximize the value of our pipeline.

Synaptic plasticity and NMDAr function in the brain and nervous system

Neural cells communicate through chemical messengers called neurotransmitters. Examples of common neurotransmitters include glutamate, glycine, GABA, acetyl choline, serotonin, dopamine, and norepinephrine. These neurotransmitters move from one neural cell to the receptors of another neural cell across small gaps between them called synapses. Movement of these neurotransmitters between neural cells is the main way in which they communicate with each other. The communication can be positive (excitation) or negative (inhibition). If excitation of a neural cell is sufficient, it will activate, or depolarize, transmitting a signal along its length.

The communication between neural cells not only enables routine function of the nervous system, but also allows the cells of the nervous system to learn, or adapt in response to external stimuli, through a process called synaptic plasticity. The hallmarks of synaptic plasticity include changes in the structure and function of neural cells, such as growth of neural cell endings and strengthening of synaptic connections. These

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lasting changes in cell structure and function are believed to translate into changes in learning, memory, cognition, mood, pain perception, and behavior.

NMDArs are important to synaptic plasticity as they are a subclass of receptors for glutamate, the principal excitatory neurotransmitter in the brain. NMDArs sit on neural cells and form channels or pores in the cell membrane that open when the receptors are activated and close when they are not. The open channel allows positively charged particles, such as calcium ions, to enter the cell and begin a cascade of activity. NMDArs require several events to occur simultaneously for the receptor to be activated. NMDArs cannot open when the neural cells they are on are in a resting state. The first event required for the receptor to be activated is therefore that the neural cell must be activated or depolarized. At the same time, the receptor must bind glutamate released by the activation of an adjacent neural cell. When these events happen simultaneously, NMDArs can be activated and open. The figure below illustrates this cascade of activity leading to activation of NMDArs.

GRAPHIC

NMDAr activation triggers a cascade of activity that ultimately strengthens the synaptic connections between neural cells that are simultaneously activated. For example, a particular group of neural cells might be activated in response to an external stimulus, such as seeing a previously unseen ("novel") object. The neural cells that are simultaneously activated by this stimulus will, through this NMDAr-dependent mechanism, become more strongly connected, and the connections will strengthen more if the object is encountered multiple times. This essentially hardwires the response to this stimulus into the brain, creating a memory of the (now "familiar") object.

The process of forming stronger connections over time between neural cells is known as long-term potentiation, or LTP. The opposing process, whereby connections weaken between cells that show less activity is known as long-term depression, or LTD. LTP and LTD are believed to be the primary physical manifestations of learning and memory throughout the brain covering a range of phenomena, including emotion and pain. These processes are key components of synaptic plasticity and act to strengthen and weaken neural connections in response to changing patterns of activity.

Learning, communication, and cognition

Synaptic plasticity is critically involved in learning and memory processes. Abnormalities in synaptic plasticity underlie a number of disorders. Disorders of cognitive ability such as dementia and mild cognitive impairment, or MCI, seen in Alzheimer's disease, Parkinson's disease, stroke, traumatic brain injury, or TBI, and numerous other diseases, clearly indicate an intuitive connection to the process of learning, thinking,

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and forming memories driven by synaptic plasticity. In many cognitive disorders, people undergo progressive loss of structure or function of neural cells. Here, the disease pathology may trigger an inability to properly attend to stimuli, learn, or remember how to perform tasks driven by a similar lack of synaptic plasticity.

There are a number of additional disorders where a similar lack of effective learning or memory plays a critical role. For example, in PTSD, chronic pain, and depression, there is evidence that specific regions of the brain exhibit a lack of plasticity and the ability to appropriately learn. Therapeutic approaches that modulate NMDArs to enhance synaptic plasticity hold great promise for alleviating these disorders, among others.

For instance, in people with PTSD, the brain acts as though a repeated stressful stimulus is present when it is not, and the acute stress, fear, and other symptoms that characterize PTSD are the result of the abnormally intrusive memory of past trauma. In many cases of chronic pain, the brain is acting as though a painful stimulus is present even when it is not, or the perception of pain is disproportional to the extent of the stimulus. This is especially true of neuropathic pain, which arises from the nervous system itself. Similarly, in some people with depression, the brain may act as though a repeated mood depressing stimulus is present even when it is not.

Many of the available treatments for these disorders are weakly efficacious. Treatments often result in little or no benefit for large groups of patients and often are accompanied by significant side effects. For example, drugs acting as calcium channel blockers often have side effects including nausea, edema, and dizziness while only providing modest efficacy. SSRIs and selective serotonin—norepinephrine reuptake inhibitors, or SNRIs, are antidepressants which may have side effects such as nausea, constipation, and weight gain while the efficacy is highly variable and often takes weeks to be achieved, if it ever is. Many current therapies for disorders like neuropathic pain, PTSD, and cognitive impairment have unclear or partially understood mechanisms of action or may involve multiple potential mechanisms, leading to similar issues with inconsistent responses and side effects. The underlying lack of synaptic plasticity in these disorders has not been effectively targeted by existing therapies.

Limitations of historical approaches to targeting NMDArs

Given the well-established evidence of a connection between certain brain and nervous system disorders, aberrant neural cell communication, and NMDArs, scientists have been trying for decades to target this family of receptors to create therapies that effectively treat these disorders. Many of the drugs developed to target NMDArs utilize the binding sites of glutamate or glycine or target the NMDAr channel itself, turning the receptor "off" (antagonists) by closing the receptor or "on" (agonists) by opening the receptor.

Antagonists tend to have significant side effects at therapeutic doses, such as psychosis-like symptoms, and dissociative symptoms such as detachment, abnormal perceptions, and memory loss, which strongly limit their potential for chronic use. The NMDAr antagonist ketamine is even used clinically as an anesthetic due to the extent of its sedative and amnesic effects.

Agonists can cause toxicity and cell death due to prolonged NMDAr activation, a process that is believed to play a role in some neurodegenerative disorders such as Alzheimer's disease.

Prior approaches to targeting NMDArs have been unidirectional, and compounds developed using these approaches have narrow therapeutic windows, resulting in limited utility. A unidirectional approach to targeting NMDArs resembles a light switch that can only be turned on or off, when what is required is a dimmer switch to dial light levels up or down in smaller increments. The drugs that have been developed using this on/off approach are also limited by their significant side effects.

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Our approach to modulating NMDArs and enhancing synaptic plasticity

Our approach to targeting NMDArs is unique, binding to a previously uncharacterized site to facilitate the activation of NMDArs leading to the cascade of activity described earlier that ultimately leads to enhanced synaptic plasticity, or neural cell communication. Our compounds enable a subtle modulation of communication between neural cells without fully turning the receptor on or off. The binding of our compounds to the NMDAr results in a concentration-dependent change in receptor conformation that can facilitate appropriate activation. The figure below illustrates the cascade of activity leading to enhanced LTP and synaptic plasticity, the mechanism by which we believe our product candidates work.

GRAPHIC

The modulatory activity of our compounds can be observed in a calcium flux assay in which NYX-2925, in a concentration dependent manner, can either enhance calcium flux by approximately 20% or inhibit calcium flux by approximately 20%. This differs substantially from antagonists like ketamine which only exhibit unidirectional effects and reduce calcium flux by up to 100%. This comparison is shown in the figure below.

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Our proprietary compounds are intended to normalize NMDAr function through subtle modulation, allowing for synaptic plasticity to be enhanced without fully turning the receptor on or off, potentially avoiding significant side effects. We believe we are positioned to be the first biopharmaceutical company to exploit this mechanism to develop small-molecule therapeutics with substantially wider therapeutic windows than other NMDAr-targeted compounds and to treat numerous disorders of the brain and nervous system. We

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are initially focusing on the following disorders which have the potential to be addressed via this mechanism:

Chronic Pain:   Chronic pain, especially neuropathic pain arising from damage to, or malfunction of, the nervous system itself, and associated emotional disturbances are believed to be partly driven by inappropriate neural cell communication in specific regions of the brain. It is established that when pain becomes chronic (especially neuropathic pain), it becomes a largely centralized disorder mediated by central learning and memory pathways. We believe centrally-mediated pain disorders can be addressed through the enhancement of synaptic plasticity. This is evidenced by the ability of NYX-2925 to alleviate pain and emotional disturbances in animal models of neuropathic pain.

PTSD:   One of the key characteristics of PTSD is the re-experiencing of fear related to a traumatic event. This can take different forms including experiencing distress in response to reminders of the event or a heightening of startle responses to otherwise harmless triggers. The persistence of, and inability to extinguish, this fear response is also believed to be partly driven by inappropriate neural cell communication in specific regions of the brain. NYX-783 enhances synaptic plasticity and neural cell communication and has shown the ability to significantly accelerate fear extinction in animal models.

Cognitive Impairment:   Cognitive impairment can occur in multiple cognitive domains, many of which are dependent on effective learning and memory. Since learning and memory are synaptic plasticity dependent, there is a clear potential for NMDAr modulation to enhance cognition. NYX-458 has demonstrated an ability to substantially reverse cognitive deficits seen in a non-human primate model of Parkinson's disease. On some measures, such as those relating to attention, working memory, and cognitive flexibility, function was restored to baseline levels.

While aspects of the underlying pathology in these different conditions are similar, the precise pathways and nature of abnormal neural cell communication is different in each case. As a result, we functionally screen our drug candidates to determine which molecules are best suited for further development in which indications.

Our NMDAr modulator discovery platform

We have synthesized an extensive proprietary chemistry library of over 800 unique, small-molecule NMDAr modulators that demonstrate receptor interaction and particular properties appropriate for drugs that target the brain and nervous system. These distinct molecules are at various stages of the drug discovery and development process, from initial synthesis to clinical studies. We designed all of these compounds to bind within a unique binding domain on NMDArs. NMDArs are composed of multiple subunits and can be expressed in different configurations within the brain and nervous system leading to multiple potential subtypes of NMDArs that show different properties and play different roles in brain and nervous system function. Our compound library demonstrates a range of profiles in receptor subtype binding and subsequent activity.

The differentiated binding profiles across compounds result in variations in activity and potency depending on the disease model being assessed. This allows us to screen compounds as potential therapies for specific disorders of the brain and nervous system based on their specific effects in different animal and cell-based models. The data we collect from these preclinical studies indicate which molecules are better suited for different indications and inform our development decisions accordingly.

The chemistry underlying our discovery platform stems from decades of original research beginning at the NIH and more recently at Northwestern University. This research began with the study of the underlying

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foundation of learning and memory, and eventually led to the discovery of a peptide that modulated a novel binding domain on NMDArs. Administration of the peptide, rapastinel, in animal models was shown to enhance synaptic plasticity in a dose-dependent fashion. As a peptide, rapastinel could not be dosed orally due to lack of oral bioavailability. Dosed intravenously, rapastinel showed a favorable tolerability profile, with no drug-related serious adverse events in over 500 subjects, and met the primary endpoint and achieved statistical significance on some of the secondary endpoints in two Phase 2 studies of major depression disorder and was acquired by Allergan in 2015 through the acquisition of Naurex.

Aptinyx was formed around the continuation of this research, with the discovery and synthesis of small-molecules that were able to bind in the same distinct domain on NMDArs and modulate activity in a similar manner as rapastinel, but with a diversity of chemistry and activity not readily achievable with peptides. Many of these small molecules, including NYX-2925 and the other molecules in our pipeline, have shown robust and long-lasting activity in several animal models and high bioavailability and brain penetration after oral administration in animal models and clinical studies. Although our new generation of small-molecule NMDAr modulators is building on the same validated foundational research that led to rapastinel, our medicinal chemistry approach has generated a wide range of differentiated pharmacological profiles, and all with the convenience of oral dosing.

Product candidates from our discovery platform

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We have three clinical-stage product candidates derived from our discovery platform, NYX-2925, NYX-783, and NYX-458, which we are developing for the treatment of chronic pain, PTSD, and Parkinson's disease cognitive impairment, respectively. Allergan is also developing a product candidate from our discovery platform, AGN-241751, for the treatment of major depressive disorder. In May 2018, Allergan exercised its option under our collaboration to acquire the exclusive intellectual property rights specific to AGN-241751. In addition to our clinical-stage product candidates, we believe our preclinical-stage small molecules have the potential to treat numerous other brain and nervous system disorders that may be addressed through NMDAr modulation or synaptic plasticity enhancement.

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NYX-2925

Our first product candidate, NYX-2925, is in Phase 2 clinical development for the treatment of painful DPN, as well as a Phase 2 exploratory study in fibromyalgia. We expect to report top-line data from these studies in the first half of 2019. In a Phase 1 study, NYX-2925 demonstrated a favorable tolerability and PK profile. NYX-2925 has also presented robust, dose-dependent, long-lasting activity across various preclinical pain models. Assuming positive results from the ongoing Phase 2 studies, we plan to develop NYX-2925 for multiple other chronic pain conditions.

Mechanistic rationale

There is increasing evidence implicating inappropriate neural cell communication and NMDAr-dependent synaptic plasticity in states of chronic pain. Human imaging studies have shown that as pain becomes chronic, the activated brain regions transition from regions associated with sensory processing to regions associated with learning and memory processing. This is seen across chronic and neuropathic pain conditions including painful DPN and fibromyalgia, as well as other centrally-mediated pain disorders such as lower back pain and osteoarthritis. This suggests that, over time, chronic pain becomes a largely centralized disorder mediated by learning and memory pathways. Therefore, we believe therapies that improve neural cell communication, such as NYX-2925, have great potential to be effective across a wide range of chronic pain conditions.

Chronic and neuropathic pain are also associated with comorbidities including impaired cognitive and emotional states. Because NMDArs are critical for neural cell communication, as well as in emotional and cognitive learning, we believe that targeting NMDArs can be effective in addressing chronic pain and its comorbidities.

Disease overview

According to the NIH, chronic pain is a persistent pain in which pain signals are transmitted within the nervous system for weeks, months, or years. Chronic pain can be triggered by an initial incident or an ongoing cause of pain. Some people may also suffer chronic pain in the absence of past injury or tissue damage. The figure below outlines chronic pain versus acute pain, and also provides examples of each of the various types of pain.

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We are currently studying NYX-2925 in two Phase 2 studies across two chronic pain conditions. The first study is in painful DPN. According to the American Chronic Pain Association, painful DPN is one of the most common complications among people with diabetes. It often causes pain or loss of feeling in the toes, feet, legs, hands, and arms. People with painful DPN report the experience of burning, electric or stabbing pain, and may also suffer from increased sensitivity to pain, or hyperalgesia, or even a pain response to an otherwise non-painful stimulus, or allodynia.

In the second study, we are exploring the effects of NYX-2925 in fibromyalgia, primarily focused on changes to markers in the brain associated with pain processing. Fibromyalgia is a condition of chronic widespread pain associated with fatigue, sleep disturbances, cognitive impairment, and depression. Individuals suffering from fibromyalgia often display symptoms without an apparent associated cause such as tissue inflammation or other damage. The systemic nature of fibromyalgia symptoms suggests that it is a centralized pain disorder with a dysfunction in pain processing within the brain.

Prevalence and market opportunity

We estimate that up to 100 million adults in the United States suffer from chronic pain. In a recent study, IMS Health Institute estimated the market for pain treatments in the United States in 2016 was approximately $19.7 billion, of which we estimate that neuropathic pain treatments represented approximately $4 billion. While we believe our compounds have the potential to address many chronic pain conditions, we estimate that the initial pain conditions we are targeting have the following prevalence in the United States:

Painful DPN—approximately 5.5 million patients

Fibromyalgia—more than 5 million patients

The figure below shows our estimates of the U.S. prevalence of a few of the most common and relevant chronic pain conditions.

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Current treatment options and unmet needs

There is substantial overlap in the treatment of chronic pain conditions, especially among our lead indications, painful DPN and fibromyalgia, where two drugs, duloxetine and pregabalin, developed by Eli Lilly and Pfizer, respectively, are widely used and have achieved substantial sales. Cymbalta (duloxetine), originally developed as an antidepressant, has been approved for multiple chronic pain conditions and before facing generic competition achieved peak sales of $5.1 billion in 2013. Lyrica (pregabalin) was originally developed for postherpetic neuralgia and painful DPN, then later expanded into fibromyalgia and pain due to spinal cord injury. Lyrica achieved revenue of $5.2 billion in 2017 with the majority of revenue from painful DPN and fibromyalgia.

In addition to duloxetine and pregabalin, the opioid tapentadol is the only other drug that is FDA-approved for painful DPN. The figure below outlines a number of therapies for painful DPN published in the American Diabetes Association's current guidelines.

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Despite these treatment options, substantial unmet medical need remains in the treatment of chronic pain broadly, and specifically in painful DPN. Many of these therapies have unclear or partially understood mechanisms of action, or may involve multiple potential mechanisms and targets, leading to the issues with inconsistent responses and side effects.

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Efficacy.   Therapies used today lack a mechanism targeted specifically for chronic pain. Most therapies were originally developed as either anticonvulsants or antidepressants. Only one-third of neuropathic pain and fibromyalgia patients achieve a 50% pain reduction with pharmacotherapy, and nearly all continue to experience residual pain. Most therapies require treatment of four to eleven patients in order for just one to achieve a satisfactory (>50%) pain reduction.

Tolerability.   All of the existing drugs used to treat painful DPN and fibromyalgia show side effects, including somnolence, dizziness, edema, tremors, nausea, constipation, and weight gain.

Dosing.   Many of the currently used therapies must be taken two to three times daily in order to maintain a pain response, if one is achieved at all. In a chronic condition, dosing multiple times daily can lead to lack of compliance, or failure to take medication as prescribed, which in turn leads to overall suboptimal treatment.

Abuse potential.   Abuse of pain medications is commonly associated with opioids, but other chronic pain therapies have been recognized as drugs with abuse potential. Specifically, pregabalin and gabapentin have been recognized as therapies carrying substantial risks. Duloxetine comes with the potential for withdrawal symptoms if discontinued abruptly.

Even with these issues, drugs to treat chronic pain conditions have garnered significant revenue and are or have been (Lyrica and Cymbalta, respectively) among the top-selling pharmaceutical products globally. We believe this indicates broad and substantial unmet need in this space.

NYX-2925 has a mechanism of action that is distinct from all other existing and emerging therapies. We believe that NYX-2925, if approved, may represent a substantial improvement to existing therapies in the following ways:

provide rapid and durable (long-lasting) pain symptom resolution;

induce fewer side effects than current therapies;

enhance patient compliance with a simple dosing regimen; and

provide a chronic pain therapy that has low potential for abuse liability.

In the future, we expect to develop NYX-2925 for broader chronic pain indications, such as neuropathic lower back pain and osteoarthritis, where there is significant need for chronic pain therapies without serious dependency issues. The Centers for Disease Control and Prevention estimates that, on average, 115 Americans die every day from an opioid overdose and that the economic burden to the United States, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement, is $78.5 billion a year. We believe that NYX-2925 has the potential to meet the desperate need for safe and effective non-opioid chronic pain therapies.

Ongoing Phase 2 clinical studies

Given the preclinical data supporting the potential ability of NYX-2925 to meet the significant unmet needs existing in the management of chronic pain, especially neuropathic pain, we have initiated two Phase 2 clinical studies in chronic pain, one in subjects with painful DPN and one in subjects with fibromyalgia. We believe NYX-2925 has the potential to achieve robust pain reduction with limited side effects.

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Painful diabetic peripheral neuropathy

We are currently enrolling a Phase 2 clinical study to evaluate efficacy and safety for NYX-2925 for the treatment of painful DPN, our lead clinical indication. The study is a double-blind, randomized, and placebo controlled clinical study of NYX-2925 in 300 subjects across multiple U.S.-based sites. We are studying multiple doses of NYX-2925 ranging up to 200 mg. Subjects will be dosed daily for four weeks, with an additional one week follow-up period.

Pain will be assessed using a patient reported scale (with a pain score ranging from zero to ten) and recorded daily on a provided hand-held device. The study will assess daily pain scores at baseline (for seven days prior to treatment) and throughout the study duration. Additional end-points will measure a range of other physical and psychological parameters.

We currently expect to conclude enrollment and report top-line results in the first half of 2019.

To mitigate high placebo response rates seen in similar chronic pain studies, we have included an analysis of baseline (pre-treatment) pain scores as part of the screening process for the study. Our protocol removes subjects, prior to randomization, whose daily pain scores exhibit significant day-to-day variation, which variation is associated with higher rates of placebo response. This is intended to reduce the variance of baseline pain scores and help to ensure a robust comparison with pain score during and after treatment.

The figure below illustrates the design of our Phase 2 study in subjects with painful DPN.

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Fibromyalgia

We are currently enrolling an exploratory Phase 2 clinical study in subjects with fibromyalgia. The study is a single-blind, placebo-controlled clinical study. We intend to enroll approximately 24 subjects across two U.S.-based academic sites evaluating daily doses of 20 mg and 200 mg.

The goal of the study is to determine whether daily dosing of NYX-2925 in subjects with fibromyalgia changes certain biomarkers of central pain processing using various neuro-imaging techniques, including

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functional magnetic resonance imaging, or fMRI. This study will give us data to indicate at which dose these changes are most prominent, potentially aiding in the design of a focused late-stage program in this indication, or other chronic pain indications. We are also evaluating additional end-points, including daily pain scores, measuring a range of other physical and psychological parameters. Each subject will serve as his or her own control, receiving both placebo and NYX-2925 over the six weeks of the study.

We currently expect to conclude enrollment and report top-line results in the first half of 2019. The figure below illustrates the design of our Phase 2 exploratory study in subjects with fibromyalgia.

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Dose selection

To select the appropriate dose levels to study in Phase 2, we leveraged our findings from Phase 1 regarding the cerebrospinal fluid, or CSF, penetration and concentration of NYX-2925. We correlated CSF levels in humans to the CSF levels seen with efficacious doses in preclinical animal studies. We believe that the predictability and linearity of the plasma PK and CSF concentrations enable accurate prediction of CNS exposure to NYX-2925 in humans. We have selected doses for our ongoing Phase 2 studies that correlate to the low and high ends of the exposure observed for the doses that demonstrated the most activity in preclinical studies.

Future development

We intend to advance NYX-2925 towards regulatory approval for the treatment of painful DPN. The specific studies that will be required to achieve this will depend on the results of the ongoing Phase 2 study in painful DPN and be informed by the results of our other clinical studies. In addition, we intend to pursue

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broader chronic pain indications for NYX-2925, including fibromyalgia, neuropathic lower-back pain, and osteoarthritis.

As well as pursing FDA approval in the United States in these indications, we also plan to opportunistically explore registrations outside of the United States in the most attractive markets, including but not limited to the European Union, Japan, Canada, Australia, and large emerging markets such as China.

Target pathway clinical studies

We are currently studying NYX-2925 in two target pathway clinical studies designed to explore NMDAr-dependent pharmacodynamic biomarkers in healthy human subjects. These studies will expand on findings from our research labs and have the potential to show, using readily and rapidly measurable markers, that NYX-2925 can engage NMDArs and downstream pathways in the human CNS in a dose-dependent and predictable way. Successful biomarker studies can also allow us to study different dose levels and dose intervals in an efficient manner. This will help inform the design, and assist in the interpretation, of data from further clinical studies of NYX-2925.

The first target pathway clinical study is a Phase 1, double-blind, placebo-controlled pilot study to assess the effect of multiple doses of NYX-2925 on sleep architecture, especially on slow-wave sleep, or SWS, as measured during a sleep monitoring study in healthy subjects whose sleep patterns are disrupted. SWS plays an important role in memory consolidation and can be enhanced in an NMDAr-dependent manner. We believe that sleep architecture and SWS measurements have potential as pharmacodynamic biomarkers of NMDAr pathway activation. While we are open to the pursuit of sleep disorders as a potential future therapeutic application for our compounds, this study is not intended to inform safety and efficacy for sleep indications.

The second target pathway clinical study is a Phase 1, double-blind, placebo-controlled exploratory study to assess the effect of multiple doses of NYX-2925 on brain function in awake healthy subjects. Brain function will be measured by electroencephalogram, or EEG, and event-related potentials, a measure of certain brain activity. The goal of the study is to determine whether NYX-2925 affects the early processing of auditory stimuli, auditory LTP, and resting EEG. Early auditory processing relates to attention and vigilance, and LTP is a key process in memory formation and consolidation. Both of these have been shown to be NMDAr pathway dependent phenomena and we believe they have potential as pharmacodynamic biomarkers of NMDAr pathway activation.

Both of these studies are ongoing and we expect initial data to be available during the second half of 2018.

Phase 1 clinical data

In 2017, we completed a Phase 1 study in 84 healthy volunteer subjects which evaluated the safety, tolerability, and PK of NYX-2925. This was the first in-human clinical study of NYX-2925. The study was a sponsor-open, placebo-controlled study that was completed in two phases. In the first phase, subjects were dosed with single ascending doses, or SAD, ranging from 50-1200 mg. The second phase was a multiple ascending dose, or MAD, phase in which subjects received repeat daily doses of NYX-2925, over seven days, in dose levels ranging from 150-900 mg. In both phases of the study, we evaluated the following safety and tolerability measures: adverse events, vital signs, clinical lab values, electrocardiographic parameters, or ECG, and heart rate interval, or QTc, measures, dissociative side effects, and suicide risk. We also measured the PK in plasma, including an exploratory food effect cohort and an elderly cohort. Along with

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the PK samples collected, we also collected samples of CSF in cohorts at two dose levels from each phase of the study.

Treatment emergent adverse event results

Overall, 19 of 84 subjects (22.6%) reported a total of 47 treatment emergent adverse events, or TEAEs. Of these, 16 of 66 subjects (24.2%) reported 42 TEAEs after receiving NYX-2925 and three of 18 subjects (16.7%) reported five TEAEs after receiving placebo. The highest percentages of subjects reported the highest numbers of TEAEs in the CSF 50 mg cohort (SAD) and the CSF 300 mg cohort (MAD). Only four of 84 subjects (4.8%) had a TEAE considered possibly or probably related to study drug by the investigator. Of the 47 reported TEAEs, 34 (72.3%) were considered procedure related and 13 (27.7%) were considered non-procedure related. No subject in the SAD or MAD groups experienced a Grade 3 (severe) or Grade 4 (life threatening) TEAE, a death or serious TEAE, or a TEAE leading to discontinuation of study drug. Importantly, there were no adverse findings as it relates to dissociative side effects or suicide risk. As shown in the table below, only three TEAEs were determined to be related to NYX-2925, and all other TEAEs were due to the CSF procedure.

The table below lists the treatment-related TEAEs that were observed in the Phase 1 study.

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Pharmacokinetic conclusions

NYX-2925 plasma concentrations were quantifiable in all subjects that received NYX-2925, in all dose groups and cohorts through the 24-hour post-dose sample on day one, and in the majority of subjects through 48 hours post dose on day seven. Based on the PK measures evaluated, including average peak plasma concentrations, or Cmax, we observed increased NYX-2925 plasma concentration in a dose-proportional manner. The concentration levels and half-life were also generally comparable across dose groups and cohorts. Repeat daily administration for seven days resulted in minimal accumulation of NYX-2925. Despite delayed absorption resulting in an approximately 10% lower Cmax, the overall extent of exposure was not impacted by a high-fat high-calorie meal, suggesting that NYX-2925 may be taken with or without food. The majority of the administered dose was excreted unchanged in the urine.

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The figure below shows the mean plasma concentration of NYX-2925 at various doses in the single ascending dose phase of the Phase 1 study.


Single Ascending Dose Pharmacokinetics

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The figure below shows the mean plasma concentration of NYX-2925 at various doses in the multiple ascending dose phase of the Phase 1 study on day one and day seven.


Multiple Ascending Dose Pharmacokinetics

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In both phases, drug concentration in plasma was predictable, dose-proportional, and linear, with no significant accumulation with repeat daily dosing.

Thorough ECG analysis

The primary finding in this analysis was that NYX-2925 did not increase QTc at any single dose up to 1200 mg or after multiple doses up to 900 mg for seven days. The maximum geometric mean Cmax (20.1  m g/mL) was well above the expected exposure in clinical care. In addition, there were no clinically significant changes in QTc or ECG measures, indicating low risk of cardiac side effects caused by NYX-2925.

CNS exposure

The CNS exposure was confirmed from the CSF concentration-time profile in both CSF dose groups. The CSF concentrations increased proportionally as the dose increased. The maximum concentrations in the CSF were approximately 6% to 9% of the plasma Cmax, resulting in concentrations that extrapolate to concentrations that resulted in therapeutic benefit in animal models.

Preclinical data

NYX-2925 has shown reproducible alleviation of pain in numerous models of neuropathic and persistent pain. The table below shows the neuropathic pain model along with the specific readout with which analgesic activity has been seen with NYX-2925. These studies were completed between 2015 and 2017. Across these models, the activity of NYX-2925 has been consistent and reproducible and the study results outlined below are representative of the results observed with NYX-2925 across various neuropathic pain models.

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Preclinical behavioral pharmacology in pain

In preclinical studies in rodent models of neuropathic pain, NYX-2925 administration resulted in significant analgesic effect after single or repeat administration. In the rodent chronic constriction injury, or CCI, model, ligation of the sciatic nerve results in robust pain that emerges two to three weeks after the initial ligation surgery. This pain can be measured as an increased pain response, paw withdrawal, to a stimulus that is not considered painful to a healthy naïve animal.

In the study shown below, we administered a single dose of NYX-2925, gabapentin (an approved neuropathic pain medication), or vehicle to different sets of rats that had undergone CCI. We used gabapentin as a positive control because it demonstrates a robust acute analgesic effect in this model over

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a wide dose range in rodents. Paw withdrawal responses, following application of a filament to the affected hind paw, were measured at different timepoints after a single administration of test compound. NYX-2925 resulted in a significant increase in paw-withdrawal threshold at all timepoints tested for doses between 1-30 mg/kg and for one hour and 24 hours for 100 mg/kg. Gabapentin resulted in a time dependent increase in paw withdrawal threshold at one hour but not 24 hours or one week post-administration.

The figure below shows the results for the various doses and timepoints for NYX-2925, gabapentin, and vehicle in the CCI model.


Rat CCI Model of Neuropathic Pain

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The analgesic effect of NYX-2925 was long-lasting, persisting for at least seven days following a single administration, unlike gabapentin, which showed robust but short-lived analgesic activity. This long-lasting analgesic activity extended beyond the PK availability of compound in the brain and we believe is due to the enhancement of synaptic plasticity, which results in long-term changes in how the brain cells communicate.

Analgesic effect has also been shown after repeat dosing in the CCI model. Animals were dosed daily with NYX-2925 or vehicle for 12 consecutive days. NYX-2925 showed persistent analgesic activity on all testing days. NYX-2925 has also demonstrated analgesic effect in the streptozotocin model of painful DPN. Streptozotocin was administered to rats to induce a diabetes-like state. Once stable neuropathic pain was established, a single dose of NYX-2925 (1 or 10 mg/kg), gabapentin (150 mg/kg), or vehicle was

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administered. NYX-2925 (10 mg/kg) resulted in a significant increase in paw-withdrawal threshold at all timepoints tested. We did not observe analgesic effects with a 1 mg/kg dose of NYX-2925 at any timepoint. Gabapentin resulted in a time dependent increase in paw withdrawal threshold at one hour but not 24 hours or one week post-administration.

The figure below shows the results for the various doses and timepoints for NYX-2925, gabapentin, and vehicle in this model.


Streptozotocin Model of Diabetic Neuropathy

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In addition to alleviating pain, data from preclinical studies suggest that NYX-2925 can improve the emotional component of neuropathic pain. Rats emit vocalizations that can be used to understand the emotional state of the animal, with different vocalization ranges representing positive or negative affective states. In neuropathic pain models, rats show an increase in negative vocalizations and a decrease in positive vocalizations. In addition, when animals are put through a learning paradigm that involves tickling the animals (rough and tumble play), rats that have undergone the CCI surgery emit fewer positive vocalizations between the tickling sessions than animals that had undergone a sham surgery. Treatment with NYX-2925 one hour prior to the first tickling session increases positive vocalizations over repeat sessions. Furthermore, a measurement of negative vocalizations across the sessions shows that animals treated with NYX-2925 emit fewer than those treated with vehicle. These data support the premise that NYX-2925 not only reduces the pain that the animals are experiencing, but also improves cognition and mood.

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As shown in the figure below, CCI animals treated with oral doses of NYX-2925 emit more positive (50 kHz) vocalizations and fewer negative (20 kHz) vocalizations than the vehicle treated CCI animals.

                Hedonic Vocalizations During
                Rough-and-Tumble Play Intertrials
  Aversive Vocalizations Across              
Rough-and-Tumble Play Intertrials                


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Preclinical safety pharmacology and toxicology

Many pain therapeutics come with adverse side effects that can cause harm or at least limit their therapeutic benefit. We are committed to only advancing product candidates that have the potential to demonstrate meaningfully better safety profiles than those seen across the currently available therapies. NYX-2925 shows no evidence of sedation or ataxia, side effects often seen in products like gabapentin, even at doses far higher than the pharmacologically-active dose. The comparative impact of oral doses of NYX-2925 and gabapentin on the amount of time observed before a rat falls off, or fall latency, a rotating rod, or rotarod, which is a measure of sedation and ataxia, is illustrated in the figure below.

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Rat Rotarod Study

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Results from a rat drug discrimination study suggest low likelihood of abuse potential of NYX-2925. We evaluated NYX-2925 in a self-administration study in which rats are trained to press a lever to self-administer ketamine, a drug known to cause psychosis-like effects and have high abuse potential. The figure on the left shows the percentage of rats that pressed the lever to receive ketamine at various doses, and the figure on the right shows the frequency with which the rats pressed the lever to receive ketamine at various doses, each versus vehicle and NYX-2925. The figures demonstrate that NYX-2925 did not substitute for, or show the same level of "liking," as ketamine in this model.

Ketamine Discrimination   Lever-Pressing Rate


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In addition, across safety pharmacology studies assessing effects on the CNS and cardiovascular system in dogs, and respiratory function in rats, NYX-2925 did not show any notable safety findings. Importantly, NYX-2925 had no significant activity in a panel of 80 receptor-binding assays that include opiate, serotonin,

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tachykinin receptors, ion channels, and transporters, indicating NYX-2925 has low potential for off-target pharmacology.

Both single-dose and daily-repeat dose toxicology studies have been performed in rats and dogs. The maximum tolerated dose, following a single oral exposure, is at least 1000 mg/kg in both rats and dogs. After six weeks of daily oral administration, the no-observed-adverse-effect levels, or NOAELs, were the highest doses tested: 180 mg/kg in dogs (42 days) and 480 mg/kg in rats (55 days).

NYX-783

Our second product candidate, NYX-783, has been granted Fast Track designation for the treatment of PTSD and is in Phase 1 clinical development to assess safety, tolerability, and PK. To date, in the Phase 1 study, NYX-783 has demonstrated a predictable, dose-dependent, and linear PK profile with no accumulation after multiple daily doses and has been well-tolerated with no drug-related serious adverse events. We plan to initiate a Phase 2 clinical study in the second half of 2018. Preclinical data suggest that NYX-783 may accelerate fear extinction and inhibit spontaneous fear, potentially addressing key underlying causes of PTSD. We believe NYX-783, if approved, may represent significant improvement over current treatments for PTSD.

Mechanistic rationale

Existing data support the involvement of NMDArs in the central mechanisms of PTSD. PTSD may be caused through abnormal function of and communication between critical regions of the brain involved in emotional learning and memory. This abnormal function and communication, which is triggered by a traumatic event and persists even when the underlying trauma has long passed, is thought to underlie many of the key characteristics of PTSD such as distress related to reminders of the trauma, avoidance of such reminders, hypervigilance or startle response to everyday triggers, and many others. NMDArs facilitate synaptic plasticity and are therefore critical for normal learning processes including emotional learning such as fear conditioning and fear extinction. As an NMDAr modulator, NYX-783 targets synaptic plasticity processes and may enable more effective fear extinction in PTSD while also addressing the numerous comorbidities associated with PTSD, including mood, cognition, and sleep disturbances.

Disease overview

PTSD is a severe, often chronic, and disabling disorder that develops in individuals after exposure to a traumatic event involving actual or threatened injury to such individuals or others. While PTSD is often associated with combat veterans, whom it affects at a disproportionately higher rate, there are a number of other common traumas that can lead to the development of PTSD, including natural disasters, criminal assault, and rape. Following exposure to one of these traumas, PTSD can be characterized by a cluster of four core symptoms: (1) re-experiencing; recurrent intrusive memories, traumatic nightmares, and flashbacks; (2) avoidance; avoiding trauma related-thoughts, feelings, objects, people, and places associated with the trauma; (3) hyper-arousal; irritability, hypervigilance, reckless behavior, sleep disturbance, and difficulty concentrating, and (4) negative changes in cognition and mood; distorted beliefs about oneself or the world, persistent shame or guilt, emotional numbing, feelings of alienation, and inability to recall key details of the trauma.

In addition to the core symptoms, people with PTSD often suffer from significant comorbidities, including depression, insomnia, chronic pain, obesity, concentration difficulties, dementia, difficulties in interpersonal

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relationships, and substance abuse. The figure below illustrates the core symptoms and comorbidities associated with PTSD.

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Prevalence and market opportunity

PTSD is one of the most common psychiatric disorders. A majority of people will experience some type of trauma in their lifetime, of those that do, it is estimated that 8% to 10% will develop PTSD in their lifetime, and as many as one-third of such individuals will fail to recover. In terms of prevalence, studies estimate that during a one-year period, 3.5% of the U.S. adult population suffers from PTSD. This equates to approximately 8.5 million people.

The market size for PTSD treatments is difficult to estimate as there are currently only two approved pharmacotherapies to treat PTSD, both of which are antidepressants and available generically. However, considering the substantial size of the patient population and lack of available efficacious therapies, we believe PTSD represents a significant market opportunity. An effective treatment for PTSD has the potential to achieve significant revenues. If a therapy were to treat 5% of the people in the United States with PTSD, assuming pricing in line with current branded antidepressants, it would represent annual revenues of approximately $2 billion.

Current treatment options and unmet needs

PTSD is currently addressed through various forms of treatment, typically including psychotherapy and/or pharmacotherapies. It is always recommended that people with PTSD are treated using psychotherapy as a primary intervention; however, psychotherapy can often be time consuming, inconvenient, and come with varying degrees of effectiveness. Further, people with PTSD often lack access to, or fail to complete psychotherapy, resulting in relative reliance on pharmacotherapies. Only two pharmacotherapies,

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paroxetine and sertraline, have been approved by the FDA to treat PTSD, and no drug has been approved for PTSD since 2001. Other drugs are used off-label and have not demonstrated effectiveness in well-controlled clinical studies. In addition to approved and off-label pharmacotherapies, people with PTSD often self-medicate with alcohol and recreational drugs, perpetuating societal impacts of the disorder.

The following diagram illustrates the current treatment guidelines, related specifically to pharmacotherapies, for treating people with PTSD.

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The lack of approved therapies over nearly the past two decades and the limited efficacy of those therapies highlight the critical unmet medical need in the treatment of PTSD. Pharmacotherapies, paroxetine and sertraline, rarely produce a response rate greater than 60% and less than 30% of patients treated with them achieve clinical remission. Along with limited efficacy, pharmacotherapies often come with substantial warnings and side effects: suicidality, slowing of movement, nausea, diarrhea, and sexual dysfunction, among others. We believe the current treatment options for PTSD are inadequate for two main reasons: (1) they are merely symptomatic treatments that target a particular subset of PTSD symptoms, leaving the underlying condition and many other symptoms that patients experience untreated, and (2) the weak efficacy and undesirable side effects of the therapies used contribute to low compliance rates.

We believe NYX-783, which has a mechanism of action distinct from that of existing and emerging therapies, has the potential to dramatically improve the treatment of PTSD in the following ways if approved:

address the underlying learning and memory dysfunction associated with PTSD by enhancing synaptic plasticity, rather than simply palliate the symptoms as other therapies do;

provide rapid and long-lasting improvement to PTSD symptoms;

address common comorbidities associated with PTSD effectively; and

produce fewer side effects than current therapies due to lack of off-target activity.

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Ongoing Phase 1 clinical study

We are currently conducting a Phase 1 clinical study of NYX-783 in order to evaluate safety and tolerability, and to understand the plasma and CSF pharmacokinetics. This is a randomized, double-blind, sponsor-open, placebo-controlled, single and multiple ascending doses, parallel safety, tolerability and pharmacokinetics, study of NYX-783 dosed orally in healthy volunteers. The single ascending dose phase includes four escalating dose groups and one additional elderly cohort after all single and multiple ascending dose groups have completed. The multiple ascending dose phase includes three dose groups. We measured the PK in plasma, including an exploratory food effect cohort. Along with the PK samples collected, we also collected samples of CSF in cohorts at two dose levels from each phase of the study.

Treatment emergent adverse event results

At each dose level tested to date, NYX-783 has been well-tolerated. 15 of 62 subjects (24.2%) in the study reported a total of 31 TEAEs. Of these, 13 of 48 subjects (27.1%) reported 29 TEAEs after receiving NYX-783 and 2 of 14 subjects (14%) reported 2 TEAEs after receiving placebo. The highest percentage of subjects reported the highest number of TEAEs in the CSF 50mg cohort (SAD) and the reported adverse events were largely related to procedures for collecting CSF. Only 1 of 62 subjects (1.6%) had a TEAE considered possibly or probably related to study drug by the investigator. The 1 TEAE deemed to be possibly or probably related to study drug was "headache; possibly related to study drug." No subjects experienced TEAEs leading to discontinuation of the study.

Pharmacokinetic conclusions

NYX-783 plasma concentrations have been quantifiable and internally consistent within each dose group. The NYX-783 plasma pharmacokinetics have been dose-proportional and the time to maximum concentration and half-life have been generally comparable across dose groups and cohorts. Repeat daily administration for seven days has resulted in minimal accumulation of NYX-783. Much of the administered dose has been excreted unchanged in the urine.

The figure below shows the mean plasma concentration of NYX-783 at various doses in the single ascending dose phase of the Phase 1 study.


Single Ascending Dose Pharmacokinetics

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The figure below shows the mean plasma concentration of NYX-783 at various doses at day 1 and day 7 in the multiple ascending dose phase of the Phase 1 study.


Multiple Ascending Dose Pharmacokinetics

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CNS exposure

The CNS exposure was confirmed from the CSF concentration-time profile in a CSF dose group. We intend to use the CSF concentration data from the ongoing Phase 1 study to evaluate brain exposure in humans and select doses to evaluate in future studies. We will leverage these data to correlate human CSF levels with CSF levels from doses in preclinical animal models to determine the human doses we believe are most likely to show efficacy based on CNS exposure.

Future development

We intend to study NYX-783 in Phase 2 human clinical studies for the treatment of PTSD and plan to initiate these studies in the second half of 2018. We may seek to confirm the translatability of our preclinical fear extinction mechanism and dose response in human subjects prior to proceeding directly in to studies in people suffering from PTSD.

We expect to study NYX-783 both as an adjunct to psychotherapy and as a monotherapy for PTSD. Certain forms of psychotherapy have proven effective in treating PTSD, but are often complicated and labor-intensive. We believe NYX-783 may have potential to augment psychotherapy in a simple and easy to administer form. We also believe it may have potential as a monotherapy, used without psychotherapy.

Target pathway clinical studies

Following the conclusion and validation of our ongoing studies of sleep architecture and EEG brain function in NYX-2925, we plan to conduct similar pharmacodynamic biomarker studies with NYX-783. The goals of these studies, similar to those of the NYX-2925 studies, will be to confirm engagement of NMDArs and downstream pathways, as well as to inform the effect of different dose levels and dose intervals on this

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engagement. This will help inform the design of, and assist in the interpretation of data from, further clinical studies of NYX-783.

Preclinical data

Preclinical behavioral pharmacology in fear extinction

Rodents, like humans, can learn to associate fear with a specific stimulus tied to a traumatic event through fear conditioning. Rodents can also learn to extinguish that fear through repeated exposures to the stimuli in the absence of any traumatic event through fear extinction, or extinction learning. In the fear conditioning model, rats are initially placed in a specific context and administered a foot-shock, which leads to the development of a contextual fear, which can be measured by observing freezing behavior. Rats are then placed back in the same context on days 1 through 6 without a foot-shock to extinguish their fear. Once the fear is extinguished, animals are left undisturbed in their home cage on days 7 through 13. On day 14 animals are placed back in the original context to assess the level of spontaneous fear recovery. The figure below illustrates this fear conditioning and extinction model:


Fear Conditioning and Extinction Model

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When administered to rats after fear conditioning and before the first fear extinction session, a single administration of NYX-783 can accelerate the fear extinction process. In addition, both rodents and humans can spontaneously recover their fear to a specific stimulus, even after fear extinction. The NYX-783 treated rats did not show spontaneous recovery of fear, while rats administered either vehicle or the control compound D-cycloserine, or DCS, presented spontaneous recovery of fear one week after that fear had been completely extinguished. This suggests that NYX-783 not only enhances fear extinction learning, but also blocks spontaneous recovery of fear. The fear conditioning paradigm and associated data from a study completed in 2016 are shown below. The figures below show that both NYX-783 and DCS facilitate a more rapid extinction of fear when compared to vehicle-treated animals. NYX-783 also significantly inhibited

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spontaneous recovery of the fear response on day 14 compared to both vehicle-treated animals and DCS-treated animals.

Contextual Fear Conditioning and Extinction Model

                % Freezing, Days 1-6, 14

 

% Freezing, Day 14        


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We have also observed effects following dosing with NYX-783 in animal models of depression, a highly comorbid indication with PTSD. In the Porsolt forced swim model, animals were habituated to a cylinder filled with water, referred to as Porsolt chambers, 24 hours prior to the test day. On the test day, animals were given oral administration of NYX-783 at various dose levels or vehicle one hour before the first test in the same Porsolt chambers. Animals were re-assessed one week and two weeks after such administration. NYX-783 administered animals showed significantly less floating, a depression-like symptom, over a wide dose range. The activity is long-lasting with a single administration resulting in a significant effect that lasts up to two weeks post-dosing. The figure below shows NYX-783 administration significantly decreased floating at all dose levels tested and on all test days when compared to vehicle treated animals.


Porsolt Forced Swim Model

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Overall, the preclinical data with NYX-783 show that the compound enhances extinction learning and therefore has the potential to treat the underlying cause of PTSD. NYX-783's ability to inhibit the spontaneous recovery of fear 14 days after the initial shock suggests that NYX-783 has a robust and long-lasting effect on fear extinction. In addition, NYX-783's effect on reducing depression-like symptoms suggests that this product candidate may alleviate one of the main comorbidities associated with PTSD.

Preclinical pharmacokinetics

PK studies have been performed in rats and dogs at doses ranging from 2 to 600 mg/kg and 0.2 to 200 mg/kg, respectively. After a single oral dose, NYX-783 is rapidly absorbed into the bloodstream, with the time at which Cmax is observed ranging between 0.5 to one hour, and is rapidly eliminated from plasma in a linear fashion. NYX-783 is highly bioavailable following oral administration, with a fraction of dose of approximately 94% and 86% in rats and dogs, respectively. Also in the study in dogs, Cmax and area under the curve, or AUC, are directly dose-proportional at doses between 1 and 200 mg/kg, with a half-life of generally one to two hours. Cmax and AUC are also directly dose-proportional in the rat at all doses studied, ranging from 10 to 600 mg/kg. Based on Cmax and AUC in rats at pharmacologically-active doses, the exposure to the brain is approximately 5% to 10% relative to plasma levels of NYX-783.

Preclinical safety pharmacology and toxicology

Safety pharmacology studies indicate that NYX-783 was inactive in modulating hERG activity, had no effect on the hemodynamic parameters or ECG in male isolated guinea pig hearts (Langendorff method) at any concentrations in the range of 10mM to £ 500 mM. In the 28-day toxicology study in dogs, the QTc interval was significantly increased at the dose of 200 mg/kg, a dose that was evaluated only in male dogs. NYX-783 did not affect any cardiac indices in conscious dogs at any oral dose £ 100 mg/kg, or affect respiratory indices in rats up to and including the highest oral dose evaluated, 1000 mg/kg. In addition, NYX-783 did not affect behavior or motor coordination in a functional observation battery in rats at oral doses up to and including 600 mg/kg. In another CNS safety study, there were no observations or adverse findings in the Rotarod test in rats (1 to 600 mg/kg). NYX-783 had no significant activity in a panel of 80 receptor-binding assays that included opiate, serotonin, tachykinin receptors, ion channels, and transporters.

The acute toxicity of NYX-783 was evaluated in rats and dogs following a single oral administration. In both species, there were no significant changes in body weights, clinical pathology, or histopathology at any dose. In general, NYX-783 was well-tolerated after single oral doses up to and including 600 mg/kg in rats and 1000 mg/kg in dogs, which represents >100 times the proposed clinical starting dose. Daily repeat-dose toxicology studies have been performed in rats and dogs. After four weeks of daily oral doses of NYX-783, there were no adverse findings in rats up to and including the highest dose tested, 600 mg/kg/day, and 20 mg/kg/day in dogs. No neurotoxicity was observed in either species when treated for four weeks with NYX-783. All of these observations occur at doses well in excess of planned clinical doses and can be easily monitored in clinical studies.

NYX-458

Our third product candidate, NYX-458, has been evaluated in IND-enabling preclinical studies and we submitted an IND application to the FDA in May 2018 for the treatment of Parkinson's disease dementia, a subset of Parkinson's disease cognitive impairment. Mechanistic rationale and compelling preclinical data in a model of Parkinson's disease suggest NYX-458 may be optimally suited to treat the cognitive deficits caused by the disease. This model is highly relevant and translatable, as it evaluates the compound's effects in non-human primates by employing the neurotoxin MPTP to destroy dopamine-related neural cells

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similar to the way Parkinson's disease does in humans and measuring cognitive function using the same battery of tests used in human clinical studies. In the model, oral administration of NYX-458 resulted in a reversal of MPTP-induced cognitive impairment and, on some measures, restored cognitive function back to pre-MPTP baseline levels. NYX-458 has also shown robust and long-lasting effects in relevant rodent models, including water maze and novel object recognition models. We plan to initiate a single- and multiple-ascending dose Phase 1 study to evaluate safety, tolerability, and PK in the second half of 2018.

Mechanistic rationale

Parkinson's disease is caused by a progressive loss of neural cells that produce the neurotransmitter dopamine in critical brain regions. The most recognized symptoms associated with this loss of dopamine neurons are the motor symptoms including slowing of movements, rigidity, and tremor. Beyond their movement disorders, people with Parkinson's disease often suffer from a myriad of other symptoms, including cognitive dysfunction and psychiatric symptoms. All of these cognitive symptoms are caused by the loss of dopamine neurons and associated downstream changes, including NMDAr dysregulation and dysfunction. We believe this results in impaired synaptic plasticity.

NYX-458 modulates NMDArs and has the potential to correct NMDAr function in the brains of people with Parkinson's disease. NYX-458 facilitates LTP in hippocampal slices and demonstrates cognitive enhancement in several rodent models of learning and memory impairment. In learning and memory models, NYX-458 appears to enhance memory encoding and attention, cognitive domains specifically altered in Parkinson's disease. This compound shows specificity for a specific NMDAr subtype, NMDAR2B, known to be the predominant subtype expressed in the striatum, a brain region severely affected by the loss of dopamine in the brain of people with Parkinson's disease. For these reasons, we believe that NYX-458 may be ideally suited for the treatment of Parkinson's disease cognitive impairment.

Disease overview

Parkinson's disease has traditionally been characterized by motor signs of resting tremor, slowness of movement (bradykinesia), rigidity, and gait impairment. In recent years, non-motor signs and symptoms, including cognitive impairment, are increasingly recognized as central to Parkinson's disease. Some studies estimate that up to 80% of people with Parkinson's disease will suffer from cognitive impairment. As cognitive impairment can be complex in nature, the table below highlights the six established neurocognitive domains and provides a brief overview of each:

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While working memory deficits tend to be the most prominent domain implicated in Alzheimer's disease, cognitive impairment in Parkinson's disease tends to more heavily involve impairments in executive function, complex attention, and perceptual-motor function.

Although Parkinson's disease cognitive impairment probably follows a continuous spectrum, it tends to be classified in two distinct groups: Parkinson's disease mild cognitive impairment, or PD-MCI, and Parkinson's disease dementia, or PDD. In general, PD-MCI represents a degree of cognitive impairment that is abnormal for age, but does not interfere with functional independence. PDD has a substantial daily living

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impact on patients and caregivers and is associated with increased nursing home placement, morbidity, and mortality. We believe that NYX-458 has the potential to treat cognitive dysfunction along the spectrum from PD-MCI to PDD.

Prevalence and market opportunity

Parkinson's disease is believed to be the second most common neurodegenerative disorder, behind Alzheimer's disease. According to the Parkinson's Foundation, Parkinson's disease affects approximately one million people in the United States and nearly ten million worldwide. It is estimated that there are nearly 60,000 new cases of Parkinson's disease diagnosed annually in the United States and as the population continues to age, studies anticipate the prevalence of Parkinson's disease will continue to grow. The emergence and progression of cognition-related symptoms in Parkinson's disease can vary due to the diverse underlying pathology of the disease; however, MCI tends to be an early non-motor symptom, and affects 15% to 25% of newly diagnosed patients. It is estimated that approximately 30% of people living with Parkinson's disease have PDD, and studies estimate that as people with Parkinson's disease approach ten years post-diagnosis, 75% will have PDD. Based on these percentages, we estimate that there are more than 500,000 people in the United States with either PD-MCI or PDD.

Current treatment options and unmet needs

Progression of cognitive symptoms can significantly diminish functional independence and is associated with increased nursing home placement, morbidity, and mortality. The current treatments for PD-MCI and PDD are limited and only one therapy has obtained FDA approval: rivastigmine, a cholinesterase inhibitor that was approved for mild to moderate dementia associated with Parkinson's disease in 2006. Rivastigmine, along with other cholinesterase inhibitors, and memantine that are all approved for Alzheimer's disease are the therapies used most often to treat cognitive impairment in Parkinson's disease. These therapies only provide modest benefit, have challenging dosing regimens (including the need for individual titration), and often come with substantial side-effects, including nausea, vomiting, anorexia, and dizziness, among others.

Deterioration of cognitive function is commonly cited as a critical unmet medical need for people with Parkinson's disease and we believe NYX-458 represents a novel therapeutic approach that has the potential to address this in the following ways:

provide a therapeutic option that works directly on the synaptic plasticity mechanisms that drive cognition, including attention, learning and memory;

demonstrate effect in a greater proportion of patients (better responder rate);

produce fewer side effects than the therapies used today; and

address dosing challenges through a convenient, oral, dosing regimen.

Future development

We intend to develop NYX-458 for the treatment of Parkinson's disease cognitive impairment, with our initial studies potentially targeting both PD-MCI and PDD.

We submitted an IND for the treatment of PDD in May 2018, and expect to initiate a Phase 1 study in the second half of 2018. In parallel, we are planning our Phase 2 safety and efficacy programs for NYX-458 within Parkinson's disease and other causes of cognitive impairment. We believe the mechanism of NYX-458 may be effective across cognitive impairment due to varying etiologies, based on the results seen in the initial studies of Parkinson's disease cognitive impairment, we may seek to expand clinical development to other diseases associated with cognitive impairment.

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Preclinical data

Parkinson's disease does not occur naturally outside of humans. The pathophysiology of Parkinson's disease must therefore be imitated in animal models, commonly through the use of agents that destroy dopamine neural cells, such as MPTP. The non-human primate chronic low-dose MPTP, or CLD-MPTP, model is considered to be the most translatable model for testing therapeutics against cognitive impairment in Parkinson's disease. In this model, animals are trained in several cognitive performance tasks until stable performance is achieved. Animals are then given chronic low-dose MPTP until stable deficits are seen in those same cognitive performance tasks. Similar to humans with Parkinson's disease cognitive impairment, CLD-MPTP treated non-human primates demonstrate dopaminergic cell loss as well as other neuropathological deficits common in the human condition. Non-human primates also suffer from similar types of cognitive impairment seen in people with PD-MCI and PDD, including deficits in attention, working memory, and executive function. These deficits can be measured using a monkey version of Cambridge Cognition's CANTAB assessment, which is an automated computerized assessment tool used in humans to assess the extent of deficit.

NYX-458 was orally administered to CLD-MPTP treated non-human primates that showed significant MPTP-induced deficits in several cognitive domains. After administration of NYX-458, improvement of function was seen in the cognitive assessment. These assessments included the continuous performance task model of sustained attention, the variable delayed response model of attention and spatial working memory, and the discrimination reversal model of cognitive flexibility.

In this model, animals must remember the location of a cue that is presented on a computer screen. The time between when they are presented with the initial cue and when they have to recall the location of the cue varies between 2 and 50 seconds. Short delays test the animal's attentional ability while long delays test spatial working memory. CLD-MPTP resulted in a severe impairment in both the short delays and the long delays as shown by the steep drop from the pre-MPTP baseline and the post-MPTP baseline. This impairment was stable for at least four months and was not affected by administration of vehicle. After oral administration of NYX-458, animals saw a robust improvement across all delay lengths, meaning that the compound was able to reverse deficits in both attention and working memory. This reversal of impairment was seen for at least three weeks after a single dose.

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The figure below shows NYX-458 (0.03 mg/kg) oral administration resulting in significant long-lasting improvement (nearly full reversal) from vehicle levels in both short and long delay times in a variable delayed response model that was completed in 2018.


Chronic Low Dose MPTP Non-human Primate Model of Parkinson's Disease
Variable Delayed Response Assay

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Animals dosed with NYX-458 (0.03 to 1 mg/kg) also showed significant improvement in the continuous performance task where the number of correct responses increased and omission errors decreased. This decrease in omission errors is also suggestive of an impact of the compound on attentional processes. NYX-458 administration also reversed deficits seen in the simple discrimination reversal assay, demonstrating that the compound was also able to improve cognitive flexibility. To assess the reproducibility of the positive results with NYX-458, animals were re-lesioned with MPTP. Once the cognitive deficit was re-established, animals were dosed with NYX-458 and the compound again improved attention, working memory, and cognitive flexibility across the assays.

Across animal models tested to date, administration of NYX-458 has resulted in consistent improvement of learning and memory in multiple cognitive domains. In the CLD-MPTP model of Parkinson's cognitive impairment, NYX-458 reversed deficits seen in attention, working memory, and cognitive flexibility in animals that had clear impairment in these memory domains. The effect of NYX-458 was robust,

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long-lasting, and reproducible when the deficit was re-established. We believe these data support advancing into clinical studies in people with Parkinson's disease cognitive impairment.

In addition to the non-human primate model, we have studied NYX-458 in numerous rodent models of learning and memory. The table below summarizes the results observed across various models.

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The novel object recognition, or NOR, assay can be used to assess recognition memory in rodent. When NYX-458 was orally administered to rodents in the NOR assay, a clear dose-dependent enhancement of memory was seen. The level of enhancement was similar to that seen with the positive control compound, SB-399885, a 5-HT6 receptor antagonist previously shown to be effective in this model.

The timing of drug administration in the NOR assay can be used to assess whether a compound's effect on memory is through facilitation of encoding, consolidation, or retrieval. An effect seen with compound administration prior to the first testing session, or T1, likely suggests an enhancement of memory encoding, an effect seen with compound administration immediately after T1 suggests an enhancement of memory consolidation, and an effect seen with compound administration prior to the second testing session, or T2, suggests an enhancement of memory retrieval. The data on NYX-458 suggest that this product candidate likely specifically enhances memory encoding.

The NOR assay consists of the two testing sessions shown in the figure below, with a 24-hour delay between T1 and T2. During T1, animals are placed in a box and allowed to explore two identical objects. During T2, animals are placed back in that box and one of the objects is replaced with a novel object. The amount of time spent exploring the novel versus the familiar objects is recorded. As rodents have an innate interest in exploring new stimuli over familiar stimuli, an increase in time spent exploring the novel object versus the familiar object can be interpreted as recognition memory for the familiar object.


Novel Object Recognition (NOR) Assay

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In the figure below on the left, NYX-458 administered orally at 1 mg/kg significantly improved novel object recognition memory compared with vehicle treated animals while 0.01 and 10 mg/kg showed a trend toward a positive effect. In the right panel, NYX-458 significantly enhanced recognition memory compared with vehicle treated animals when administered one hour prior to T1 with no effect when administered immediately post-T1 or one hour prior to T2. These data suggest that the effect of NYX-458 on the enhancement of recognition memory is specific to facilitation of memory encoding and attention.


Novel Object Recognition Assay

                                                                                                  NYX-458 Exhibits a Clear
                                                                                                  Dose Response
  NYX-458 Enhances                                                         
Memory Encoding                                                           

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We have also assessed the effect of NYX-458 on LTP, which is a key driver of synaptic plasticity processes in the brain. When the compound is bath applied to Schaffer collateral-CA1 synapses in hippocampal slices from rats, a clear stimulus- and dose-dependent enhancement is seen, as illustrated by the figure below. The figure below shows that a 100 nM application of NYX-458 results in a significant enhancement of LTP.


NYX-458 LTP Enhancement

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The enhancement of LTP seen with NYX-458 led us to assess the compound in models of learning and memory, since one would expect that an enhancement of LTP and synaptic plasticity to result in facilitation of learning and memory processes.

Preclinical pharmacokinetics

We have evaluated PK parameters in rats, dogs, and non-human primates for up to 28 days. The PK profile of NYX-458 is linear and dose-proportional.

Preclinical safety pharmacology and toxicology

We have been conducting a standard battery of safety-pharmacology studies to assess the effects on the CNS, cardiovascular system, and respiratory function. To date, there have been no notable safety findings in these studies.

We have evaluated NYX-458 in rats and dogs for up to 28 days to understand the toxicology of this product candidate. To date, there have been no noteworthy findings in studies with doses up to and including 1000 mg/kg.

AGN-241751

Through our research collaboration, Allergan has advanced one compound from our discovery platform into Phase 1 clinical development and has disclosed its plan to develop it as a treatment for major depressive disorder. In May 2018, Allergan exercised its option under our collaboration to acquire the exclusive intellectual property rights specific to such compound, triggering payment of a $1.0 million option fee in connection with such exercise. We will receive no further economic consideration from this product candidate. For more information, see "—Research collaboration agreement with Allergan" below.

Competition

Overview

Our industry is highly competitive and subject to rapid and significant technological change. The large and growing markets for pain, PTSD, Parkinson's disease, and other disorders of the brain and nervous system make them attractive therapeutic areas for biopharmaceutical businesses. While we believe that our employees and consultants, scientific knowledge, technology, and development experience provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical, and biotechnology companies, academic institutions, governmental agencies, and public and private research institutions. Several of these entities have commercial products, robust drug pipelines, readily available capital, and established research and development organizations. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical studies, 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. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. The key competitive factors affecting the success of

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all of our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of branded and generic competition, and the availability of reimbursement from government and other third-party payors.

NMDAr-targeted therapies

A number of pharmaceutical, biotechnology, and specialty pharmaceutical companies are developing therapies targeting NMDArs. Most of the therapies being developed are broad antagonists and tend to have multiple target actions while our compounds are truly modulatory and have not demonstrated any off-target activity in preclinical screening. We are aware of other companies developing or commercializing NMDAr-targeted therapies, including but not limited to, Adamas Pharmaceuticals Inc., Allergan plc, AmKor Pharma, Inc., Avanir Pharmaceuticals, Inc., Axsome Therapeutics, Inc., Biohaven Pharmaceutical Holding Co. Ltd., Cadent Therapeutics, Inc., Cerecor Inc., Eli Lilly and Company, Genentech Inc., Immune Pharmaceuticals Inc., Intra-Cellular Therapies, Inc., Janssen Pharmaceuticals, Inc., NeuroRx, Inc., Newron Pharmaceuticals S.p.A., Otonomy, Inc., Relmada Therapeutics, Inc., Sage Therapeutics, Inc., UCB S.A., and Vistagen Therapeutics, Inc.

NYX-2925—neuropathic/chronic pain

We expect that, if approved, NYX-2925 will compete with the currently approved therapies for painful DPN, including pregabalin, duloxetine, and tapentadol HCl. We are aware of a number of therapies that are approved to treat other types of neuropathic pain. We are also aware that various therapies are used off-label to treat neuropathic pain. In addition to the marketed therapies, we are aware of companies currently developing therapies for neuropathic pain, including Biogen Inc., Cara Therapeutics, Inc., Daiichi Sankyo Company, Immune Pharmaceuticals Inc., Novartis AG, and Xenoport Inc.

NYX-783—post-traumatic stress disorder

We expect that, if approved, NYX-783 will compete with currently approved therapies for PTSD, including paroxetine and sertraline. We are also aware of other companies developing therapies for PTSD, including but not limited to, Otsuka Pharmaceutical Co., Ltd. and Tonix Pharmaceuticals Holding Corp.

NYX-458—Parkinson's disease cognitive impairment

We expect that, if approved, NYX-458 will compete with currently approved therapies for PDD, the only one of which in the United States is rivastigmine. There are no therapies currently approved for Parkinson's mild cognitive impairment in the United States.

Research collaboration agreement with Allergan

Overview

In July 2015, we entered into a research collaboration agreement with Allergan, pursuant to which we and Allergan have research, development, and commercial rights to compounds discovered using our discovery platform. The research collaboration was structured to afford Allergan an option to obtain field-limited rights for up to three of the compounds discovered under the research collaboration. In exchange for these rights, Allergan reimburses us for a certain percentage of the direct costs associated with the medicinal chemistry, screening, and profiling efforts conducted as part of the research collaboration. Allergan also pays us a fixed annual rate per full time employee, or FTE, for each individual assigned to these discovery efforts. Our research activities are supervised by a Joint Steering Committee, or JSC, comprising representatives from both our company and Allergan.

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Under the research collaboration agreement, we are required to use commercially reasonable efforts to perform research activities in accordance with the research collaboration. We propose target compound profiles for use in identifying, discovering, and developing collaboration compounds most suitable for further research and development under the collaboration. Molecules from our discovery platform that meet our mutually agreed upon criteria are designated as "eligible compounds." When the pool of eligible compounds reaches a certain size, Allergan and we may select, in alternating fashion, molecules from this pool for further investigation.

Allergan may perform research and development on (but not commercialize) molecules it selects as therapies for Alzheimer's disease, delirium and a list of psychiatric disorders (which list does not include PTSD or substance abuse). On May 16, 2018, Allergan exercised its option to acquire the compound designated AGN-241751, triggering payment of a $1.0 million option fee in connection with such exercise. Allergan may also exercise up to two more options to acquire commercialization rights to molecules that it previously selected from the pool of eligible compounds. Under this agreement, each time Allergan exercises its option, it is required to pay us an option exercise fee of $1.0 million and we must (a) assign to Allergan rights in intellectual property that pertains only to the Allergan-optioned compound, and (b) grant Allergan a fully-paid, perpetual, exclusive and irrevocable license under other intellectual property we control that pertains to both the optioned compound and also pertains to other compounds or uses, solely to develop and commercialize the optioned compound within Allergan's field of specified indications.

We may research and develop molecules we select from the pool of eligible compounds as therapies for any indication outside of Allergan's field of specified indications. We anticipate we will invent, and therefore own, most intellectual property pertaining to our selected compounds, but Allergan must grant us a non-exclusive license under any intellectual property rights Allergan may own related to our selected compounds to develop and commercialize our selected compounds outside of Allergan's field of specified indications.

During the exclusivity period set forth in the agreement, we have agreed not to, alone or with a third party, directly or indirectly, engage in the research, preclinical development, clinical development, or commercialization of any compound or any product for the purpose of the treatment, prevention or diagnosis of any disorders or conditions in Allergan's field of specified indications. In addition, any chemistry or technology we discover or develop related to the modulation of NMDArs for therapeutic effect is and will be subject to the terms of the agreement. Allergan and its affiliates will not have the right to, alone or with a third party, directly or indirectly, engage in the research, preclinical development, clinical development, or commercialization of the compounds it acquires under the research collaboration for the purpose of the treatment, prevention, or diagnosis of any disorders or conditions outside Allergan's field of specified indications, without first obtaining Aptinyx approval at our sole discretion. The exclusivity period commences on the effective date of the agreement and ends on the third anniversary of the last day of the term of the agreement.

The research collaboration agreement expires on the expiration of Allergan's options. The term for Allergan's options expires on February 24, 2021; provided that such period would be extended as needed to permit Aptinyx to provide a complete data package to Allergan for the Allergan selected compounds. The option period (and the research collaboration agreement) would terminate prior to expiration if and when Allergan exercises a third option under the research collaboration agreement. Allergan may terminate the research collaboration agreement upon 60 days' written notice to us. Either party may terminate the agreement immediately upon written notice upon the other party's filing for protection under bankruptcy or insolvency laws. In the event we are in material breach of one or more of our material obligations under the agreement, then Allergan may terminate the agreement and the exclusivity

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period will remain in effect until a predetermined anniversary of the date that would have been the expiration date if the research term had run its full course without extension. Upon termination of the research collaboration agreement, the research program will terminate, rights to molecules that were previously optioned by Allergan will continue in effect, and all molecules, and associated data, for which Allergan has selected but not exercised an option will be returned to us and will no longer be subject to any Allergan rights.

This collaboration has enabled both parties to advance compounds from our discovery platform into clinical studies.

Manufacturing

We do not have any manufacturing facilities or personnel. We currently rely, and expect to continue to rely, on third parties for the manufacturing of our product candidates for preclinical and clinical testing, as well as for commercial manufacturing if our product candidates receive marketing approval.

As a key part of our product development approach, we aim to complete formulation work at an early stage of development, such that our clinical studies are conducted with a formulation that has the potential for eventual scale-up.

All of our product candidates are small molecules and are manufactured in reliable and reproducible synthetic processes from readily available starting materials. The chemistry does not require unusual equipment in the manufacturing process, although certain manufacturers may choose to manufacture our product candidates in specifically isolated facilities since many are spiro-beta lactams. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities.

Commercialization

We intend to develop and, if approved by the FDA, to commercialize our product candidates in the United States. We may work in combination with one or more large pharmaceutical partners for certain indications, where specialist capabilities are needed. Depending on the specific development path pursued, this may include larger chronic pain indications. For other, more specialized indications, we intend to commercialize our product candidates independently. For example, we believe the patient and prescriber populations for Parkinson's disease cognitive impairment are relatively concentrated and can be addressed with a focused sales team of fewer than 200 full time employees. We also do not believe any existing pharmaceutical companies have significant expertise in the commercialization of therapies in this specific area. We will, however, continuously review our partnering strategy in the light of new clinical data and market understanding. We may enter into distribution or licensing arrangements for commercialization rights for other regions outside the United States.

Intellectual property

Our owned and licensed patents and patent applications relate to our NDMAr modulating compounds and include patents and patent applications directed to new compositions of matter and to methods of treating brain and nervous system disorders. We intend to seek patent protection in the United States and in selected jurisdictions worldwide.

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NYX-2925 and NYX-783

As of March 31, 2018, we own one issued U.S. patent, one pending U.S. patent application and pending and issued foreign counterpart patents and patent applications, that relate to both NYX-2925 and NYX-783. We also own two pending U.S. provisional patent applications that relate to NYX-2925. Provisional patent applications are not eligible to become issued patents until, among other things, we file a non-provisional patent application within 12 months of filing of one or more of our related provisional patent applications. The issued U.S. patent is expected to expire in 2034. If we continue to pursue patent protection and file a non-provisional patent application with respect to our latest filed provisional patent application, and if any patents issue based on such applications, we expect such patents, if issued, to expire between 2034 and 2038.

NYX-458

As of March 31, 2018, we own one international patent application filed under the Patent Cooperation Treaty (PCT) relating to our product candidate, NYX-458. We do not currently own any issued patents related to NYX-458. If we continue to pursue patent protection, and if any patents issue based on this application, we expect such patents to expire in 2037.

Other compounds

As of March 31, 2018, we own five issued U.S. patents, eight pending U.S. utility patent applications and pending and issued foreign counterpart patents and patent applications, as well as six international PCT patent applications and eleven U.S. provisional patent applications, all of which generally relate to our efforts to develop other compounds in our NMDAr modulator small-molecule program. The issued U.S. patents are expected to expire in 2034. If we continue to pursue patent protection and file a non-provisional patent application with respect to our latest filed provisional patent application, and if any patents issue based on such pending applications, we expect such patents, if issued, to expire between 2034 and 2039.

For a discussion of the risks associated with our intellectual property, see "Risk factors—Risks related to our intellectual property rights."

Government regulation

Government authorities in the United States at the federal, state and local level and in other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority.

U.S. drug development

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA, and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or

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judicial sanctions. These sanctions could include, among other actions, the FDA's refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Additionally, a manufacturer may need to recall a product from the market. Any agency or judicial enforcement action could have a material adverse effect on us.

Our product candidates must be approved by the FDA through the NDA process before they may be legally marketed in the United States. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of extensive nonclinical laboratory tests, animal studies and formulation studies in accordance with applicable regulations, including the FDA's Good Laboratory Practice, or GLP, regulations;

submission to the FDA of an IND application, which must become effective before human clinical studies may begin;

approval by an independent institutional review board, or IRB, or ethics committee at each clinical study site before each study may be initiated;

performance of adequate and well-controlled human clinical studies in accordance with applicable IND and other clinical study-related regulations, referred to as good clinical practices, or GCPs, to establish the safety and efficacy of the proposed drug for each proposed indication;

submission to the FDA of an NDA for a new drug;

a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review;

satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug is produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity;

potential FDA audit of the nonclinical study and/or clinical study sites that generated the data in support of the NDA; and

FDA review and approval of the NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the drug in the United States.

The nonclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

The data required to support an NDA is generated in two distinct development stages: nonclinical and clinical. For new chemical entities, the nonclinical development stage generally involves synthesizing the active component, developing the formulation and determining the manufacturing process, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing. These nonclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The conduct of the nonclinical tests must comply with federal regulations, including GLPs. The sponsor must submit the results of the nonclinical tests, together with

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manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. Some nonclinical testing may continue even after the IND is submitted, but an IND must become effective before human clinical studies may begin. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical studies, including concerns that human research subjects will be exposed to unreasonable health risks, and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical studies due to safety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that could cause the study to be suspended or terminated.

The clinical stage of development involves the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor's control, in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical studies are conducted under protocols detailing, among other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical study must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical study will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical study subject or his or her legal representative and must monitor the clinical study until completion. There are also requirements governing the reporting of ongoing clinical studies and completed clinical study results to public registries.

As part of the 21 st  Century Cures Act, or the Cures Act, which was signed into law on December 13, 2016, upon request, the FDA is to establish a process for the qualification of drug development tools. A drug development tool includes a biomarker including a surrogate endpoint, a clinical outcome assessment including a patient-reported outcome, and any other method, material or measure that the FDA determines aids drug development and regulatory review. A drug development tool is qualified if the FDA has determined that the tool and its proposed context of use can be relied upon to have a specific interpretation and application in drug development and regulatory review. A qualified drug development tool may be used to support the investigational use of a drug or support or obtain NDA approval.

A sponsor who wishes to conduct a clinical study outside the United States may, but need not, obtain FDA authorization to conduct the clinical study under an IND. If a foreign clinical study is not conducted under an IND, the sponsor may submit data from the clinical study to the FDA in support of an NDA so long as the clinical study is conducted in compliance with GCP and the FDA is able to validate the data through an onsite inspection if the agency deems it necessary.

Clinical studies

Clinical studies are generally conducted in three sequential phases that may overlap, known as Phase 1, Phase 2 and Phase 3 clinical studies.

Phase 1 clinical studies generally involve a small number of healthy volunteers who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical studies is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug.

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Phase 2 clinical studies typically involve studies in disease-affected patients to determine the dose required to produce the desired benefits and provide a preliminary evaluation of efficacy. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as identification of possible adverse effects and safety risks.

Phase 3 clinical studies generally involve large numbers of patients at multiple sites (from several hundred to several thousand subjects) and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for physician labeling. Phase 3 clinical studies may include comparisons with placebo and/or comparator treatments.

Post-approval studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical studies as a condition of approval of an NDA.

Progress reports detailing the results of the clinical studies must be submitted at least annually to the FDA. Written IND safety reports must be submitted to the FDA and the investigators within 15 calendar days for serious and unexpected suspected adverse events, finding from other studies or animal or in vitro testing that suggests a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Additionally, a sponsor must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days. Phase 1, Phase 2 and Phase 3 clinical studies may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected serious harm to patients. Additionally, some clinical studies are overseen by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study.

Pursuant to the Cures Act, the manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug. This requirement applies on the later of 60 calendar days after the date of enactment of the Cures Act or the first initiation of a Phase 2 or Phase 3 study of the investigational drug.

Concurrently with clinical studies, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug 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 drug candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality and purity of the final drug product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

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NDA and FDA review process

The results of the nonclinical studies and clinical studies, together with other detailed information, including extensive manufacturing information and information on the composition of the drug and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use and whether the product is being manufactured in accordance with cGMP to assure and preserve the product's identity, strength, quality, and purity. FDA approval of an NDA must be obtained before a drug may be offered for sale in the United States.

In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA must contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. According to the FDA's fee schedule, effective from October 1, 2017 through September 30, 2018, the user fee for an application requiring clinical data, such as an NDA, is $2,421,495. PDUFA also imposes an annual prescription drug product program fee for human drugs ($304,162). Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. The FDA must make a decision on accepting an NDA for filing within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the goals and policies agreed to by the FDA under PDUFA, for drugs that do not contain an NCE, the FDA has 10 months from the receipt date in which to complete its initial review of a standard NDA and respond to the applicant, and six months from the receipt date for a priority NDA. For drugs containing an NCE, these 10 and six month review timeframes are from the filing date of an NDA. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs, and the review process is often significantly extended by FDA requests for additional information or clarification.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product 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. In addition, before approving an NDA, the FDA may also audit data from clinical studies to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA will likely re-analyze the clinical study data, which could result in extensive discussions between the FDA and the applicant during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all.

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After the FDA evaluates an NDA, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter usually describes all of the specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical study(s), and/or other significant and time-consuming requirements related to clinical studies, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may resubmit the NDA addressing all of the deficiencies identified in the letter, withdraw the application, or request an opportunity for a hearing. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the same data.

There is no assurance that the FDA will ultimately approve a drug product for marketing in the United States and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-marketing testing or clinical studies and surveillance to monitor the effects of approved products. For example, the FDA may require Phase 4 testing which involves clinical studies designed to further assess a drug's safety and efficacy and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA also may place other conditions on approvals including the requirement for a risk evaluation and mitigation strategy, or REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product.

Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for

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seven years from the date of such approval, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication but that could be used off-label in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if our product is determined to be contained within the scope of the competitor's product for the same indication or disease. If one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.

Expedited development and review programs

The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs that meet certain criteria. Specifically, new drugs are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of a new drug may request the FDA to designate the drug as a Fast Track product at any time during the clinical development of the product. Unique to a Fast Track product, the FDA may review sections of the marketing application on a rolling basis before the complete NDA is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application.

Any product submitted to the FDA for marketing, including under the Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review. A product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or offers a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review.

Additionally, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinical development. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from FDA to ensure an efficient drug development program. Fast Track designation, priority review, and breakthrough designation do not change the standards for approval but may expedite the development or approval process.

Pediatric trials

The FDCA requires that a sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and the FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age

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groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical studies and/or other clinical development programs.

Post-marketing requirements

Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the FDA of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug's approved labeling (known as "off-label use"), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require the applicant to develop additional data or conduct additional nonclinical studies and clinical studies. As with new NDAs, the review process is often significantly extended by FDA's requests for additional information or clarification. Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription Drug Marketing Act, or the PDMA, a part of the FDCA.

In the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These manufacturers must comply with cGMP regulations that require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs 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 and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market.

Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with

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doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product's approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA's policies may change, which could delay or prevent regulatory approval of our products under development. Changes in statutes, regulations, or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

Orange book listing

Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is an application in which the applicant, in part, relies on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. Limited changes must be preapproved by the FDA via a suitability petition. ANDAs are termed "abbreviated" because they are generally not required to include nonclinical and clinical data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

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 having claims that cover the applicant's product and method of use. 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. These products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA.

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 make patent certifications to the FDA that (1) no patent information on the drug or method of use that is the subject of the application has been submitted to the FDA; (2) the patent has expired; (3) the date on which the patent has expired and approval will not be sought until after the patent expiration; or (4) the 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. The last certification is known as a paragraph IV certification. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a paragraph IV certification or if the applicant is not seeking approval of a patented method of use. If the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.

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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 reference listed drug and the patent owner within 20 days after 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 notice prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit, a decision in the infringement case that is favorable to the applicant or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay.

In instances where an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owners regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

U.S. marketing exclusivity

Marketing exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications. The FDCA provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving abbreviated new drug applications, or ANDAs, for drugs containing the active agent for the original indication or condition of use. The FDCA also provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for an NCE. A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. Three-year and five-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical studies necessary to demonstrate safety and efficacy. Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued "Written Request" for such a trial.

A drug that is granted regulatory approval may be eligible for five years of marketing exclusivity in the United States following regulatory approval if that drug is classified as an NCE. A drug can be classified as a NCE if the FDA has not previously approved any other drug containing the same active moiety. While we believe there is a likelihood that the FDA would grant NCE status to both NYX-2925 and NYX-783 if both are granted regulatory approval, NYX-2925 and NYX-783 have the same structural formula but differ in

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spatial orientation, i.e., are separate stereoisomers of each other, and there can be no assurance that both will be granted NCE exclusivity.

U.S. patent-term extension

Depending upon the timing, duration and specifics of FDA approval of our current product candidates or any future product candidate, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch Waxman Act. The Hatch Waxman Act permits extension of the patent term of up to five years as compensation for patent term lost during FDA regulatory review process. Patent term extension, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product's approval date. The patent term extension period is generally one half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for the extension (and only those patient claims covering the approved drug, a method for using it or a method for manufacturing it may be extended), and the application for the extension must be submitted prior to the expiration of the patent. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the approvals. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension. In the future, we may apply for extension of patent term for our currently owned patents to add patent life beyond its current expiration date, depending on the expected length of the clinical studies and other factors involved in the filing of the relevant NDA. However, there can be no assurance that the USPTO or FDA will grant us any requested patent term extension, either for the length we request or at all.

Other regulatory matters

Manufacturing, sales, promotion, and other activities following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services including the Office of the Inspector General, the U.S. Department of Justice, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local regulatory authorities. In the United States, sales, marketing and scientific/educational programs must also comply with state and federal fraud and abuse laws. These laws include the federal Anti-Kickback Statute, which makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. Moreover, the ACA provides that the government may assert 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 civil False Claims Act.

Although we would not submit claims directly to payors, drug manufacturers can be held liable under the federal civil False Claims Act, which prohibits anyone from knowingly presenting, or causing to be

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presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. The government may deem manufacturers to have "caused" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. Penalties for a False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of between $11,181 and $22,363 for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The civil monetary penalties statute imposes penalties against any person or entity that, 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. Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, to the extent that any of our product candidates, if approved, are sold in a foreign country, we may be subject to similar foreign laws.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. Among other things, HITECH makes HIPAA's security standards directly applicable to business associates, defined as independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates, 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 attorney's fees and costs associated with pursuing federal civil actions. In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are

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more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and criminal penalties.

Other regulations may affect other aspects of our business. For example, pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws. There has also been a recent trend of increased federal and state regulation of payments made to physicians. Certain states mandate implementation of compliance programs, impose restrictions on drug manufacturers' marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians.

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and individual imprisonment, any of which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these 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.

European Union drug development

In the European Union, our future products may also be subject to extensive regulatory requirements. As in the United States, medicinal products can only be marketed if a marketing authorization from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of nonclinical and clinical research in the European Union are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical studies regulatory framework, setting out common rules for the control and authorization of clinical studies in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member state regimes. Under the current regime, before a clinical study can be initiated it must be approved in each of the EU countries where the study is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical study have to be reported to the NCA and ECs of the Member State where they occurred.

In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC. It is expected that the new Clinical Trials Regulation (EU) No 536/2014 will apply in 2019 with a three-year transition period. It will overhaul the current system of approvals for clinical studies in the EU. Specifically, the new regulation, which will be directly applicable in all member states, aims at simplifying and streamlining the approval of clinical studies in the EU. For instance, the new Clinical Trials Regulation provides for a streamlined application procedure via a single point and strictly defined deadlines for the assessment of clinical study applications.

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European Union drug review and approval

In the European Economic Area, or EEA, comprising the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

The Community MA is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products and medicinal products containing a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member States through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for their approval. If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in all the Member States (i.e., in the RMS and the Member States Concerned).

Under the above described procedures, before granting the MA, the EMA 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.

European Union new chemical entity exclusivity

In the EU, new chemical entities, sometimes referred to as new active substances, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents regulatory authorities in the EU from referencing the innovator's data to assess a generic application for eight years, after which generic marketing authorization can be submitted, and the innovator's data may be referenced, but not approved for two years. The overall ten year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies.

European Union orphan designation and exclusivity

In the EU, the European Commission, based on the recommendation of the EMA's Committee for Orphan Medicinal Products, grants orphan drug designation to promote the development of products that are

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intended for the diagnosis, prevention or treatment of life threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU community (or where it is unlikely that the development of the medicine would generate sufficient return to justify the investment) and for which no satisfactory method of diagnosis, prevention or treatment has been authorized (or, if a method exists, the product would be a significant benefit to those affected).

In the EU, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity is granted following medicinal product approval. This period is extended by two years for compliance with an agreed upon pediatric investigation plan granted at the time of review of the orphan drug designation. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing authorization may be granted to a similar product for the same indication at any time, if (i) the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal product application, (ii) the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of the orphan medicinal product, or (iii) the second applicant can establish that the second medicinal product, although similar, is safer, more effective or otherwise clinically superior to the authorized orphan medicinal product. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

European data collection

The collection and use of personal health data in the European Economic Area (EEA) is governed by the provisions of the Data Protection Directive 95/46/EC, which will be replaced by the General Data Protection Regulation 2016/679 (or GDPR) effective May 25, 2018. The GDPR applies to any company established in the EEA and to companies established outside the EEA that process personal data in connection with the offering of goods or services to data subjects in the EU or the monitoring of the behavior of data subjects in the EU. The GDPR enhances data protection obligations for data controllers of personal data (including stringent requirements relating to the consent of data subjects, expanded disclosures about how personal data is used, requirements to conduct privacy impact assessments for "high risk" processing, limitations on retention of personal data, mandatory data breach notification and "privacy by design" requirements) and creates direct obligations on service providers acting as data processors. The Data Protection Directive and GDPR also impose strict rules on the transfer of personal data outside of the EEA to countries that do not ensure an adequate level of protection, like the U.S. Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the EEA Member States may result in fines up to 20 million Euros or 4% of a company's global annual revenues for the preceding financial year, whichever is higher. Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting from infringement of the GDPR. Given the breadth and depth of changes in data protection obligations, preparing to meet the GDPR's requirements before it becomes effective, and maintaining compliance with the GDPR thereafter, will require significant time, resources and expense, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.

Rest of the world regulation

For other countries outside of the European Union and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical studies, product

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licensing, pricing and reimbursement vary from country to country. In all cases the clinical studies must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Reimbursement

Sales of our products will depend, in part, on the extent to which our products will be covered by third-party payors, such as government health programs, commercial insurance and managed healthcare organizations. In the United States no uniform policy of coverage and reimbursement for drug products exists. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for any of our products will be made on a payor by payor basis. A payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved or that any required patient cost-sharing amount will be acceptable to the patient. Moreover, one payor's decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Third-party payors are increasingly reducing reimbursements for medical products and services. Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our products or a decision by a third-party payor to not cover our products could reduce physician usage of the products and have a material adverse effect on our sales, results of operations and financial condition.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities that provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval. However, any negotiated prices for our products covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

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The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare the effectiveness of different treatments for the same illness. The plan for the research was published in 2012 by the Department of Health and Human Services, the Agency for Healthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research and related expenditures will be made to Congress.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly lower.

Affordable Care Act and other reform initiatives

In the United States and some foreign jurisdictions, there have been, and likely will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the cost of healthcare.

For example, in March 2010, the ACA was enacted in the United States. The ACA includes measures that have significantly changed, and are expected to continue to significantly change, the way healthcare is financed by both governmental and private insurers. Among the provisions of the ACA of greatest importance to the pharmaceutical industry are the following:

The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the U.S. Department of Health and Human Services in exchange for state Medicaid coverage of most of the manufacturer's drugs. The ACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers' rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs to 23.1% of average manufacturer price, or AMP, and adding a new rebate calculation for "line extensions" (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP.

The ACA imposed a requirement on manufacturers of branded drugs to provide a 50% (70% commencing January 1, 2019) point-of-sale discount off the negotiated price of branded drugs dispensed to Medicare Part D beneficiaries in the coverage gap (i.e., "donut hole") as a condition for a manufacturer's outpatient drugs being covered under Medicare Part D.

The ACA imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs, apportioned among these entities according to their market share in certain government healthcare programs.

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The ACA imposed new reporting requirements on drug manufacturers for payments made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $165,786 per year (or up to an aggregate of $1,105,241 per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers are required to submit reports to CMS by the 90th day of each calendar year.

The ACA established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products. The ACA established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation through 2019.

Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges. Further, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Congress may consider other legislation to replace elements of the ACA. The Tax Cuts and Jobs Act of 2017, or TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called "Cadillac" tax on certain high cost employer-sponsored insurance plan, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device exercise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." Congress also could consider additional legislation to repeal, replace, or further modify elements of the ACA. Thus, the full impact of the ACA, or any law replacing elements of it, and the political uncertainty regarding any repeal and replacement on the ACA, on our business remains unclear.

Many of the details regarding the implementation of the ACA are yet to be determined, and at this time, it remains unclear the full effect that the ACA would have on our business. There have been judicial and Congressional challenges to the ACA, and we expect such challenges and amendments to continue in the future.

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Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013, following passage of the Bipartisan Budget Act of 2013, and will remain in effect through 2027 unless additional congressional action is taken. Further, in January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability. Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs.

We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory developments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates and may affect our overall financial condition and ability to develop product candidates.

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Employees

As of March 31, 2018, we employed 60 full-time employees, including 46 in research and development and 14 in general and administrative, and no part-time employees. Twenty-two of our employees hold M.D. or Ph.D. degrees. We have never had a work stoppage, and none of our employees is represented by a labor organization or under any collective-bargaining arrangements. We consider our relationship with our employees to be good.

Facilities

We currently have two locations located in Evanston, Illinois where we lease space. Our research facilities, which include lab and office space, consists of approximately 4,700 square feet and are leased through Northwestern University. We lease a facility containing our research and development, laboratory and office space, which consists of approximately 16,519 square feet located at 909 Davis Street, Suite 600, Evanston, IL 60201. Our lease on our corporate headquarters expires on August 31, 2022 and is subject to a five year renewal period in accordance with the terms of the lease. We believe our facilities are adequate for our current needs and that suitable additional substitute space would be available if needed.

Legal proceedings

As of the date of this prospectus, we are not party to any legal matters or claims. In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

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Management

Executive officers and directors

The following table sets forth information regarding our executive officers and directors, including their ages as of March 31, 2018:

 
   
   
Name
  Age
  Position(s)
Executive Officers:          
Norbert G. Riedel, Ph.D.      60   President, Chief Executive Officer, and Director
Ashish Khanna     42   Chief Financial Officer and Chief Business Officer
David R. Houck, Ph.D.      62   Chief Development Officer
Andrew Kidd     42   Chief Commercial Officer
Torsten M. Madsen, M.D., Ph.D.      51   Chief Medical Officer
Joseph R. Moskal, Ph.D.      67   Chief Scientific Officer
Non-Management Directors:          
Wilbur H. Gantz III(1)     80   Chairman of the Board
Patrick G. Enright(1)(3)     56   Director
Elisha P. Gould III(2)     61   Director
Robert J. Hombach(1)     52   Director
Adam M. Koppel, M.D., Ph.D.(2)     48   Director
Liam Ratcliffe, M.D., Ph.D.(2)     54   Director
James N. Topper, M.D., Ph.D.(3)     56   Director

(1)    Member of the audit committee.

(2)    Member of the compensation and management development committee.

(3)    Member of the nominating and corporate governance committee.

Norbert G. Riedel, Ph.D., has served as a member of our board of directors and our President and Chief Executive Officer since June 2015. Dr. Riedel previously served as Chief Executive Officer and President of Naurex Inc., our predecessor company, from January 2014 to July 2015. From 2001 to January 2013, he served as Corporate Vice President and Chief Scientific Officer of Baxter International Inc., a diversified healthcare company, where from 1998 to 2001, he also served as President and General Manager of the recombinant therapeutic proteins business unit and Vice President of Research and Development of the bioscience business unit. From 1996 to 1998, Dr. Riedel served as head of worldwide biotechnology and worldwide core research functions at Hoechst-Marion Roussel, now Sanofi, a global pharmaceutical company. Dr. Riedel served on the board of directors of Ariad Pharmaceuticals, Inc., an oncology company, from May 2011 until the company was acquired in February 2017. Dr. Riedel also serves on the board of directors of Jazz Pharmaceuticals plc and the Illinois Biotechnology Industry Organization and is also a member of the Austrian Academy of Sciences. Dr. Riedel is an Adjunct Professor at Boston University School of Medicine and an Adjunct Professor of Medicine at Northwestern University's Feinberg School of Medicine. Dr. Riedel holds a Diploma in biochemistry and a Ph.D. in biochemistry from the University of Frankfurt. Dr. Riedel brings significant scientific, drug discovery and development, and commercial expertise to our board of directors with over 20 years of experience in the biotechnology and pharmaceutical industries.

Ashish Khanna has served as our Chief Business Officer since July 2015 and as our Chief Financial Officer since February 2018. He was previously Vice President of Corporate Development at Naurex and managed its financing and transaction efforts between 2010 and 2015, culminating in the company's acquisition by

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Allergan plc. Prior to Naurex, Mr. Khanna served as Director of Business Development at Vanda Pharmaceuticals. He was formerly a member of the cardiology strategic marketing team at Cordis Corporation, a Johnson & Johnson company. Earlier, Mr. Khanna was a strategy consultant with the Palladium Group and with the Strategic Advisory Services practice of Ernst & Young (now Capgemini). He serves on the board of directors of the Illinois Biotechnology Innovation Organization. Mr. Khanna received a B.S. in finance and B.A.S. in systems engineering from the University of Pennsylvania, as well as an M.B.A. from the Wharton School.

David R. Houck, Ph.D., has served as our Chief Development Officer since April 2018. He previously served as our Vice President for Drug Development Operations and Quality from August 2015 to April 2018 and has also served in that role in Naurex Inc. from May 2013 to August 2015. Prior to Naurex, Dr. Houck was president of PharmaKey, LLC from April 2009 until May 2013, and he currently serves as the chairman of its board of directors. Dr. Houck also serves on the editorial board on the Journal of Antibiotics. Dr. Houck has held scientific and managerial roles in several pharmaceutical companies including Merck & Company, Inc., Sanofi S.A., and OSI Pharmaceuticals, Inc. Dr. Houck received a B.S. in biology from Alma College, an M.S. in biochemistry from Purdue University, and a Ph.D. in chemistry from Ohio State University.

Andrew Kidd has served as our Chief Commercial Officer since November 2017. He was previously at Baxter International for over ten years, most recently as senior vice president of strategy and business development. Prior to that he held a number of commercial leadership positions including general manager of Baxter Canada, global franchise head for surgical care, and general manager of U.S. anesthesia and cardiovascular. Before joining Baxter he worked at The Boston Consulting Group both in London and then Chicago focused on pharmaceutical and other healthcare clients. Mr. Kidd received a BM BCh medical degree from the University of Oxford and a B.A. in medical sciences from the University of Cambridge.

Torsten M. Madsen, M.D., Ph.D. , has served as our Chief Medical Officer since July 2015. He previously served as Vice President and an observer on the board of directors of Naurex Inc. and was previously chief medical officer and vice president of U.S. drug development at Lundbeck from January 2014 to April 2015. Prior to this, Dr. Madsen served in different roles at H. Lundbeck A/S between 2009 and 2013, including as divisional director of international clinical research in mood and anxiety disorders, directing the clinical development program and registration of vortioxetine. Before joining Lundbeck, Dr. Madsen was a resident physician in psychiatry at Aarhus University Hospital in Denmark. Dr. Madsen received an M.D. and a Ph.D. from Copenhagen University and worked as a postdoctoral associate in the department of molecular psychiatry at Yale University.

Joseph R. Moskal, Ph.D., has served as our Chief Scientific Officer since July 2015. He founded Naurex in September 2006 and served as its chief scientific officer until the company was acquired by Allergan plc in July 2015. He is also a professor of biomedical engineering at Northwestern University and director of the university's Falk Center for Molecular Therapeutics. Dr. Moskal previously served as assistant professor and director of the neurosurgery laboratories at the Albert Einstein College of Medicine. Earlier, he was a staff fellow at the National Institutes of Health. Dr. Moskal is well known for his research on the NMDAr. He received a B.S. and a Ph.D. from the University of Notre Dame.

Wilbur H. Gantz III has served as a member of our board of directors since July 2015. Mr. Gantz has been the President of PathoCapital, an investor in healthcare companies, since March 2009. He previously served as Executive Chairman and Chief Executive Officer of Ovation Pharmaceuticals, Inc., which was sold to Lundbeck, AG in 2009, and as Chairman, Chief Executive Officer and President of PathoGenesis Corporation, a biopharmaceutical company that was sold to Chiron, Inc. in 2000. Prior to founding PathoGenesis, from

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1987 to 1992 he served as President of Baxter International, Inc., a manufacturer and marketer of healthcare products. During the past five years, Mr. Gantz has served on the board of directors of Aevi Genomic Medicine, Inc. and W.W. Grainger, Inc. He currently serves on the boards of private companies Harmony Biosciences, LLC, ReliefBand Technologies LLC, and Adams Street Partners, LLC. He is a trustee of The Field Museum of Natural History and Brain Research Foundation. Mr. Gantz holds a B.A. degree from Princeton University, where he graduated cum laude, and an M.B.A. from Harvard Business School. We believe that Mr. Gantz is qualified to serve on our board due to his extensive experience managing biopharmaceutical and healthcare companies.

Patrick G. Enright has served as a member of our board of directors since May 2016. Since 2007, Mr. Enright has served as a Managing Director of Longitude Capital, a venture capital firm, of which he is a founder. From 2002 through 2006, Mr. Enright was a Managing Director of Pequot Ventures, a venture capital investment firm, where he co-led the life sciences investment practice. He currently serves on the boards of directors of Aimmune Therapeutics, Inc., Jazz Pharmaceuticals plc, and several privately-held companies. Previously, Mr. Enright served on the boards of directors of Esperion Therapeutics, Inc., from April 2013 to June 2016 and Corcept Therapeutics Incorporated from April 2008 to May 2017. Mr. Enright received a B.S. from Stanford University and an M.B.A. from the Wharton School at the University of Pennsylvania. We believe Mr. Enright is qualified to serve on our board due to his experience as a venture capital investor focused on life sciences companies and his past work in the pharmaceutical industry.

Elisha P. Gould III has served as a member of our board of directors since July 2015. Mr. Gould is currently a Partner and Head of Venture/Growth Equity Investments at Adams Street Partners, LLC, a global private equity firm, and has been employed by Adams Street Partners or its predecessor organizations since 1994. Since 2014, Mr. Gould has served on the board of directors of Corvus Pharmaceuticals, Inc. and in the past five years, he has also served on the board of directors of OncoMed Pharmaceuticals, Inc. He also currently serves on the board of directors of several private companies. Mr. Gould received an A.B. in Engineering Science from Dartmouth College and an M.B.A. from the Stanford University Graduate School of Business. We believe Mr. Gould's experience in the venture capital industry and as director of a pharmaceutical company provides him with the qualifications and skills to serve as a member of our board of directors.

Robert J. Hombach has served as a member of our board of directors since May 2018. Mr. Hombach is the retired Executive Vice President, Chief Financial Officer and Chief Operations Officer of Baxalta Inc., a biopharmaceutical company, a position he held from July 2015 until the acquisition of Baxalta by Shire plc in June 2016. Baxalta was spun off from its parent, Baxter International Inc., in July 2015, where Mr. Hombach served as Vice President and Chief Financial Officer from June 2010 until the Baxalta spin off. Mr. Hombach began his career at Baxter in 1989 and served in a number of roles there, including as Vice President of Finance EMEA from 2004 to 2007 and Treasurer from 2007 to 2010. Mr. Hombach currently serves on the board of directors of BioMarin Pharmaceutical Inc. and Carmax Inc. Mr. Hombach earned an M.B.A. from Northwestern University's J.L. Kellogg Graduate School of Management, and a B.S. in finance cum laude from the University of Colorado. Mr. Hombach is qualified to serve on our board due to his extensive experience in finance and accounting, capital markets, and managing large biotechnology and pharmaceutical organizations.

Adam M. Koppel, M.D., Ph.D. , joined our board of directors in December 2017. Dr. Koppel rejoined Bain Capital in 2016 as a managing director of Bain Capital Life Sciences. He had initially joined Bain Capital Public Equity in 2003 where he was a leader within the healthcare sector until mid-2014. During the period from mid-2014 to mid-2016, Dr. Koppel worked at Biogen, Inc. where he served as executive vice president of corporate development and chief strategy officer. Prior to joining Bain Capital Public Equity in 2003,

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Dr. Koppel was an associate principal at McKinsey & Co in New Jersey where he served a variety of healthcare companies. Dr. Koppel currently serves on the board of directors of Dicerna Pharmaceuticals, Inc., Solid Biosciences, Inc. and Trevena, Inc. Dr. Koppel previously served on the board of directors of PTC Therapeutics, Inc. Dr. Koppel received an M.D. and Ph.D. in neuroscience from the University of Pennsylvania School of Medicine, as well as an M.B.A. from The Wharton School at the University of Pennsylvania, where he was a Palmer Scholar. He graduated magna cum laude from Harvard University with an A.B. and A.M. in History and Science. We believe that Dr. Koppel's background as an executive officer, director and public equity and growth private equity investor in biopharmaceutical companies, as well as his scientific and medical background, provide him with the qualifications and skills to serve as a member of our board of directors.

Liam Ratcliffe, M.D., Ph.D. , has served on our board of directors since May 2016. Dr. Ratcliffe is a Managing Director at New Leaf Venture Partners, and concentrates on biopharmaceutical investing. Dr. Ratcliffe joined New Leaf in September 2008. Dr. Ratcliffe was previously Senior Vice President and Development Head for Pfizer Neuroscience, as well as Worldwide Head of Clinical Research and Development. Additional positions during his 12 years at Pfizer included Vice President of Exploratory Development for the Mid-West region, and Head of Experimental Medicine at Pfizer's Sandwich, UK Laboratories. Dr. Ratcliffe received his M.D. degree and Ph.D. degree in immunology from the University of Cape Town and his M.B.A. degree from the University of Michigan. Dr. Ratcliffe currently serves on the board of directors of Deciphera Pharmaceuticals, Inc. and Edge Therapeutics, Inc. as well as on the board of directors of the following private biopharmaceutical companies: Arvinas, Inc., Calchan Ltd., Karus Therapeutics and Unum Therapeutics. Dr. Ratcliffe previously served on the board of Array BioPharma Inc. from April 2012 to April 2014. We believe that Dr. Ratcliffe's experience in the biopharmaceutical industry and investing in life sciences companies, as well as his medical and scientific background, provide him with the qualifications and skills to serve as a director.

James N. Topper, M.D., Ph.D., has served as a member of our board of directors since May 2016. Since August 2003, he has been a partner with Frazier Healthcare Partners, a venture capital firm, currently holding the position of managing general partner of the life sciences team. Prior to this, Dr. Topper served as head of the cardiovascular research and development division of Millennium Pharmaceuticals, Inc. from February 2002 to August 2003. Prior to the merger of COR Therapeutics, Inc. and Millennium Pharmaceuticals in 2002, Dr. Topper served as the vice president of biology at COR Therapeutics from 1999 to 2002. He served on the faculties of Stanford Medical School and Harvard Medical School prior to joining COR Therapeutics. Dr. Topper currently serves as a member of the board of directors of Allena Pharmaceuticals Inc., Alpine Immune Sciences, Inc., and AnaptysBio, Inc. Dr. Topper received a B.S. in Biology from the University of Michigan and an M.D. and a Ph.D. in Biophysics from Stanford University School of Medicine. He did his postgraduate training in Internal Medicine and Cardiovascular Disease at the Brigham and Women's Hospital in Boston and is board certified in both disciplines. We believe that Dr. Topper is qualified to serve on our board of directors because of his management experience in our industry and knowledge of medical and scientific matters.

Composition of our board of directors

Our board of directors consists of eight members, each of whom is a member pursuant to the board composition provisions of our certificate of incorporation and agreements with our stockholders, which agreements are described under "Certain relationships and related person transactions." These board composition provisions will terminate upon the completion of this offering. Upon the termination of these provisions, there will be no further contractual obligations regarding the election of our directors. Our nominating and corporate governance committee and our board of directors may therefore consider a

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broad range of factors relating to the qualifications and background of nominees, which may include diversity, which is not only limited to race, gender, or national origin. We have no formal policy regarding board diversity. Our nominating and corporate governance committee's and our board of directors' priority in selecting board members is identification of persons who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business, understanding of the competitive landscape and professional and personal experiences and expertise relevant to our growth strategy. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. Our amended and restated certificate of incorporation that will become effective upon the closing of this offering and amended and restated bylaws that will become effective upon the effectiveness of the registration statement of which this prospectus is a part also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast in an annual election of directors, and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of directors then in office.

Director independence

Our board of directors has determined that all members of the board of directors, except Norbert G. Riedel, Ph.D., are independent directors in accordance with the rules of The Nasdaq Stock Market, or Nasdaq, and the SEC. In making such independence determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of the directors listed above, our board of directors considered the association of our directors with the holders of more than 5% of our common stock. Upon the completion of this offering, we expect that the composition and functioning of our board of directors and each of our committees will comply with all applicable requirements of Nasdaq and the rules and regulations of the SEC. There are no family relationships among any of our directors or executive officers.

Under the rules of Nasdaq, subject to specified exceptions, each member of a listed company's audit, compensation, and nominating and corporate governance committees must be independent. We intend to rely on the phase-in rules of Nasdaq with respect to the independence of the audit, compensation, and nominating and corporate governance committees. In accordance with these phase-in provisions, our audit, compensation, and nominating and corporate governance committees will have at least one independent member by the effective date of the registration statement of which this prospectus is a part, at least two independent members within 90 days of the effective date of the registration statement of which this prospectus is a part, and all members will be independent within one year of the effective date of the registration statement of which this prospectus is a part.

Staggered board

In accordance with the terms of our amended and restated certificate of incorporation that will become effective upon the closing of this offering and amended and restated bylaws that will become effective upon the effectiveness of the registration statement of which this prospectus is a part, our board of directors will be divided into three staggered classes of directors and each director will be assigned to one of these three classes. At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of

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stockholders to be held during the year 2019 for Class I directors, 2020 for Class II directors, and 2021 for Class III directors.

Our Class I directors will be Wilbur H. Gantz III and Norbert G. Riedel, Ph.D.;

Our Class II directors will be Patrick G. Enright, Adam M. Koppel, M.D., Ph.D., and James Topper, M.D., Ph.D.; and

Our Class III directors will be Elisha P. Gould III, Robert J. Hombach, and Liam Ratcliffe, M.D., Ph.D.

Our amended and restated certificate of incorporation that will become effective upon the closing of this offering and amended and restated bylaws that will become effective upon the effectiveness of the registration statement of which this prospectus is a part provide that the size of our board of directors shall be fixed from time to time by a resolution of the majority of our board of directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of our management or a change in control.

Board leadership structure and board's role in risk oversight

Currently, the role of chairman of the board is separated from the role of chief executive officer, and we plan to keep these roles separated following the completion of this offering. We believe that separating these positions allows our chief executive officer to focus on our day-to-day business, while allowing the chairman of the board to lead the board of directors in its fundamental role of providing advice to and independent oversight of management. Our board of directors recognizes the time, effort, and energy that the chief executive officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our chairman, particularly as the board of directors' oversight responsibilities continue to grow. While our amended and restated bylaws and our corporate governance guidelines do not require that our chairman and chief executive officer positions be separate, our board of directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance.

Risk is inherent to every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our financial condition, development and commercialization activities, operations, strategic direction, and intellectual property, as more fully discussed under "Risk factors" in this prospectus. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

The role of the board of directors in overseeing the management of our risks is conducted primarily through committees of the board of directors, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees. The full board of directors (or the appropriate board committee in the case of risks that are under the purview of a particular committee) discusses with management our major risk exposures, their potential impact on us, and the steps we take to manage them. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairman of the relevant committee reports on the discussion to the full board of directors during the committee reports portion of the next board meeting. This enables the board of directors and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

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Committees of our board of directors

Our board of directors has established an audit committee, a compensation and management development committee, and a nominating and corporate governance committee, each of which will operate pursuant to a charter to be adopted by our board of directors and will be effective upon the effectiveness of the registration statement of which this prospectus is a part. Upon the effectiveness of the registration statement of which this prospectus is a part, the composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, Nasdaq rules, and SEC rules and regulations.

Audit committee

Patrick G. Enright, Wilbur H. Gantz III, and Robert J. Hombach will serve on the audit committee, which will be chaired by Robert J. Hombach. Our board of directors has determined that Patrick G. Enright, Wilbur H. Gantz III, and Robert J. Hombach are "independent" for audit committee purposes as that term is defined in the rules of the SEC and the applicable Nasdaq rules, and each has sufficient knowledge in financial and auditing matters to serve on the audit committee. Our board of directors has designated Robert J. Hombach as an "audit committee financial expert," as defined under the applicable rules of the SEC. The audit committee's responsibilities include:

appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements;

reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;

coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;

establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

recommending based upon the audit committee's review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our Annual Report on Form 10-K;

monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

preparing the audit committee report required by SEC rules to be included in our annual proxy statement;

reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and

reviewing quarterly earnings releases.

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Compensation and management development committee

Elisha P. Gould III, Adam M. Koppel, M.D., Ph.D., and Liam Ratcliffe, M.D., Ph.D. will serve on the compensation and management development committee, which will be chaired by Adam M. Koppel, M.D., Ph.D. Our board of directors has determined that each member of the compensation and management development committee is "independent" as defined in the applicable Nasdaq rules. The compensation and management development committee's responsibilities include:

annually reviewing and recommending to the board of directors corporate goals and objectives relevant to the compensation of our chief executive officer;

evaluating the performance of our chief executive officer in light of such corporate goals and objectives and recommending to the board of directors the compensation of our chief executive officer;

reviewing and approving the compensation of our other executive officers;

reviewing and establishing our overall management compensation, philosophy, and policy;

overseeing and administering our compensation and similar plans;

evaluating and assessing potential and current compensation advisors in accordance with the independence standards identified in the applicable Nasdaq rules;

retaining and approving the compensation of any compensation advisors;

reviewing and making recommendations to our board of directors about our policies and procedures for the grant of equity-based awards;

evaluating and making recommendations to the board of directors about director compensation;

preparing the compensation and management development committee report required by SEC rules, if and when required, to be included in our annual proxy statement;

reviewing and approving the retention or termination of any consulting firm or outside advisor to assist in the evaluation of compensation matters; and

reviewing and discussing with the board of directors corporate succession plans for our chief executive officers and our other key officers.

Nominating and corporate governance committee

Patrick G. Enright and James Topper, M.D., Ph.D. will serve on the nominating and corporate governance committee, which will be chaired by James Topper, M.D., Ph.D. Our board of directors has determined that each member of the nominating and corporate governance committee is "independent" as defined in the applicable Nasdaq rules. The nominating and corporate governance committee's responsibilities include:

developing and recommending to the board of directors criteria for board and committee membership;

establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by stockholders;

reviewing the size and composition of the board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us;

identifying individuals qualified to become members of the board of directors;

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recommending to the board of directors the persons to be nominated for election as directors and to each of the board's committees;

developing and recommending to the board of directors a code of business conduct and ethics and a set of corporate governance guidelines; and

overseeing the evaluation of our board of directors and management.

Our board of directors may from time to time establish other committees.

Compensation and management development committee interlocks and insider participation

None of the members of our compensation and management development committee has at any time during the prior three years been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation and management development committee of any entity that has one or more executive officers serving on our board of directors or compensation and management development committee.

Corporate governance

Prior to the effectiveness of the registration statement of which this prospectus is a part, we will adopt a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following the effectiveness of the registration statement of which this prospectus is a part, a current copy of the code of business conduct and ethics will be posted on the Corporate Governance section of our website, which is located at https://www.aptinyx.com/. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website to be part of this prospectus.

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Executive compensation

Executive compensation overview

Historically, our executive compensation program has reflected our growth and development-oriented corporate culture. To date, the compensation of our President and Chief Executive Officer and our other executive officers identified in the 2017 Summary Compensation Table below, who we refer to as the "named executive officers," has consisted of a combination of base salary, annual cash bonus, and long-term incentive compensation in the form of stock options. Our named executive officers, like all full-time employees, are eligible to participate in our health and welfare benefit plans, subject to the terms of those plans.

As we transition from a private company to a publicly traded company, we will evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require. At a minimum, we expect to review executive compensation annually with input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation and management development committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee.

2017 summary compensation table

The following table presents information regarding the total compensation awarded to, earned by, or paid to our named executive officers for services rendered to us in all capacities for the year ended December 31, 2017.

 
   
   
   
   
   
   
 
 
  Year

  Salary
($)

  Bonus
($)

  Option
awards
($)(1)

  All other
compensation
($)(2)

  Total
($)

 

Norbert G. Riedel, Ph.D.
President and Chief Executive Officer

    2017     424,017     159,054     197,230   28,059     808,360  

Torsten M. Madsen, M.D., Ph.D.
Chief Medical Officer

    2017     345,049     80,832     12,909   19,571     458,361  

Joseph R. Moskal, Ph.D.
Chief Scientific Officer

    2017     376,425     88,042     15,878   17,513     497,858  

(1)    Amounts reflect the aggregate grant date fair value of option awards granted to the named executive officer during 2017 under our 2015 Stock Option and Grant Plan, or the 2015 Plan, calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation—Stock Compensation . The assumptions used in calculating the grant date fair value of the stock options reported in the Option Awards column are set forth in Note 12 to the financial statements included in this prospectus. Note that the amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the named executive officer upon exercise of the options. Unlike the calculations contained in our financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the executive will perform the requisite service for the award to vest in full.

(2)    For 2017, amounts include for each named executive officer: (a) amounts contributed by us and to the named executive officer's 401(k) account in the amount of $10,800 for each of Drs. Riedel and Moskal and $2,312 for Dr. Madsen and (b) medical, dental, vision, life, and disability premiums paid by us in the amount of $17,259 for each of Drs. Riedel and Madsen and $6,713 for Dr. Moskal.

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Narrative disclosure to summary compensation table

Base salary

Each named executive officer's base salary is a fixed component of annual compensation for performing specific duties and functions, and has been established by our board of directors taking into account each individual's role, responsibilities, skills, and experience.

Cash bonus

Our annual bonus program is intended to reward our named executive officers for meeting objective or subjective performance goals for a fiscal year.

Long-term equity incentives

Our equity grant program is intended to align the interests of our named executive officers with those of our stockholders and to motivate them to make important contributions to our performance.

Employment arrangements with our named executive officers

We have entered into employment agreements with each of our named executive officers, each of which became effective as of August 29, 2015. All of such employment arrangements provide for "at will" employment. Prior to the closing of this offering, we intend to enter into new employment agreements with each of our named executive officers.

Norbert G. Riedel, Ph.D.

Dr. Riedel's current annual base salary is $426,420, which is subject to review and redetermination by our board of directors or our compensation and management development committee, and he is eligible to earn an annual bonus with a target amount equal to 40% of his base salary. Dr. Riedel is also eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Dr. Riedel's employment agreement provides that, in the event that his employment is terminated by us without "cause" (as defined in his employment agreement) or Dr. Riedel resigns for "good reason" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to 12 months of his base salary, plus 100% of his target annual bonus, payable in substantially equal installments over 12 months following his termination, (ii) if Dr. Riedel is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of 12 months following termination or the end of Dr. Riedel's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health insurance to Dr. Riedel had he remained employed with us, and (iii) 12 months' acceleration of all outstanding time-based equity awards held by Dr. Riedel. In lieu of the payments and benefits described in the preceding sentence, in the event that Dr. Riedel's employment is terminated by us without cause or Dr. Riedel resigns for good reason, in either case within 12 months following a "sale event" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to 18 months of his base salary, plus 100% of his annual target bonus, payable in substantially equal installments over 18 months following his termination, (ii) if Dr. Riedel is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of 18 months following termination or the end of Dr. Riedel's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health

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insurance to him had he remained employed with us and (iii) full acceleration of all outstanding time-based equity awards held by Dr. Riedel.

The payments and benefits provided to Dr. Riedel under his employment agreement in connection with a sale event may not be eligible for a federal income tax deduction for the company pursuant to Section 280G of the Code. These payments and benefits also may be subject to an excise tax under Section 4999 of the Code. If the payments or benefits payable to Dr. Riedel in connection with a sale event would be subject to the excise tax on golden parachutes imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to such officer.

In addition, Dr. Riedel has entered into a non-competition, non-solicitation, confidentiality and assignment agreement with us that contains, among other things, non-competition and non-solicitation provisions that apply during the term of Dr. Riedel's employment and for 12 months thereafter.

Torsten M. Madsen, M.D., Ph.D.

Dr. Madsen's current annual base salary is $346,732, which is subject to review and redetermination by our board of directors or our compensation and management development committee, and he is eligible to earn an annual bonus with a target amount equal to 25% of his base salary. Dr. Madsen is also eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Dr. Madsen's employment agreement provides that, in the event that his employment is terminated by us without "cause" (as defined in his employment agreement) or Dr. Madsen resigns for "good reason" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to nine months of his base salary, plus 75% of his target annual bonus, payable in substantially equal installments over nine months following his termination, (ii) if Dr. Madsen is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of nine months following termination or the end of Dr. Madsen's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health insurance to Dr. Madsen had he remained employed with us, and (iii) nine months' acceleration of all outstanding time-based equity awards held by Dr. Madsen. In lieu of the payments and benefits described in the preceding sentence, in the event that Dr. Madsen's employment is terminated by us without cause or Dr. Madsen resigns for good reason, in either case within 12 months following a "sale event" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to nine months of his base salary, plus 75% of his annual target bonus, payable in substantially equal installments over nine months following his termination, (ii) if Dr. Madsen is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of nine months following termination or the end of Dr. Madsen's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health insurance to him had he remained employed with us and (iii) full acceleration of all outstanding time-based equity awards held by Dr. Madsen.

The payments and benefits provided to Dr. Madsen under his employment agreement in connection with a sale event may not be eligible for a federal income tax deduction for the company pursuant to Section 280G of the Code. These payments and benefits also may be subject to an excise tax under Section 4999 of the Code. If the payments or benefits payable to Dr. Madsen in connection with a sale event would be subject to the excise tax on golden parachutes imposed under Section 4999 of the Code,

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then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to such officer.

In addition, Dr. Madsen has entered into a non-competition, non-solicitation, confidentiality and assignment agreement with us that contains, among other things, non-competition and non-solicitation provisions that apply during the term of Dr. Madsen's employment and for 12 months thereafter.

Joseph R. Moskal, Ph.D.

Dr. Moskal's current annual base salary is $377,659, which is subject to review and redetermination by our board of directors or our compensation and management development committee, and he is eligible to earn an annual bonus with a target amount equal to 25% of his base salary. Dr. Moskal is also eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Dr. Moskal's employment agreement provides that, in the event that his employment is terminated by us without "cause" (as defined in his employment agreement) or Dr. Moskal resigns for "good reason" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to nine months of his base salary, plus 75% of his target annual bonus, payable in substantially equal installments over nine months following his termination, (ii) if Dr. Moskal is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of nine months following termination or the end of Dr. Moskal's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health insurance to Dr. Moskal had he remained employed with us, and (iii) nine months' acceleration of all outstanding time-based equity awards held by Dr. Moskal. In lieu of the payments and benefits described in the preceding sentence, in the event that Dr. Moskal's employment is terminated by us without cause or Dr. Moskal resigns for good reason, in either case within 12 months following a "sale event" (as defined in his employment agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, he will be entitled to receive (i) an amount equal to nine months of his base salary, plus 75% of his annual target bonus, payable in substantially equal installments over nine months following his termination, (ii) if Dr. Moskal is participating in our group health plan immediately prior to his termination, a monthly cash payment until the earlier of nine months following termination or the end of Dr. Moskal's COBRA health continuation period in an amount equal to the amount that we would have paid to provide health insurance to him had he remained employed with us and (iii) full acceleration of all outstanding time-based equity awards held by Dr. Moskal.

The payments and benefits provided to Dr. Moskal under his employment agreement in connection with a sale event may not be eligible for a federal income tax deduction for the company pursuant to Section 280G of the Code. These payments and benefits also may be subject to an excise tax under Section 4999 of the Code. If the payments or benefits payable to Dr. Moskal in connection with a sale event would be subject to the excise tax on golden parachutes imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to such officer.

In addition, Dr. Moskal has entered into a non-competition, non-solicitation, confidentiality and assignment agreement with us that contains, among other things, non-competition and non-solicitation provisions that apply during the term of Dr. Moskal's employment and for 12 months thereafter.

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Outstanding equity awards at 2017 fiscal year-end

The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2017. All equity awards set forth in the table below were granted under our 2015 Plan.

 
   
   
   
   
   
   
 
 
  Option awards
  Stock awards
 
Name
  Number of
securities
underlying
unexercised
options (#)
exercisable

  Number of
securities
underlying
unexercised
options (#)
unexercisable

  Option
exercise price
($)

  Option
expiration
date

  Number of
shares or
units of stock
that have
not vested
(#)

  Market value
of shares or
units of stock
that have
not vested
($)(3)

 

Norbert G. Riedel, Ph.D. 

        13,246,294 (1)   0.09     2/1/2027     5,724,023 (2)      

Torsten M. Madsen, M.D., Ph.D.

        866,967 (1)   0.09     2/1/2027     2,003,400 (2)      

Joseph R. Moskal, Ph.D. 

        1,066,393 (1)   0.09     2/1/2027     2,289,604 (2)      

(1)   Each of the named executive officer's options was granted on February 2, 2017 and vests over a four-year period, with one-fourth ( 1 / 4 ) of the option granted vesting on January 19, 2018, and the balance of the option granted vesting ratably on a monthly basis, over the following 36 months, subject to continued service through each such date.

(2)  Each of the named executive officer's restricted stock awards was granted on November 17, 2015 and vests over a four-year period, with 20% of the restricted shares granted vesting on the grant date, and the balance of the restricted shares granted vesting ratably on a monthly basis, over the following 48 months, subject to continued service through each such date.

(3)  Calculated using an assumed initial public offering price of $              , the midpoint of the price range set forth on the cover page of this prospectus.

Compensation risk assessment

We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to remain focused on both short-term and long-term strategic goals, in particular in connection with our pay-for-performance compensation philosophy. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

2018 stock option and incentive plan

In                           , 2018, our board of directors, upon the recommendation of the compensation and management development committee of the board of directors, adopted our 2018 Stock Option and Incentive Plan, or the 2018 Plan, which was subsequently approved by our stockholders. The 2018 Plan will become effective on the date upon which our registration statement on Form S-1 is declared effective by the SEC, or the Registration Date. The 2018 Plan will replace our 2015 Stock Option and Grant Plan, or the 2015 Plan, as our board of directors has determined not to make additional awards under the 2015 Plan following the Registration Date. Our 2018 Plan provides flexibility to our compensation and management development committee to use various equity-based incentive awards as compensation tools to motivate our workforce.

We have initially reserved                           shares of our common stock, or the Initial Limit, for the issuance of awards under the 2018 Plan, plus the shares of common stock remaining available for issuance under our 2015 Plan. The 2018 Plan provides that the number of shares reserved and available for

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issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by % of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation and management development committee, or the Annual Increase. This number is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

The shares we issue under the 2018 Plan will be authorized but unissued shares or shares that we reacquire. The shares of common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2018 Plan and the 2015 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan.

The maximum aggregate number of shares that may be issued in the form of incentive stock options shall not exceed the Initial Limit cumulatively increased on January 1, 2019 and on each January 1 thereafter by the lesser of the Annual Increase for such year or                           shares of common stock.

The 2018 Plan will be administered by our compensation and management development committee. Our compensation and management development committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2018 Plan. Persons eligible to participate in the 2018 Plan will be those full or part-time officers, employees, non-employee directors, and other key persons (including consultants) as selected from time to time by our compensation and management development committee in its discretion.

The 2018 Plan permits the granting of both options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code, or the Code, and options that do not so qualify. The option exercise price of each option will be determined by our compensation and management development committee but may not be less than 100% of the fair market value of our common stock on the date of grant. The term of each option will be fixed by our compensation and management development committee and may not exceed 10 years from the date of grant. Our compensation and management development committee will determine at what time or times each option may be exercised.

Our compensation and management development committee may award stock appreciation rights subject to such conditions and restrictions as it may determine. Stock appreciation rights entitle the recipient to shares of common stock or cash equal to the value of the appreciation in our stock price over the exercise price. The exercise price of each stock appreciation right may not be less than 100% of the fair market value of the common stock on the date of grant.

Our compensation and management development committee may award restricted shares of common stock and restricted stock units to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period. Our compensation and management development committee may also grant shares of common stock that are free from any restrictions under the 2018 Plan. Unrestricted stock may be granted to participants in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant. Our compensation and management development committee may grant cash bonuses under the 2018 Plan to participants, subject to the achievement of certain performance goals.

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The 2018 Plan provides that in the case of, and subject to, the consummation of a "sale event" as defined in the 2018 Plan, all outstanding awards may be assumed, substituted or otherwise continued by the successor entity. To the extent that the successor entity does not assume, substitute or otherwise continue such awards, then (i) all stock options and stock appreciation rights will automatically become fully exercisable and the restrictions and conditions on all other awards with time-based conditions will automatically be deemed waived, and awards with conditions and restrictions relating to the attainment of performance goals may become vested and non-forfeitable in connection with a sale event in the compensation and management development committee's discretion and (ii) upon the effectiveness of the sale event, the 2018 Plan and all awards will automatically terminate. In the event of such termination, (i) individuals holding options and stock appreciation rights will be permitted to exercise such options and stock appreciation rights (to the extent exercisable) prior to the sale event or (ii) we may make or provide for a cash payment to participants holding options and stock appreciation rights equal to the difference between the per share cash consideration payable to stockholders in the sale event and the exercise price of the options or stock appreciation rights.

Our board of directors may amend or discontinue the 2018 Plan and our compensation and management development committee may amend the exercise price of options and amend or cancel outstanding awards for purposes of satisfying changes in law or any other lawful purpose but no such action may adversely affect rights under an award without the holder's consent. Certain amendments to the 2018 Plan require the approval of our stockholders. No awards may be granted under the 2018 Plan after the date that is ten years from the date of stockholder approval. No awards under the 2018 Plan have been made prior to the date of this prospectus.

2015 stock option and grant plan

The 2015 Stock Option and Grant Plan, or the 2015 Plan, was approved by our board of directors and our stockholders on November 10, 2015. We have reserved an aggregate of 149,201,692 shares of our common stock for the issuance of options and other equity awards under the 2015 Plan. This number is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. As of March 31, 2018, options to purchase 90,356,401 shares of our common stock were outstanding under the 2015 Plan at a weighted-average exercise price of $0.14 per share, 11,433,721 restricted shares of our common stock were outstanding and unvested, and 17,703,802 shares remained available for future grant under the 2015 Plan. Effective upon the Registration Date, our board of directors has determined not to grant any further awards under our 2015 Plan, but all outstanding awards under the 2015 Plan will continue to be governed by their existing terms.

The shares we issued under the 2015 Plan were authorized but unissued shares or shares we reacquired. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by us prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise) under the 2015 Plan are currently added back to the shares of common stock available for issuance under the 2015 Plan. Following the Registration Date, such shares will be added to the shares of common stock available for issuance under the 2018 Plan.

The 2015 Plan is currently administered by our board of directors or a committee appointed by the board. The plan administrator has the authority to interpret and administer our 2015 Plan and any agreement thereunder and to determine the terms of awards, including the recipients, the number of shares subject to each award, the exercise price, if any, the vesting schedule applicable to the awards together with any vesting acceleration and the terms of the award agreement for use under our 2015 Plan. The plan

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administrator is specifically authorized to exercise its discretion to reduce the exercise price of outstanding stock options or effect the repricing of stock options through cancellation and re-grants.

The 2015 Plan permitted us to make grants of incentive stock options to our employees and any of our subsidiary corporations' employees, and grants of non-qualified stock options, restricted stock awards, unrestricted stock awards and restricted stock units to our officers, employees, directors and consultants and our subsidiary corporations.

The 2015 Plan permitted the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. The option exercise price per share of our common stock underlying each stock option was determined by our board or directors or a committee appointed by the board of directors, and must have been at least equal to 100% of the fair market value of a share of our common stock on the date of grant. In the case of an incentive stock option granted to a participant who, at the time of grant of such stock option, owned stock representing more than 10% of the voting power of all classes of our stock, or a 10% owner, the exercise price per share of our common stock underlying each such stock option must have been at least equal to 110% of the fair market value of a share of our common stock on the date of grant. The term of each stock option may not have exceeded ten years from the date of grant (or five years for a 10% owner). The plan administrator will determine the methods of payment of the exercise price of a stock option, which may include cash, a net exercise arrangement for non-qualified stock options and if permitted by our board of directors or a committee appointed by our board of directors and an initial public offering has occurred, through either the delivery of shares of our common stock owned by the participant or a broker-assisted arrangement. After a participant's termination of service (other than a termination for cause), the participant generally may exercise his or her stock options, to the extent vested as of such date of termination, for 90 days after termination or such longer period of time as specified in the applicable stock option agreement; provided, that if the termination is due to death or disability, the stock option generally will remain exercisable, to the extent vested as of such date of termination, until the one-year anniversary of such termination. However, in no event may a stock option be exercised later than the expiration of its term.

The 2015 Plan also permitted the granting of restricted shares of common stock to participants subject to such conditions and restrictions as the plan administrator determined. These conditions and restrictions, among others, included the continued employment of the participant with us through a specified vesting period.

The 2015 Plan generally does not allow for the transfer or assignment of awards, other than, at the discretion of the plan administrator, by will or the laws of descent and distribution, by gift to an immediate family member, or by instrument to an inter vivos or testamentary trust in which the award is passed to beneficiaries upon the death of the participant.

The 2015 Plan provides that upon the occurrence of a "sale event" as defined in the 2015 Plan, awards may be assumed, substituted for new awards of a successor entity, or otherwise continued at the effective time of such sale event. To the extent that awards granted under the 2015 Plan are not so assumed, substituted or continued, upon the effective time of the sale event, such awards under the 2015 Plan shall terminate. In such case, except as may be otherwise provided in the relevant award agreement, all options that are not exercisable immediately prior to the effective time of the sale event shall become fully exercisable as of the effective time of the sale event, all other awards with time-based vesting, conditions, or restrictions shall become fully vested and non-forfeitable as of the effective time of the sale event, and all awards with conditions and restrictions relating to the attainment of performance goals may become

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vested and non-forfeitable in connection with a sale event in the discretion of our board of directors or to the extent specified in the relevant award agreement. In the case of such termination, such stock options may be exercised to the extent then exercisable within a period of time prior to the consummation of the sale event. In the case of forfeiture of restricted stock, such awards may be repurchased by us for a price per share equal to the original per share purchase price paid by the participant for the shares or the current fair market value of such shares. We may also make or provide for cash payment to holders of vested and exercisable stock options, in exchange for the cancellation thereof, equal to, for each share of our common stock underlying such stock option, the difference between the per share cash consideration in the sale event and the per share exercise price. We may make or provide for cash payment to holders of restricted stock and restricted stock unit awards, in exchange for the cancellation thereof, in an amount equal to the product of the per share cash consideration in the sale event and the number of shares subject to each such award.

Our board of directors may amend, suspend or terminate the 2015 Plan at any time, subject to stockholder approval where such approval is required by applicable law. The board of directors may also amend, modify or terminate any outstanding award, including the exercise price, provided that no amendment to an award may adversely affect any of the rights of a participant under any awards previously granted without his or her consent. The board of directors has determined not to make any further grants under the 2015 Plan following the Registration Date.

Employee stock purchase plan

In                                          , 2018 our board of directors adopted and our stockholders approved our 2018 Employee Stock Purchase Plan, or the ESPP. The ESPP authorizes the issuance of up to a total of              shares of common stock to participating employees. The ESPP provides that the number of shares reserved and available for issuance under the ESPP shall be cumulatively increased each January 1, beginning on January 1, 2019, by the lesser of (i)                percent of the outstanding number of shares of our common stock on the immediately preceding December 31, (ii)               shares of common stock or (iii) such lesser number of shares as determined by our compensation and management development committee. The number of shares reserved and available for issuance under the ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

All employees who we have employed for at least              months and whose customary employment is for more than              hours a week are eligible to participate in the ESPP. Any employee who owns five percent or more of the voting power or value of our shares of common stock is not eligible to purchase shares under the ESPP.

We may make one or more offerings each year to our employees to purchase shares under the ESPP. Each eligible employee may elect to participate in any offering by submitting an enrollment form at least 15 business days before the relevant offering date.

Each employee who is a participant in the ESPP may purchase shares by authorizing payroll deductions of up to 15 percent of his or her base compensation during an offering period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares of common stock on the last business day of the offering period at a price equal to 85 percent of the fair market value of the common stock on the first business day or the last business day of the offering period, whichever is lower, provided that no more than              shares of common stock may be purchased by any one employee during each offering period. Under applicable tax rules, an

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employee may purchase no more than $25,000 worth of ordinary shares, valued at the start of the purchase period, under the ESPP in any calendar year.

The accumulated payroll deductions of any employee who is not a participant on the last day of an offering period will be refunded. An employee's rights under the ESPP terminate upon voluntary withdrawal from the plan or when the employee ceases employment with us for any reason.

The ESPP may be terminated or amended by our board of directors at any time. An amendment that increases the number of shares of common stock that are authorized under the ESPP and certain other amendments require the approval of our stockholders.

Senior executive cash incentive bonus plan

In                                          , 2018 our board of directors adopted the Senior Executive Cash Incentive Bonus Plan, or the Bonus Plan. The Bonus Plan provides for cash bonus payments based upon the attainment of performance targets established by our compensation and management development committee. The payment targets will be related to financial and operational measures or objectives with respect to our company, or corporate performance goals, as well as individual performance objectives.

Our compensation and management development committee may select corporate performance goals from among the following: earnings before interest, taxes, depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes in the market price of our common stock, economic value-added, funds from operations or similar measure, sales or revenue, acquisitions or strategic transactions, operating income (loss), cash flow (including, but not limited to, operating cash flow and free cash flow), return on capital, assets, equity, or investment, stockholder returns, return on sales, gross or net profit levels, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings (loss) per share of stock, sales or market shares and number of customers, any of which may be measured in absolute terms, as compared to any incremental increase, in terms of growth, or as compared to results of a peer group.

Each executive officer who is selected to participate in the Bonus Plan will have a target bonus opportunity set for each performance period. The bonus formulas will be adopted in each performance period by the compensation and management development committee and communicated to each executive. The corporate performance goals will be measured at the end of each performance period after our financial reports have been published or such other appropriate time as the compensation and management development committee determines. If the corporate performance goals and individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment. The Bonus Plan also permits the compensation and management development committee to approve additional bonuses to executive officers in its sole discretion.

Retirement plans

We maintain a tax-qualified 401(k) retirement plan for eligible employees in the United States. Under our 401(k) plan, employees may elect to defer up to 100% of their eligible compensation subject to applicable annual limits set pursuant to the Code. While we have the option to provide a discretionary employer matching contribution under the 401(k) plan, we have not made a matching contribution. Employees are 100% vested in their contributions to the 401(k) plan. We intend for the 401(k) plan to qualify, depending

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on the employee's election, under Section 401(a) of the Code so that contributions by employees, and income earned on those contributions, are not taxable to employees until withdrawn from the 401(k) plan.

Rule 10b5-1 sales plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a 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 Rule 10b5-1 plan would be subject to the lock-up agreement that the director or executive officer has entered into with the underwriters.

Limitations on liability and indemnification matters

Our amended and restated certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the Delaware General Corporation Law, or DGCL. Consequently, our directors are not personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

any breach of the director's duty of loyalty to us or our 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 as provided in Section 174 of the DGCL; or

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

Our amended and restated bylaws require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL. Subject to certain limitations, our amended and restated bylaws also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted.

We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers and certain of our key employees, in addition to the indemnification provided for in our restated certificate of incorporation and restated bylaws. These agreements, among other things, require us to indemnify our directors, officers and key employees for certain expenses, including attorneys' fees, judgments, penalties, fines and settlement amounts actually incurred by these individuals in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which these individuals provide services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers and key employees for the defense of any action for which indemnification is required or permitted.

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We believe that provisions of our amended and restated certificate of incorporation, amended and restated bylaws and indemnification agreements are necessary to attract and retain qualified directors, officers and key employees. We also maintain 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 and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to 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.

Director compensation

We have historically not compensated our directors for their services to us. We reimburse our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of directors and committee meetings.

Our board of directors intends to approve a compensation policy for our non-employee directors that will become effective upon the effectiveness of the registration statement of which this prospectus forms a part. This policy will be intended to provide a total compensation package that enables us to attract and retain qualified and experienced individuals to serve as directors and to align our directors' interests with those of our stockholders.

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Certain relationships and related person transactions

Other than the compensation agreements and other arrangements described under "Executive compensation" and "Director compensation" in this prospectus and the transactions described below, since our inception on June 24, 2015, there has not been and there is not currently proposed, any transaction or series of similar transactions to which we were, or will be, a party in which the amount involved exceeded, or will exceed, $120,000 and in which any director, executive officer, holder of five percent or more of any class of our capital stock or any member of the immediate family of, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest.

Private placements of securities

Common stock

In July 2015, in connection with an agreement and plan of merger, we entered into an asset contribution agreement with Naurex Inc., or Naurex, pursuant to which we granted 49,164,484 shares of our common stock, par value $0.01 per share, to funds affiliated with Adams Street Partners, funds affiliated with LVP Life Science Ventures, two directors, and five executive officers, each an accredited investor. The following table summarizes the issuances of our common stock to related persons in this transaction.

Stockholder
  Affiliated
director(s) or officer(s)

  Shares of
common stock

 

5% Stockholders:

           

Entities Affiliated with Adams Street Partners(1)

  Elisha P. Gould III     23,187,701   

Entities Affiliated with LVP Life Science Ventures(2)

        13,954,467  

Directors and Executive Officers:

           

Norbert G. Riedel, Ph.D. 

        5,117,217  

David R. Houck, Ph.D. 

        411,660  

Ashish Khanna

        933,230  

Torsten M. Madsen, M.D., Ph.D. 

        162,500  

Joseph R. Moskal, Ph.D. 

        2,812,885    

Wilbur H. Gantz III Revocable Trust

  Wilbur H. Gantz III     2,996,484   

Baxalta US Inc.(3)

  Robert J. Hombach     5,656,836                       

(1)    Consists of: (i) 6,890,800 shares of common stock issued to Adams Street 2008 Direct Fund L.P.; (ii) 5,960,089 shares of common stock issued to Adams Street 2009 Direct Fund L.P.; (iii) 3,385,613 shares of common stock issued to Adams Street 2010 Direct Fund LP; (iv) 2,944,964 shares of common stock issued to Adams Street 2011 Direct Fund LP; (v) 1,438,326 shares of common stock issued to Adams Street 2012 Direct Fund LP; (vi) 1,088,017 shares of common stock issued to Adams Street 2013 Direct Fund L.P.; and (vii) 1,479,892 shares of common stock issued to Adams Street 2014 Direct Fund LP. Mr. Gould, a partner at Adams Street Partners, is a member of our board of directors.

(2)    Consists of: (i) 12,980,901 shares of common stock issued to LVP Life Science Ventures III LP; (ii) 649,044 shares of common stock issued to by LVP III Associates, L.P.; and (iii) 324,522 shares of common stock issued to LVP III Partners, L.P.

(3)    Robert J. Hombach, a member of our board of directors, was the Chief Financial Officer of Baxalta Inc., the ultimate parent company of Baxalta US Inc., at the time of this transaction.

Series A convertible preferred stock financing

On May 4, 2016, we entered into a stock purchase agreement, which provided for the sale 151,772,701 of our Series A-1 convertible preferred stock, $0.01 par value per share, at a purchase price of $0.16472 per share. On February 2, 2017, we sold an additional 173,453,018 shares of our Series A-2 convertible preferred stock, $0.01 par value per share, at a price of $0.23061 per share. Each share of our Series A-1 convertible preferred stock and Series A-2 convertible preferred stock will convert automatically into one share of our common stock immediately prior to the completion of this offering. The following table

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summarized purchases of our Series A-1 convertible preferred stock and Series A-2 convertible preferred stock by related persons:

Stockholder
  Shares of
Series A-1
convertible
preferred stock

  Total
purchase price

 

Norbert G. Riedel, Ph.D.(1)

    1,117,482   $ 184,072  

David R. Houck, Ph.D.(2)

    35,024   $ 5,769  

Ashish Khanna(3)

    145,935   $ 24,038  

Torsten M. Madsen, M.D., Ph.D.(4)

    64,212   $ 10,577  

Joseph R. Moskal, Ph.D.(5)

    233,496   $ 38,462  

Entities Affiliated with Wilbur H. Gantz III(6)

    3,035,455   $ 500,000  

Entities Affiliated with Adams Street Partners(7)

    28,895,188   $ 4,759,615  

New Leaf Ventures III, L.P.(8)

    28,895,188   $ 4,759,615  

Longitude Venture Partners II, L.P.(9)

    28,895,188   $ 4,759,615  

Frazier Life Sciences VIII, L.P.(10)

    28,895,188   $ 4,759,615  

Entities Affiliates with LVP Life Science Ventures(11)

    9,339,859   $ 1,538,462  


Stockholder
  Shares of
Series A-2
convertible
preferred stock

  Total
purchase price

 

Norbert G. Riedel, Ph.D.(12)

    1,334,254   $ 307,692  

David R. Houck, Ph.D.(2)

    40,028   $ 9,231  

Ashish Khanna(3)

    166,782   $ 38,462  

Torsten M. Madsen, M.D., Ph.D.(4)

    73,384   $ 16,923  

Joseph R. Moskal, Ph.D.(5)

    266,851   $ 61,539  

Entities Affiliated with Wilbur H. Gantz III(13)

    3,469,060   $ 800,000  

Entities Affiliated with Adams Street Partners(14)

    33,022,786   $ 7,615,385  

New Leaf Ventures III, L.P.(8)

    33,022,786   $ 7,615,385  

Longitude Venture Partners II, L.P.(9)

    33,022,786   $ 7,615,385  

Frazier Life Sciences VIII, L.P.(10)

    33,022,786   $ 7,615,385  

Entities Affiliates with LVP Life Science Ventures(15)

    10,674,032   $ 2,461,539  

(1)    Consists of 1,042,482 shares of Series A-1 convertible preferred stock purchased and received by Norbert G. Riedel, Ph.D., and 75,000 shares of Series A-1 convertible preferred stock purchased and received by individuals related to Dr. Riedel. Dr. Riedel is our President and Chief Executive Officer, and a member of our board of directors.

(2)    David R. Houck, Ph.D., is our Chief Development Officer.

(3)    Ashish Khanna is our Chief Financial Officer and Chief Business Officer.

(4)   Torsten M. Madsen, M.D., Ph.D., is our Chief Medical Officer.

(5)    Joseph R. Moskal, Ph.D., is our Chief Scientific Officer.

(6)   Consists of 2,334,966 shares of Series A-1 convertible preferred stock purchased and received by Wilbur H. Gantz III Revocable Trust, and 700,489 shares of Series A-1 convertible preferred stock purchased and received by LMC Holdings, LLC. Wilbur H. Gantz is the trustee of the Wilbur H. Gantz III Revocable Trust and the manager of LMC Holdings, LLC. Mr. Gantz is the chairman of our board of directors.

(7)    Consists of: (i) 4,406,861 shares of Series A-1 convertible preferred stock purchased and received by Adams Street 2012 Direct Fund LP; (ii) 3,333,558 shares of Series A-1 convertible preferred stock purchased and received by Adams Street 2013 Direct Fund LP; (iii) 4,534,213 shares of Series A-1 convertible preferred stock purchased and received by Adams Street 2014 Direct Fund LP; (iv) 3,480,521 shares of Series A-1 convertible preferred stock purchased and received by Adams Street 2015 Direct Venture/Growth Fund LP; (v) 3,032,316 shares of Series A-1 convertible preferred stock purchased and received by Adams Street 2016 Direct Venture/Growth Fund LP; and (vi) 10,107,719 shares of Series A-1 convertible preferred stock purchased and received by Adams Street Venture/Growth Fund VI LP. Mr. Gould, a partner at Adams Street Partners, is a member of our board of directors.

(8)   New Leaf Ventures III, L.P., or NLV III, is an affiliate fund of New Leaf Venture Partners, L.L.C., or NLV, and is a holder of five percent or more of our capital stock. Liam Ratcliffe, M.D., Ph.D., a Managing Director at NLV, is a member of our board of directors.

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(9)   Longitude Venture Partners II, L.P. is an affiliate fund of Longitude Capital, or Longitude, and is a holder of five percent or more of our capital stock. Patrick G. Enright, a founder and Managing Director of Longitude Capital, is a member of our board of directors.

(10)  Frazier Life Sciences VIII, L.P. is an affiliate fund of Frazier Healthcare Partners, or Frazier, and is a holder of five percent or more of our capital stock. James N. Topper, M.D., Ph.D., a Managing General Partner at Frazier Healthcare Partners, is a member of our board of directors.

(11)  Consists of: (i) 8,688,241 shares of Series A-1 convertible preferred stock purchased and received by LVP Life Science Ventures III LP; (ii) 434,412 shares of Series A-1 convertible preferred stock purchased and received by LVP III Associates, L.P.; and (iii) 217,206 shares of Series A-1 convertible preferred stock purchased and received by LVP III Partners, L.P.

(12)  Norbert G. Riedel, Ph.D., is our President and Chief Executive Officer, and a member of our board of directors.

(13)  Consists of 2,668,508 shares of Series A-2 convertible preferred stock purchased and received by Wilbur H. Gantz III Revocable Trust, and 800,552 shares of Series A-2 convertible preferred stock purchased and received by LMC Holdings, LLC. Wilbur H. Gantz is the trustee of the Wilbur H. Gantz III Revocable Trust and the manager of LMC Holdings, LLC. Mr. Gantz is the chairman of our board of directors.

(14)  Consists of: (i) 5,036,369 shares of Series A-2 convertible preferred stock purchased and received by Adams Street 2012 Direct Fund L.P.; (ii) 3,809,747 shares of Series A-2 convertible preferred stock purchased and received by Adams Street 2013 Direct Fund LP; (iii) 5,181,913 shares of Series A-2 convertible preferred stock purchased and received by Adams Street 2014 Direct Fund LP; (iv) 3,977,704 shares of Series A-2 convertible preferred stock purchased and received by Adams Street 2015 Direct Venture/Growth Fund LP; (v) 3,465,474 shares of Series A-2 convertible preferred stock purchased and received by Adams Street 2016 Direct Venture/Growth Fund LP; and (vi) 11,551,579 shares of Series A-2 convertible preferred stock purchased and received by Adams Street Venture/Growth Fund VI LP. Mr. Gould, a partner at Adams Street Partners, is a member of our board of directors.

(15)  Consists of: (i) 9,929,332 shares of Series A-2 convertible preferred stock purchased and received by LVP Life Science Ventures III LP; (ii) 496,467 shares of Series A-2 convertible preferred stock purchased and received by LVP III Associates, L.P.; and (iii) 248,233 shares of Series A-2 convertible preferred stock purchased and received by LVP III Partners, L.P.

Series B convertible preferred stock financing

In December 2017, we sold an aggregate of 234,954,520 shares of Series B convertible preferred stock at a purchase price of $0.29793 per share. Each share of our Series B convertible preferred stock will convert automatically into one share of our common stock immediately prior to the completion of this offering. The following table summarizes purchases of our Series B convertible preferred stock by related persons:

Stockholder
  Shares of
Series B
convertible
preferred stock

  Total
purchase
price

 

Norbert G. Riedel, Ph.D.(1)

    836,541   $ 249,231  

David R. Houck, Ph.D.(2)

    16,782   $ 5,000  

Ashish Khanna(3)

    112,959   $ 33,654  

Andrew Kidd(4)

    67,130   $ 20,000  

Torsten M. Madsen, M.D., Ph.D.(5)

    49,702   $ 14,808  

Joseph R. Moskal, Ph.D.(6)

    180,734   $ 53,846  

Entities affiliated with Wilbur H. Gantz III(7)

    2,711,012   $ 807,692  

Entities Affiliated with Adams Street Partners(8)

    21,946,301   $ 6,538,462  

Entities Affiliated with New Leaf Ventures(9)

    21,946,301   $ 6,538,462  

Longitude Venture Partners II, L.P.(10)

    21,946,301   $ 6,538,462  

Frazier Life Sciences VIII, L.P.(11)

    21,946,301   $ 6,538,462  

Entities Affiliated with Bain Capital Life Sciences LP(12)

    50,347,397   $ 15,000,000  

Entities Affiliated with LVP Life Science Ventures(13)

    7,229,370   $ 2,153,846  

(1)    Norbert G. Riedel, Ph.D., is our President and Chief Executive Officer, and a member of our board of directors.

(2)    David R. Houck, Ph.D., is our Chief Development Officer.

(3)    Ashish Khanna is our Chief Financial Officer and Chief Business Officer.

(4)   Andrew Kidd is our Chief Commercial Officer.

(5)    Torsten M. Madsen, M.D., Ph.D., is our Chief Medical Officer.

(6)   Joseph R. Moskal, Ph.D., is our Chief Scientific Officer.

(7)    Consists of 1,807,340 shares of Series B convertible preferred stock purchased and received by Wilbur H. Gantz III Revocable Trust, 361,469 shares of Series B convertible preferred stock purchased and received by Gantz Family 2011 Dynasty Trust, and 542,203 shares of Series B convertible preferred stock purchased and received by LMC Holdings, LLC. Wilbur H. Gantz is the trustee of the Wilbur H. Gantz III

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Revocable Trust and the manager of LMC Holdings, LLC, and is affiliated with the Gantz Family 2011 Dynasty Trust. Mr. Gantz is the chairman of our board of directors.

(8)   Consists of: (i) 3,347,072 shares of Series B convertible preferred stock purchased and received by Adams Street 2012 Direct Fund LP; (ii) 2,531,884 shares of Series B convertible preferred stock purchased and received by Adams Street 2013 Direct Fund LP; (iii) 3,443,798 shares of Series B convertible preferred stock purchased and received by Adams Street 2014 Direct Fund LP; (iv) 2,643,505 shares of Series B convertible preferred stock purchased and received by Adams Street 2015 Direct Venture/Growth Fund LP; (v) 2,303,087 shares of Series B convertible preferred stock purchased and received by Adams Street 2016 Direct Venture/Growth Fund LP; and (vi) 7,676,955 shares of Series B convertible preferred stock purchased and received by Adams Street Venture/Growth Fund VI LP. Mr. Gould, a partner at Adams Street Partners, is a member of our board of directors.

(9)   Consists of: (i) 15,233,315 shares of Series B convertible preferred stock purchased and received by NLV III and (ii) 6,712,986 shares of Series B convertible preferred stock purchased and received by New Leaf Biopharma Opportunities I, L.P., or NLV Biopharma. NLV III is an affiliate fund of NLV and is a holder of five percent or more of our capital stock. Liam Ratcliffe, M.D., Ph.D., a Managing Director at NLV, is a member of our board of directors.

(10)  Longitude Venture Partners II, L.P. is an affiliate fund of Longitude and is a holder of five percent or more of our capital stock. Patrick G. Enright, a founder and Managing Director of Longitude Capital, is a member of our board of directors.

(11)  Frazier Life Sciences VIII, L.P. is an affiliate fund of Frazier and is a holder of five percent or more of our capital stock. James N. Topper, M.D., Ph.D., a Managing General Partner at Frazier Healthcare Partners, is a member of our board of directors.

(12)  Consists of: (i) 45,672,386 shares of Series B convertible preferred stock purchased and received by Bain Capital Life Sciences Fund, L.P., or BCLSF, and (ii) 4,675,011 shares of Series B convertible preferred stock purchased and received by BCIP Life Sciences Associates, LP, BCIP, BCLSF, and BCIP are affiliate funds of Bain Capital Life Sciences Investors, LLC and collectively are holders of five percent or more of our capital stock. Adam M. Koppel, M.D., Ph.D., a Managing Director of Bain Capital Life Sciences Investors, LLC, is a member of our board of directors.

(13)  Consists of: (i) 6,724,995 shares of Series B convertible preferred stock purchased and received by LVP Life Science Ventures III LP, or LVP III LP; (ii) 336,250 shares of Series B convertible preferred stock purchased and received by LVP III Associates, L.P.; and (iii) 168,125 shares of Series B convertible preferred stock purchased and received by LVP III Partners, L.P.

Agreement with PharmaKey

During the years ended December 31, 2016 and 2017, we received consulting services from PharmaKey, LLC, or PharmaKey, where David R. Houck, Ph.D., our Chief Development Officer, is founder, owner, chairman, and former president. We incurred consulting services totaling $156,000 and $82,000 for the years ended December 31, 2016 and 2017.

Agreements with stockholders

Amended and restated investors' rights agreement

We are a party to an amended and restated investors' rights agreement, dated as of December 11, 2017, with holders of our convertible preferred stock, including some of our 5% stockholders and entities affiliated with our directors. The investor rights agreement provides these holders the right, following the completion of this offering, to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing. See "Description of capital stock—Registration rights" for additional information regarding these registration rights.

Amended and restated voting agreement

We are a party to an amended and restated voting agreement, dated as of December 11, 2017, with holders of our convertible preferred stock, including some of our 5% stockholders and entities affiliated with our directors. The voting agreement provides the holders the right to elect certain directors to the board of directors and will terminate upon completion of this offering.

Amended and restated right of first refusal and co-sale agreement

We are a party to an amended and restated right of first refusal and co-sale agreement, dated as of December 11, 2017, with holders of our convertible preferred stock, including some of our 5% stockholders and entities affiliated with our directors. The right of first refusal and co-sale agreement provides the key

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holders the right to purchase all or any portion of transfer stock, as well as the right of co-sale and participate in any proposed transfers. The agreement will terminate upon completion of this offering.

Indemnification agreements

We have entered into agreements to indemnify our directors and executive officers. These agreements will, among other things, require us to indemnify these individuals for certain expenses (including attorneys' fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our company or that person's status as a member of our board of directors to the maximum extent allowed under Delaware law.

Related person transaction policy

Our board of directors reviews and approves transactions with directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related person. Prior to this offering, the material facts as to the related person's relationship or interest in the transaction are disclosed to our board of directors prior to their consideration of such transaction, and the transaction is not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approve the transaction. Further, when stockholders are entitled to vote on a transaction with a related person, the material facts of the related person's relationship or interest in the transaction are disclosed to the stockholders, who must approve the transaction in good faith.

In connection with this offering, we expect to adopt a written related person transactions policy that such transactions must be approved by our audit committee. This policy will become effective on the date on which the registration statement of which this prospectus is part is declared effective by the SEC. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving "related person transactions," which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.

As appropriate for the circumstances, the audit committee will review and consider:

the related person's interest in the related person transaction;

the approximate dollar amount involved in the related person transaction;

the approximate dollar amount of the related person's interest in the transaction without regard to the amount of any profit or loss;

whether the transaction was undertaken in the ordinary course of our business;

whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;

the purpose of, and the potential benefits to us of, the related-party transaction; and

any other information regarding the related-party transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

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Principal stockholders

The following table sets forth certain information known to us regarding beneficial ownership of our capital stock as of March 31, 2018, as adjusted to reflect the sale of common stock offered by us in this offering, for:

each person or group of affiliated persons known by us to be the beneficial owner of more than five percent of our capital stock;

each of our named executive officers;

each of our directors; and

all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe, based on the information provided to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them.

The percentage of beneficial ownership prior to this offering in the table below is based on 721,002,675 shares of common stock deemed to be outstanding as of March 31, 2018, and the percentage of beneficial ownership at this offering in the table below is based on                       shares of common stock assumed to be outstanding after the closing of the offering. The information in the table below assumes no exercise of the underwriters' option to purchase additional shares. Options to purchase shares of common stock that are exercisable within 60 days of March 31, 2018 are deemed to be beneficially owned by the persons holding these options for the purpose of computing percentage ownership of that

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person, but are not treated as outstanding for the purpose of computing any other person's ownership percentage.

 
  Shares beneficially owned
prior to offering
  Shares
beneficially
owned after
offering
 
Name and address of beneficial owner(1)
  Number
  Percentage
  Percentage
 

5% Stockholders:

                   

Entities affiliated with Adams Street Partners(2)

    107,051,976     14.85 %      

Entities affiliated with New Leaf Ventures(3)

    83,864,275     11.63 %      

Longitude Venture Partners II, L.P.(4)

    83,864,275     11.63 %      

Frazier Life Sciences VIII, L.P.(5)

    83,864,275     11.63 %      

Entities Affiliated with Bain Capital Life Sciences(6)

    50,347,397     6.98 %      

Entities Affiliated with LVP Life Science Ventures(7)

    41,197,728     5.71 %      

Named Executive Officers and Directors:

                   

Norbert G. Riedel, Ph.D.(8)

    29,993,024     4.13 %      

Torsten M. Madsen, M.D., Ph.D.(9)

    6,649,022     *        

Joseph R. Moskal, Ph.D.(10)

    10,718,270     1.49 %      

Patrick G. Enright(4)

               

Wilbur H. Gantz III(11)

    11,850,542     1.64 %      

Elisha P. Gould III(2)

               

Adam M. Koppel, M.D., Ph.D.(6)

               

Liam Ratcliffe, M.D., Ph.D.(3)

               

James N. Topper, M.D., Ph.D.(5)

               

Robert J. Hombach(12)

    20,833     *        

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

    70,770,708     9.71 %      

*      Represents beneficial ownership of less than one percent.

(1)    Unless otherwise indicated, the address for each beneficial owner is c/o Aptinyx Inc., 909 Davis Street, Evanston, IL 60201.

(2)    Consists of: (i) 6,890,800 shares of common stock purchased and received by Adams Street 2008 Direct Fund, L.P., or AS 2008; (ii) 5,960,089 shares of common stock purchased and received by Adams Street 2009 Direct Fund, L.P., or AS 2009; (iii) 3,385,613 shares of common stock purchased and received by Adams Street 2010 Direct Fund, L.P., or AS 2010; (iv) 2,944,964 shares of common stock purchased and received by Adams Street 2011 Direct Fund LP, or AS 2011; (v) 1,438,326 shares of common stock, 4,406,861 shares of Series A-1 convertible preferred stock, 5,036,369 shares of Series A-2 convertible preferred stock and 3,347,072 shares of Series B convertible preferred stock purchased and received by Adams Street 2012 Direct Fund LP, or AS 2012; (vi) 1,088,017 shares of common stock 3,333,558 shares of Series A-1 convertible preferred stock,3,809,747 shares of Series A-2 convertible preferred stock and 2,531,884 shares of Series B convertible preferred stock purchased and received by Adams Street 2013 Direct Fund LP, or AS 2013; (vii) 1,479,892 shares of common stock, 4,534,213 shares of Series A-1 convertible preferred stock, 5,181,913 shares of Series A-2 convertible preferred stock and 3,443,798 shares of Series B convertible preferred stock purchased and received by Adams Street 2014 Direct Fund LP, or AS 2014; (viii) 3,480,521 shares of Series A-1 convertible preferred stock, 3,977,704 shares of Series A-2 convertible preferred stock and 2,643,505 shares of Series B convertible preferred stock purchased and received by Adams Street 2015 Direct Venture/Growth Fund LP, or AS 2015; (ix) 3,032,316 shares of Series A-1 convertible preferred stock, 3,465,474 shares of Series A-2 convertible preferred stock and 2,303,087 shares of Series B convertible preferred stock purchased and received by Adams Street 2016 Direct Venture/Growth Fund LP, or AS 2016; and (x) 10,107,719 shares of Series A-1 convertible preferred stock, 11,551,579 shares of Series A-2 convertible preferred stock and 7,676,955 shares of Series B convertible preferred stock purchased and received by Adams Street Venture/Growth Fund VI LP, or ASVG VI. Adams Street Partners, LLC is the managing member of the general partner of each of AS 2008, AS 2009, and AS 2010, and the managing member of the general partner of the general partner of AS 2011, AS 2012, AS 2013, AS 2014, AS 2015, AS 2016 and ASVG VI. Thomas S. Bremner, Jeffrey T. Diehl, Elisha P. Gould III, Robin P. Murray, Fred Wang and Michael R. Zappert, each of whom is a partner of Adams Street Partners, LLC (or subsidiary thereof), may be deemed to have shared voting and investment power over the above-listed shares. The address of Adams Street Partners, LLC is One North Wacker Drive, Suite 2200, Chicago, IL 60606-2823.

(3)    Consists of: (i) 28,895,188 shares of Series A-1 convertible preferred stock, 33,022,786 shares of Series A-2 convertible 15,233,315 shares of Series B convertible preferred stock purchased and received by NLV-III; and (ii) 6,712,986 shares of Series B convertible preferred stock purchased and received by NLV Biopharma. The general partner of NLV-III is New Leaf Venture Associates III, L.P., or NLVA-III. The general partner of NLV Biopharma is New Leaf BPO Associates I, L.P., or NLBA-I. The general partner of both NLVA-III and NLBA-I is New Leaf Venture Management III, L.L.C., or Management-III. Ronald M. Hunt, Vijay K. Lathi, and Liam Ratcliffe are individual members of Management-III, or

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Individual Members, which is responsible for the investment decisions of NLV-III and Biopharma-I. Each of the Individual Members disclaim beneficial ownership of the shares held by NLV-III and Biopharma-I except to the extent of their pecuniary interest therein. The address of the entities and individuals listed above is 7 Times Square, Suite 3502, New York, New York 10036.

(4)   Consists of: (i) 28,895,188 shares of Series A-1 convertible preferred stock purchased and received by Longitude; (ii) 33,022,786 shares of Series A-2 convertible preferred stock purchased and received by Longitude; and (iii) 21,946,301 shares of Series B convertible preferred stock purchased and received by Longitude. Longitude Capital Partners II, LLC, or Longitude Capital II, is the general partner of Longitude and may be deemed to share voting, investment, and dispositive power over the shares held by Longitude. Patrick G. Enright and Juliett Tammenoms Bakker are the managing members of Longitude Capital II and in their capacity as such, may be deemed to exercise shared voting and investment power with respect to such shares. Each of Ms. Bakker and Mr. Enright disclaim beneficial ownership of such shares except to the extent of his or her pecuniary interest therein. The address of Longitude Capital is 2740 Sand Hill Road, Second Floor, Menlo Park, CA 94025.

(5)    Consists of: (i) 28,895,188 shares of Series A-1 convertible preferred stock purchased and received by Frazier Life Sciences VIII, L.P., or FLS VIII, LP; (ii) 33,022,786 shares of Series A-2 convertible preferred stock purchased and received by FLS VIII, LP; and (iii) 21,946,301 shares of Series B convertible preferred stock purchased and received by FLS VIII, LP. The general partner of FLS VIII, LP is FHM Life Sciences VIII, LP, or FHM LS VIII LP. The general partner of FHM LS VIII LP is FHM Life Sciences VIII, LLC. James N. Topper and Patrick Heron are the sole managing members of FHM Life Sciences VIII, LLC and share voting and investment power with respect to the above-listed shares. Dr. Topper and Mr. Heron disclaim beneficial ownership of such shares except to the extent of their pecuniary interest in such shares, if any, and this prospectus shall not be deemed an admission that they are the beneficial owners of such shares. The address of Frazier is 601 Union, Two Union Square, Suite 3200, Seattle, Washington 98101.

(6)   Consists of: (i) 45,672,386 shares of Series B convertible preferred stock purchased and received by BCLSF; and (ii) 4,675,011 shares of Series B convertible preferred stock purchased and received by BCIP. The governance, investment strategy and decision-making process with respect to investments held by BCLSF and BCIP is directed by Bain Capital Life Sciences Investors, LLC, whose managers are Jeffrey Schwartz, and Adam M. Koppel. As a result, each of Bain Capital Life Sciences Investors, LLC, Mr. Schwartz, and Dr. Koppel may be deemed to share voting and dispositive power over the shares held by BCLS and BCIP. The address of BCLS and BCIP is c/o Bain Capital Life Sciences, LP, 200 Clarendon Street, Boston, Massachusetts 02116.

(7)    Consists of: (i) 12,980,901 shares of common stock, 8,688,241 shares of Series A-1 convertible preferred stock, 9,929,332 shares of Series A-2 convertible preferred stock, and 6,724,995 shares of Series B convertible preferred stock purchased and received by LVP Life Science Ventures III LP; (ii) 649,044 shares of common stock,434,412 shares of Series A-1 convertible preferred stock, 496,467 shares of Series A-2 convertible preferred stock, and 336,250 shares of Series B convertible preferred stock purchased and received by LVP III Associates, L.P.; and (iii) 324,522 shares of common stock, 217,206 shares of Series A-1 convertible preferred stock, 248,233 shares of Series A-2 convertible preferred stock, and 168,125 shares of Series B convertible preferred stock purchased and received by LVP III Associates, L.P. Patrick Latterell, Stephen Salmon and James Woody are members of LVP GP III, LLC and may be deemed to share voting and dispositive power over the reported securities and disclaim beneficial ownership of the reported securities except to the extent of any pecuniary interest therein. The address of each of the entities affiliated with LVP is 2603 Camino Ramon, Suite 200, San Ramon, CA 94583.

(8)   Consists of: (i) 1,042,482 shares of Series A-1 convertible preferred stock purchased and received by Dr. Riedel; (ii) 75,000 shares of Series A-1 convertible preferred stock purchased and received by family members of Dr. Riedel; (iii) 1,334,254 shares of Series A-2 convertible preferred stock purchased and received by Dr. Riedel; (iv) 836,541 shares of Series B convertible preferred stock purchased and received by Dr. Riedel; (v) 9,158,453 shares of restricted common stock held by Dr. Riedel; (vi) 5,117,217 shares of common stock held by the Norbert G. Riedel 2015 Generation Trust; (vii) 8,013,646 shares of restricted common stock held by the Norbert G. Riedel 2015 Generation Trust; and (viii) 4,415,431 shares of common stock underlying options exercisable within 60 days of March 31, 2018.

(9)   Consists of: (i) 162,500 shares of common stock; (ii) 6,010,235 shares of restricted common stock; (iii) 64,212 shares of Series A-1 convertible preferred stock; (iv) 73,384 shares of Series A-2 convertible preferred stock; (v) 49,702 shares of Series B convertible preferred stock; and (vi) 288,989 shares of common stock underlying options exercisable within 60 days of March 31, 2018.

(10)  Consists of: (i) 2,812,885 shares of common stock; (ii) 6,868,840 shares of restricted common stock; (iii) 233,496 shares of Series A-1 convertible preferred stock; (iv) 266,851 shares of Series A-2 convertible preferred stock; (v) 180,734 shares of Series B convertible preferred stock; and (vi) 355,464 shares of common stock underlying options exercisable within 60 days of March 31, 2018.

(11)  Consists of: (i) 2,996,484 shares of common stock held by the Wilbur H. Gantz III Revocable Trust, or Gantz Revocable Trust, (ii) 2,334,966 shares of Series A-1 convertible preferred stock, 2,668,508 shares of Series A-2 convertible preferred stock, and 1,807,340 shares of Series B convertible preferred stock purchased and received by Gantz Revocable Trust, and (iii) 700,489 shares of Series A-1 convertible preferred stock, 800,552 shares of Series A-2 convertible preferred stock, and 542,203 shares of Series B convertible preferred stock purchased and received by LMC Holdings LLC. Wilbur H. Gantz is the trustee of the Wilbur H. Gantz III Revocable Trust and the manager of LMC Holdings, LLC. As a result, Mr. Gantz may be deemed to share voting and investment power with respect to the above-listed shares.

(12)  Consists of 20,833 shares of common stock underlying options exercisable within 60 days of March 31, 2018.

(13)  See notes 2, 3, 4, 5, 6, 8, 9, 10, 11, and 12 above; also includes Andrew Kidd, Ashish Khanna, and David R. Houck, Ph.D., who are executive officers but not named executive officers.

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Description of capital stock

The following descriptions are summaries of the material terms of our amended and restated certificate of incorporation, which will be effective upon the closing of this offering and amended and restated bylaws, which will be effective upon the effectiveness of the registration statement of which this prospectus is a part. The descriptions of the common stock and convertible preferred stock give effect to changes to our capital structure that will occur immediately prior to the closing of this offering. We refer in this section to our amended and restated certificate of incorporation as our certificate of incorporation, and we refer to our amended and restated bylaws as our bylaws .

General

Upon closing of this offering, our authorized capital stock will consist of 150,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share, all of which shares of preferred stock will be undesignated.

As of March 31, 2018, 721,002,675 shares of our common stock were outstanding and held by 211 stockholders of record. This amount assumes the conversion of all outstanding shares of our convertible preferred stock into common stock, which will occur immediately prior to the closing of this offering. In addition, as of March 31, 2018, we had outstanding options to purchase 90,356,401 shares of our common stock under our 2015 Stock Option and Grant Plan at a weighted-average exercise price of $0.14 per share, 13,590,048 of which were exercisable.

Common stock

The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by our board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding convertible preferred stock. Our common stock has no preemptive rights, conversion rights, or other subscription rights or redemption or sinking fund provisions.

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding convertible preferred stock. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid, and non-assessable.

Preferred stock

Immediately prior to the closing of this offering, all outstanding shares of our convertible preferred stock will be converted into shares of our common stock. Upon the consummation of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to              shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. 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, or the designation of, such series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring, or preventing a change in control of our company or other corporate action. Immediately after consummation

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of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Registration rights

Upon the completion of this offering, the holders of 560,180,239 shares of our common stock, including those issuable upon the conversion of convertible preferred stock, are entitled to rights with respect to the registration of these securities under the Securities Act. These rights are provided under the terms of an investors' rights agreement between us and holders of our preferred stock. The investors' rights agreement includes demand registration rights, short-form registration rights, and piggyback registration rights. All fees, costs and expenses of underwritten registrations under this agreement will be borne by us and all selling expenses, including underwriting discounts and selling commissions, will be borne by the holders of the shares being registered.

Demand registration rights

Beginning 180 days after the effective date of this registration statement, the holders of 560,180,239 shares of our common stock, including those issuable upon the conversion of preferred stock upon closing of this offering, are entitled to demand registration rights. Under the terms of the investors' rights agreement, we will be required, upon the written request of holders of (i) at least 50% of these securities or (ii) at least 50% of the common stock issued or issuable upon the conversion of our Series B Preferred Stock (if the anticipated aggregate offering price of this offering, net of selling expenses, would exceed $10.0 million), to file a registration statement and use best efforts to effect the registration of all or a portion of these shares for public resale. We are required to effect only two registrations pursuant to this provision of the investors' rights agreement.

Short-form registration rights

Pursuant to the investors' rights agreement, if we are eligible to file a registration statement on Form S-3, upon the written request of at least 20% of these holders to sell registrable securities at an aggregate price, net of selling expenses, of at least $5.0 million, we will be required to use commercially reasonable efforts to effect a registration of such shares. We are required to effect only two registrations in any twelve month period pursuant to this provision of the investors' rights agreement. The right to have such shares registered on Form S-3 is further subject to other specified conditions and limitations.

Piggyback registration rights

Pursuant to the investors' rights agreement, if we register any of our securities either for our own account or for the account of other security holders, the holders of these shares are entitled to include their shares in the registration. Subject to certain exceptions contained in the investors' rights agreement, we and the underwriters may limit the number of shares included in the underwritten offering to the number of shares which we and the underwriters determine in our sole discretion will not jeopardize the success of the offering.

Expiration of registration rights

The demand registration rights, short-form registration rights and piggyback registration rights granted under the investor rights agreement will terminate on the fifth anniversary of the completion of this offering.

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Indemnification

Our investors' rights agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.

Anti-takeover effects of our certificate of incorporation and bylaws and Delaware law

Our certificate of incorporation and bylaws include a number of provisions that may have the effect of delaying, deferring or preventing another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include the items described below.

Board composition and filling vacancies

Our certificate of incorporation provides for the division of our board of directors into three classes serving staggered three-year terms, with one class being elected each year. Our certificate of incorporation also provides that directors may be removed only for cause and then only by the affirmative vote of the holders of two-thirds or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. The classification of directors, together with the limitations on removal of directors and treatment of vacancies, has the effect of making it more difficult for stockholders to change the composition of our board of directors.

No written consent of stockholders

Our certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our bylaws or removal of directors by our stockholders without holding a meeting of stockholders.

Meetings of stockholders

Our certificate of incorporation and bylaws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our bylaws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.

Advance notice requirements

Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our bylaws

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specify the requirements as to form and content of all stockholders' notices. These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting.

Amendment to certificate of incorporation and bylaws

Any amendment of our certificate of incorporation must first be approved by a majority of our board of directors, and if required by law or our certificate of incorporation, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, board composition, limitation of liability and the amendment of our bylaws and certificate of incorporation must be approved by not less than two-thirds of the outstanding shares entitled to vote on the amendment, and not less than two-thirds of the outstanding shares of each class entitled to vote thereon as a class. Our bylaws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the bylaws; and may also be amended by the affirmative vote of at least two-thirds of the outstanding shares entitled to vote on the amendment, or, if our board of directors recommends that the stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares entitled to vote on the amendment, in each case voting together as a single class.

Undesignated preferred stock

Our certificate of incorporation will provide for 10,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.

Exclusive jurisdiction for certain actions

Our bylaws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers and employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Our amended and restated bylaws will further provide that the United States District Court for the Northern District of Illinois will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. In addition, our amended and restated bylaws will provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions. We have chosen the United States District

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Court for the Northern District of Illinois as the exclusive forum for such causes of action because our principal executive offices are located in Evanston, Illinois. Some companies that have adopted similar federal district court forum selection provisions are currently subject to a suit in the Court of Chancery of the State of Delaware brought by stockholders who assert that the federal district court forum selection provision is not enforceable. We recognize that the federal district court forum selection clause may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Illinois. Additionally, the forum selection clauses in our amended and restated bylaws may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us. Alternatively, if the federal district court forum selection provision is found inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have an adverse effect on our business, financial condition or results of operations. The United States District Court for the Northern District of Illinois may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Section 203 of the Delaware General Corporation Law

Upon completion of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:

before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or

at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

any merger or consolidation involving the corporation and the interested stockholder;

any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

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subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

Exchange listing

We intend to apply to list our common stock on The Nasdaq Global Market under the trading symbol "APTX."

Transfer agent and registrar

The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A. The transfer agent and registrar's address is 250 Royall Street, Canton, Massachusetts 02021, and its telephone number is (800) 962-4284.

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Shares eligible for future sale

Prior to this offering, there has been no public market for our shares. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Based on the number of shares outstanding as of March 31, 2018, upon the completion of this offering,              shares of our common stock will be outstanding, assuming no exercise of the underwriters' option to purchase additional shares and no exercise of outstanding options. 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.

Rule 144

In general, a person who has beneficially owned restricted 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 Securities Exchange Act of 1934, as amended, periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares 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:

1% of the number of shares then outstanding, which will equal approximately              shares immediately after this offering assuming no exercise of the underwriters' option to purchase additional shares, based on the number of shares outstanding as of March 31, 2018; or

the average weekly trading volume of our common stock on The Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;

provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.

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 or directors 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 "Underwriting" included elsewhere in this prospectus and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.

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Lock-up agreements

We, our directors and executive officers and holders of substantially all of our common stock have signed a lock-up agreement that prevent us and them from selling any of our common stock or any securities convertible into or exercisable or exchangeable for common stock for a period of not less than 180 days from the date of this prospectus without the prior written consent of the Underwriters, subject to certain exceptions. See the section entitled "Underwriting" appearing elsewhere in this prospectus for more information.

Registration rights

Upon completion of this offering, certain holders of our securities will be entitled to various rights with respect to registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. See "Description of capital stock—Registration rights" for additional information.

Equity incentive plans

We intend to file one or more registration statements on Form S-8 under the Securities Act to register our shares issued or reserved for issuance under our equity incentive plans. The first such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above. As of                           , 2018, we estimate that such registration statement on Form S-8 will cover approximately              shares.

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Certain material U.S. federal income and estate tax considerations to non-U.S. holders

The following discussion is a summary of the material U.S. federal income tax considerations applicable to non-U.S. holders (as defined below) with respect to their ownership and disposition of shares of our common stock issued pursuant to this offering. For purposes of this discussion, a non-U.S. holder means a beneficial owner of our common stock that is for U.S. federal income tax purposes:

a non-resident alien individual;

a foreign corporation or any other foreign organization taxable as a corporation for U.S. federal income tax purposes; or

a foreign estate or trust, the income of which is not subject to U.S. federal income tax on a net income basis.

This discussion does not address the tax treatment of partnerships or other entities that are pass-through entities for U.S. federal income tax purposes or persons that hold their common stock through partnerships or other pass-through entities. A partner in a partnership or other pass-through entity that will hold our common stock should consult his, her or its tax advisor regarding the tax consequences of acquiring, holding and disposing of our common stock through a partnership or other pass-through entity, as applicable.

This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the Code, existing and proposed U.S. Treasury Regulations promulgated thereunder, current administrative rulings and judicial decisions, all as in effect as of the date of this prospectus and, all of which are subject to change or to differing interpretation, possibly with retroactive effect. Any such change or differing interpretation could alter the tax consequences to non-U.S. holders described in this prospectus. There can be no assurance that the Internal Revenue Service, which we refer to as the IRS, will not challenge one or more of the tax consequences described herein. We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of Section 1221 of the Code, generally property held for investment.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder's individual circumstances nor does it address any aspects of any U.S. federal tax other than the income tax, U.S. state, local or non-U.S. taxes, the alternative minimum tax, or the Medicare tax on net investment income. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder and does not address the special tax rules applicable to particular non-U.S. holders, such as:

insurance companies;

tax-exempt or governmental organizations;

financial institutions;

brokers or dealers in securities;

regulated investment companies;

pension plans;

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"controlled foreign corporations," "passive foreign investment companies," and corporations that accumulate earnings to avoid U.S. federal income tax;

"qualified foreign pension funds," or entities wholly owned by a "qualified foreign pension fund";

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and partners and investors therein);

persons deemed to sell our common stock under the constructive sale provisions of the Code;

persons that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment;

persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

persons for whom our stock constitutes "qualified small business stock" within the meaning of Section 1202 of the Code; and

certain U.S. expatriates.

Accordingly, all prospective non-U.S. holders of our common stock should consult their tax advisors with respect to the U.S. federal, state, local, and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock.

Distributions on our common stock

Distributions, if any, on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the non-U.S. holder's investment, up to such holder's tax basis in the common stock. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in "Gain on sale or other taxable disposition of our common stock." Any such distributions will also be subject to the discussions below under the sections titled "Backup withholding and information reporting" and "Withholding and information reporting requirements—FATCA."

Subject to the discussion in the following two paragraphs in this section, dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder's country of residence.

Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States and, if an applicable income tax treaty so provides, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and disclosure requirements. However, such U.S. effectively connected income, net of specified deductions and credits, is taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code). Any U.S. effectively connected income received by a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder's country of residence.

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A non-U.S. holder of our common stock who claims the benefit of an applicable income tax treaty between the United States and such holder's country of residence generally will be required to provide a properly executed IRS Form W-8BEN or W-8BEN-E (or successor form) to the applicable withholding agent and satisfy applicable certification and other requirements. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty. A non-U.S. holder that is eligible for a reduced rate of U.S. withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing a U.S. tax return with the IRS.

Gain on sale or other taxable disposition of our common stock

Subject to the discussions below under "Backup withholding and information reporting" and "Withholding and information reporting requirements—FATCA," a non-U.S. holder generally will not be subject to any U.S. federal income tax on any gain realized upon such holder's sale or other taxable disposition of shares of our common stock unless:

the gain is effectively connected with the non-U.S. holder's conduct of a U.S. trade or business and, if an applicable income tax treaty so provides, is attributable to a permanent establishment or a fixed-base maintained by such non-U.S. holder in the United States, in which case the non-U.S. holder generally will be taxed on a net income basis at the graduated U.S. federal income tax rates applicable to U.S. persons (as defined in the Code) and, if the non-U.S. holder is a foreign corporation, the branch profits tax described above in "Distributions on our common stock" also may apply;

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the non-U.S. holder will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder's country of residence) on the net gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or

we are, or have been, at any time during the five-year period preceding such sale of other taxable disposition (or the non-U.S. holder's holding period, if shorter) a "U.S. real property holding corporation," unless our common stock is regularly traded on an established securities market and the non-U.S. holder holds no more than 5% of our outstanding common stock, directly or indirectly, actually or constructively, during the shorter of the 5-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock. Generally, a corporation is a U.S. real property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we do not believe that we are, or have been, a U.S. real property holding corporation, or that we are likely to become one in the future. No assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above.

Backup withholding and information reporting

We must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions on our common stock paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. holders may have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup withholding at the applicable rate with

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respect to dividends on our common stock. Dividends paid to non-U.S. holders subject to withholding of U.S. federal income tax, as described above in "Distributions on our common stock," generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States. through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them. Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder's U.S. federal income tax liability, if any, provided that an appropriate claim is filed with the IRS in a timely manner.

Withholding and information reporting requirements—FATCA

The Foreign Account Tax Compliance Act, or FATCA, generally imposes a U.S. federal withholding tax at a rate of 30% on payments of dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to a foreign entity unless (i) if the foreign entity is a "foreign financial institution," such foreign entity undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) if the foreign entity is not a "foreign financial institution," such foreign entity identifies certain of its U.S. investors, if any, or (iii) the foreign entity is otherwise exempt under FATCA. Under applicable U.S. Treasury regulations, withholding under FATCA currently applies to payments of dividends on our common stock, but will only apply to payments of gross proceeds from a sale or other disposition of our common stock made after December 31, 2018. Under certain circumstances, a non-U.S. holder may be eligible for refunds or credits of this withholding tax. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their tax advisors regarding the possible implications of this legislation on their investment in our common stock and the entities through which they hold our common stock, including, without limitation, the process and deadlines for meeting the applicable requirements to prevent the imposition of the 30% withholding tax under FATCA.

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Underwriting

We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Cowen and Company, LLC, Leerink Partners LLC and BMO Capital Markets Corp. are acting as joint book-running managers of the offering and as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discount set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

Name
  Number of
shares

J.P. Morgan Securities LLC

   

Cowen and Company, LLC

   

Leerink Partners LLC

   

BMO Capital Markets Corp. 

   

Total

   

The underwriters are committed to purchase all the shares of common stock offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $              per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $              per share from the initial public offering price. After the initial offering of the shares to the public, if all of the shares are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms.

The underwriters have an option to buy up to                           additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $               per share. The following table shows the per share and total underwriting discount to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

 
  Without option
to purchase
additional
shares exercise

  With full option
to purchase
additional
shares exercise

 

Per Share

  $             $            

Total

  $             $            

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We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discount, will be approximately $              . We have agreed to reimburse the underwriters for expense relating to clearance of this offering with the Financial Industry Regulatory Authority up to $              .

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters 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 representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise dispose of, directly or indirectly, or file with the SEC 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, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC, Cowen and Company, LLC, and Leerink Partners LLC for a period of 180 days after the date of this prospectus, other than (a) grants of employee stock options or other equity-based awards pursuant to the terms of any employee stock options or other equity-based plans disclosed in this prospectus in the ordinary course of business consistent with past practice, (b) issuances of shares pursuant to the exercise of options or other equity-based awards, (c) the shares of our common stock sold in this offering, (d) issuances of shares of our common stock or securities exercisable for, convertible into, or exchangeable for shares of our common stock in connection with any acquisition, collaboration, licensing, or other joint venture or strategic transaction or any debt financing transaction involving us or pursuant to an employee benefit plan assumed by us in connection with such transaction; provided that in the case of clause (d), that such issuances shall not be greater than 5% of the then outstanding shares of our common stock and the recipients of such shares of our common stock agree to be bound by a lock-up agreement in the form executed by directors and officers as described below.

Our directors and executive officers, and substantially all holders of our common stock have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of J.P. Morgan Securities LLC, Cowen and Company, LLC, and Leerink Partners LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise, or (3) make any

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demand for or exercise any right with respect to the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for our common stock, in each case, subject to certain exceptions, including:

a)
the sale of shares of common stock, if any, to be sold by our directors, executive officers, and certain of our shareholders pursuant to the underwriting agreement;

b)
sales or transfers of shares of our common stock acquired in this offering or in open market transactions after the consummation of this offering;

c)
transfers of shares of our common stock (i) as a bona fide gift or gifts, (ii) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the holder in a transaction not involving a disposition for value or (iii) by operation of law, such as pursuant to a qualified domestic order or as required by a divorce settlement;

d)
if the holder is an individual, transfers of shares of our common stock or any security directly or indirectly convertible into our common stock to any trust for the direct or indirect benefit of the holder or the immediate family of the holder, or limited partnerships the partners of which are the holder and/or the immediate family members of the holder, in each case for estate planning purposes;

e)
if the holder is a trust, distributions of shares of our common stock or any security directly or indirectly convertible into shares of our common stock to its beneficiaries in a transaction not involving a disposition for value;

f)
if the holder is a corporation, limited liability company, partnership (whether general, limited or otherwise), or other entity, distribution of shares of our common stock or any security directly or indirectly convertible into our common stock to current or former members, stockholders, limited partners, general partners, subsidiaries, or affiliates (as defined in Rule 405 promulgated under the Securities Act) of the holder or to any investment fund or other entity that controls or manages the holder (including, for the avoidance of doubt, a 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 as the holder or who shares a common investment advisor with the holder) in a transaction not involving a disposition for value;

g)
the receipt by the holder of shares of our common stock in connection with the conversion of our outstanding preferred stock upon the consummation of this offering into shares of our common stock, provided that any such shares of our common stock received upon such conversion shall be subject to the terms of the lock-up agreement;

h)
transfers or dispositions in connection with a change of control (it being further understood that the lock-up agreement shall not restrict the holder from entering into any agreement or arrangement in connection therewith, including an agreement to vote in favor of, or tender shares of our common stock or our other securities in, any such transaction, or taking or not taking any other action in connection with any such transaction); provided that in the event that the acquisition, merger, consolidation, or other transaction in connection with such change of control is not completed, the common stock owned by the holder shall remain subject to the restrictions contained in the lock-up agreement; and

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i)
the entering into by the holder of a written trading plan pursuant to Rule 10b5-1 of the Exchange Act, or a Rule 10b5-1 Plan, 180 days after the date of this prospectus, provided that no sales or transfers of shares of the holder's common stock shall be made pursuant to such Rule 10b5-1 Plan prior to 180 days after the date of this prospectus and no filing under the Exchange Act or other public announcement shall be required or voluntarily made by the holder or any other person in connection therewith without the permission of J.P. Morgan Securities LLC, Cowen and Company, LLC, and Leerink Partners LLC, prior to 180 days after the date of this prospectus;

provided that in the case of any transfer or distribution pursuant to clause (c), (d), (e) or (f), each transferee, beneficiary, donee, heir or distributee shall execute and deliver to the representatives a lock-up letter in the form of this paragraph; and provided , further , that in the case of any transfer or distribution pursuant to clause (b), (c), (d), (e) or (f), no filing by any party (the holder, transferor, transferee, beneficiary, donor, donee, heir, distributor or distributee) under the Exchange Act, or other public announcement shall be required or shall be made voluntarily in connection with such transfer or distribution (other than a filing on a Form 5 made after the expiration of the Restricted Period and any required Schedule 13G (or 13G/A) or 13F filing).

J.P. Morgan Securities LLC, Cowen and Company, LLC, and Leerink Partners LLC, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We will apply to have our common stock approved for listing/quotation on The Nasdaq Global Market under the symbol "APTX."

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' option to purchase additional shares referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the

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representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on The Nasdaq Global Market, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

the information set forth in this prospectus and otherwise available to the representatives;

our prospects and the history and prospects for the industry in which we compete;

an assessment of our management;

our prospects for future earnings;

the general condition of the securities markets at the time of this offering;

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our shares, or that the shares will trade in the public market at or above the initial public offering price.

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services.

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 have received and may continue to receive customary fees and commissions. In addition, from time to time,

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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 and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of our securities and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in our securities.

Selling restrictions

General

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Notice to prospective investors in the European Economic Area

In relation to each Member State of the European Economic Area (each is referred to as a Relevant Member State), no offer of shares may be made to the public in that Relevant Member State other than:

A.
to any legal entity which is a qualified investor as defined in the Prospectus Directive;

B.
to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or

C.
in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that no such offer of shares shall require us or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.

We, the representatives, and their affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.

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This prospectus has been prepared on the basis that any offer of shares in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for us or the underwriters to publish a prospectus for such offer.

For the purpose of the above provisions, 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 the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) 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

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are "qualified investors" (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons") or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000.

Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to prospective investors in Canada

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principals that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The

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purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Notice to prospective investors in Switzerland

The shares 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 does not constitute a prospectus within the meaning of, and 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 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, the company, 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, or FINMA, and the offer of 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 shares.

Notice to prospective investors in the United Arab Emirates

The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.

Notice to prospective investors in Australia

This prospectus:

does not constitute a product disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth), or the Corporations Act;

has not been, and will not be, lodged with the Australian Securities and Investments Commission, or ASIC, as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document under Chapter 6D.2 of the Corporations Act;

does not constitute or involve a recommendation to acquire, an offer or invitation for issue or sale, an offer or invitation to arrange the issue or sale, or an issue or sale, of interests to a "retail client" (as defined in section 761G of the Corporations Act and applicable regulations) in Australia; and

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may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, or Exempt Investors, available under section 708 of the Corporations Act.

The shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any shares may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the shares, you represent and warrant to us that you are an Exempt Investor.

As any offer of shares under this prospectus will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares you undertake to us that you will not, for a period of 12 months from the date of issue of the shares, offer, transfer, assign or otherwise alienate those securities to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

Notice to prospective investors in Japan

The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any "resident" of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.

Notice to prospective investors in Hong Kong

The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Notice to prospective investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares may not be circulated or distributed, nor may the shares

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be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

(a)
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(b)
where no consideration is or will be given for the transfer;

(c)
where the transfer is by operation of law;

(d)
as specified in Section 276(7) of the SFA; or

(e)
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

Notice to prospective investors in Bermuda

Shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.

Notice to prospective investors in Saudi Arabia

This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations as issued by the board of the Saudi Arabian Capital Market Authority, or CMA, pursuant to resolution number 2-11-2004 dated 4 October 2004 as amended by resolution number 1-28-2008, as amended, or the CMA Regulations. The CMA does not make any representation as to the accuracy or completeness of this document and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this document, you should consult an authorised financial adviser.

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Notice to prospective investors in the British Virgin Islands

The shares are not being, and may not be offered to the public or to any person in the British Virgin Islands for purchase or subscription by or our behalf. The shares may be offered to companies incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), or BVI Companies, but only where the offer will be made to, and received by, the relevant BVI Company entirely outside of the British Virgin Islands.

This prospectus has not been, and will not be, registered with the Financial Services Commission of the British Virgin Islands. No registered prospectus has been or will be prepared in respect of the shares for the purposes of the Securities and Investment Business Act, 2010, or SIBA, or the Public Issuers Code of the British Virgin Islands.

Notice to prospective investors in China

This prospectus does not constitute a public offer of shares, whether by sale or subscription, in the People's Republic of China, or the PRC. The shares are not being offered or sold directly or indirectly in the PRC to or for the benefit of, legal or natural persons of the PRC.

Further, no legal or natural persons of the PRC may directly or indirectly purchase any of the shares or any beneficial interest therein without obtaining all prior PRC's governmental approvals that are required, whether statutorily or otherwise. Persons who come into possession of this document are required by the issuer and its representatives to observe these restrictions.

Notice to prospective investors in Korea

The shares have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder, or the FSCMA, and the shares have been and will be offered in Korea as a private placement under the FSCMA. None of the shares may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder, or the FETL. Furthermore, the purchaser of the shares shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased the shares pursuant to the applicable laws and regulations of Korea.

Notice to prospective investors in Malaysia

No prospectus or other offering material or document in connection with the offer and sale of the shares has been or will be registered with the Securities Commission of Malaysia, or Commission, for the Commission's approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services Licence; (iii) a person who acquires the shares, as principal, if the offer is on terms that the shares may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of

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the primary residence of the individual; (v) an individual who has a gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the shares is made by a holder of a Capital Markets Services Licence who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.

Notice to prospective investors in Taiwan

The shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorised to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.

Notice to prospective investors in South Africa

Due to restrictions under the securities laws of South Africa, the shares are not offered, and the offer shall not be transferred, sold, renounced or delivered, in South Africa or to a person with an address in South Africa, unless one or other of the following exemptions applies:

(i)
the offer, transfer, sale, renunciation or delivery is to:

(a)
persons whose ordinary business is to deal in securities, as principal or agent;

(b)
the South African Public Investment Corporation;

(c)
persons or entities regulated by the Reserve Bank of South Africa;

(d)
authorised financial service providers under South African law;

(e)
financial institutions recognised as such under South African law;

(f)
a wholly-owned subsidiary of any person or entity contemplated in (c), (d) or (e), acting as agent in the capacity of an authorised portfolio manager for a pension fund or collective investment scheme (in each case duly registered as such under South African law); or

(g)
any combination of the person in (a) to (f); or

(ii)
the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000.

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No "offer to the public" (as such term is defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted, or the South African Companies Act) in South Africa is being made in connection with the issue of the shares. Accordingly, this document does not, nor is it intended to, constitute a "registered prospectus" (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act and has not been approved by, and/or filed with, the South African Companies and Intellectual Property Commission or any other regulatory authority in South Africa. Any issue or offering of the shares in South Africa constitutes an offer of the shares in South Africa for subscription or sale in South Africa only to persons who fall within the exemption from "offers to the public" set out in section 96(1)(a) of the South African Companies Act. Accordingly, this document must not be acted on or relied on by persons in South Africa who do not fall within section 96(1)(a) of the South African Companies Act (such persons being referred to as the SA Relevant Persons). Any investment or investment activity to which this document relates is available in South Africa only to SA Relevant Persons and will be engaged in South Africa only with SA relevant persons.

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Legal matters

The validity of the shares of common stock offered by this prospectus will be passed upon for us by Goodwin Procter LLP, Boston, Massachusetts. Certain legal matters related to this offering will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York.

Experts

The financial statements as of December 31, 2016 and 2017, and for each of the two years in the period ended December 31, 2017 included in this Prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority 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 (File Number 333-                  ) under the Securities Act with respect to the common stock we are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.

Upon the completion of the offering, we will be subject to the informational requirements of the Securities Exchange Act of 1934 and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC's website at www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. We also maintain a website at https://www.aptinyx.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website as part of this prospectus. Upon completion of the offering, you may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendment to those reported filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

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Aptinyx Inc.
Contents

Report of independent registered public accounting firm

  F-2

Financial statements

   

Balance sheets

  F-3

Statements of operations and comprehensive loss

  F-4

Statements of convertible preferred stock and stockholders' deficit

  F-5

Statements of cash flows

  F-6

Notes to financial statements

  F-7

F-1


Table of Contents


Report of independent registered public accounting firm

To the Stockholders and the Board of Directors of Aptinyx Inc.

Opinion on the financial statements

We have audited the accompanying balance sheets of Aptinyx Inc. (the "Company") as of December 31, 2016 and 2017, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders' deficit, and cash flows, for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2017, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Chicago, Illinois
March 30, 2018
We have served as the Company's auditor since 2017.

F-2


Table of Contents

Aptinyx Inc.
Balance sheets
(in thousands, except per share data)

 
   
   
   
   
 
 
  December 31,
2016

  December 31,
2017

  March 31,
2018

  Pro forma
convertible
preferred
stock and
stockholders'
equity,
March 31,
2018

 
 
   
   
  (unaudited)
  (unaudited)
 

Assets

                         

Current assets:

                         

Cash and cash equivalents

  $ 16,180   $ 92,136   $ 82,350        

Accounts receivable

    488     937     1,842        

Prepaid expenses and other current assets

    605     1,960     2,312        

Total current assets

    17,273     95,033     86,504        

Restricted cash

    773     473     473        

Property and equipment, net

    600     1,816     1,833        

Total assets

  $ 18,646   $ 97,322   $ 88,810        

Liabilities, convertible preferred stock, and stockholders' (deficit) equity

   
 
   
 
   
 
   
 
 

Current liabilities:

                         

Accounts payable

  $ 1,596   $ 1,537   $ 2,864        

Accrued expenses and other current liabilities

    2,951     2,835     4,163        

Total current liabilities

    4,547     4,372     7,027        

Other long-term liabilities

        282     263        

Total liabilities

  $ 4,547   $ 4,654   $ 7,290        

Commitments and contingencies (note 16)

                         

Convertible preferred stock—Series A-1, $0.01 par value, 151,773 shares authorized, issued and outstanding at December 31, 2016 and 2017, and at March 31, 2018 (unaudited); no shares issued or outstanding at March 31, 2018, pro forma (unaudited)

    22,650     22,650     22,650      

Convertible preferred stock—Series A-2, $0.01 par value, 173,453 shares authorized, none issued or outstanding at December 31, 2016; and 173,453 shares authorized, issued and outstanding at December 31, 2017, and at March 31, 2018 (unaudited); no shares issued or outstanding at March 31, 2018, pro forma (unaudited)

        39,979     39,979      

Convertible preferred stock—Series B, $0.01 par value, no shares authorized, issued or outstanding at December 31, 2016; and 234,955 shares authorized, issued and outstanding at December 31, 2017, and at March 31, 2018 (unaudited); no shares issued or outstanding at March 31, 2018, pro forma (unaudited)

        69,757     69,757      

Stockholders' (deficit) equity:

   
 
   
 
   
 
   
 
 

Common stock, $0.01 par value, 683,000 shares authorized, 139,299 issued and outstanding at December 31, 2016; and 900,000 shares authorized at December 31, 2017, and at March 31, 2018 (unaudited); 147,370 issued and outstanding at December 31, 2017, and 149,388 issued and outstanding at March 31, 2018 (unaudited); 709,569 shares issued and outstanding at March 31, 2018, pro forma (unaudited)                  

    1,393     1,474     1,494     7,096  

Additional paid-in capital

    10,245     11,065     11,569     138,353  

Accumulated deficit

    (20,189 )   (52,257 )   (63,929 )   (63,929 )

Total stockholders' (deficit) equity

  $ (8,551 ) $ (39,718 ) $ (50,866 ) $ 81,520  

Total liabilities, convertible preferred stock, and stockholders' deficit

  $ 18,646   $ 97,322   $ 88,810        

   

See accompanying notes to financial statements.

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Aptinyx Inc.
Statements of operations and comprehensive loss
(in thousands, except per share data)

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 
 
   
   
  (unaudited)
 

Collaboration and grant revenue

  $ 9,792   $ 4,962   $ 1,145   $ 2,464  

Operating expenses:

                         

Research and development

    22,743     31,644     8,662     12,224  

General and administrative

    4,766     5,551     1,232     2,049  

Total operating expenses

    27,509     37,195     9,894     14,273  

Loss from operations

    (17,717 )   (32,233 )   (8,749 )   (11,809 )

Other income

    2,239     165     52     137  

Net loss and comprehensive loss

  $ (15,478 ) $ (32,068 ) $ (8,697 ) $ (11,672 )

Net loss per share attributable to common stockholders, basic and diluted

  $ (0.11 ) $ (0.22 ) $ (0.06 ) $ (0.08 )

Weighted-average number of common shares outstanding, basic and diluted

    135,252     143,336     140,287     148,357  

Pro forma net loss per share, basic and diluted (unaudited)

        $ (0.07 )       $ (0.02 )

Pro forma weighted-average common shares outstanding, basic and diluted (unaudited)

          464,297           708,538  

   

See accompanying notes to financial statements.

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Aptinyx Inc.
Statements of convertible preferred stock and stockholders' deficit
(in thousands)

 
   
   
   
   
   
   
   
   
   
   
   
   
 
  Series A-1
convertible
preferred stock
  Series A-2
convertible
preferred stock
  Series B
convertible
preferred stock
   
   
   
   
   
   
 
   
  Common stock   Additional
paid-in
capital

   
  Total
stockholders'
equity
(deficit)

 
   
  Accumulated
deficit

 
  Shares
  Amount
  Shares
  Amount
  Shares
  Amount
   
  Shares
  Amount

Balance at January 1, 2016

      $       $       $         131,186   $1,312   $ 9,960   $  (4,711)   $     6,561

Issuance of Series A-1 convertible preferred stock, net of issuance costs of $269

    151,773     24,731                           —    —    —    — 

Reclassification of preferred stock tranche liability

        (2,081 )                         —    —    —    — 

Issuance of common stock upon vesting of restricted stock awards

                                8,113   81    (81)   —    — 

Stock-based compensation

                                  —    391    —    391 

Repurchase of unvested restricted shares

                                  —    (25)   —    (25)

Net loss

                                  —    —    (15,478)   (15,478)

Balance at December 31, 2016

    151,773   $ 22,650       $       $         139,299   $1,393   $10,245   $(20,189)   $(8,551)

Issuance of Series A-2 convertible preferred stock, net of issuance costs of $21

            173,453     39,979                        

Issuance of Series B convertible preferred stock, net of issuance costs of $243

                    234,955     69,757                

Issuance of common stock upon vesting of restricted stock awards

                                8,071   81   (81)    

Stock-based compensation

                                    901     901

Net loss

                                      (32,068)   (32,068)

Balance at December 31, 2017

    151,773   $ 22,650     173,453   $ 39,979     234,955   $ 69,757         147,370   $1,474   $11,065   $(52,257)   $(39,718)

Issuance of common stock upon vesting of restricted stock awards (unaudited)

                                2,018   20   (20)    

Stock-based compensation (unaudited)

                                    524     524

Net loss (unaudited)

                                      (11,672)   (11,672)

Balance at March 31, 2018 (unaudited)

    151,773   $ 22,650     173,453   $ 39,979     234,955   $ 69,757         149,388   $1,494   $11,569   $(63,929)   $(50,866)

See accompanying notes to financial statements.

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Table of Contents

Aptinyx Inc.
Statements of cash flows
(in thousands)

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months
ended March 31,
 
 
  2016
  2017
  2017
  2018
 
 
   
   
  (unaudited)
 

Cash flows from operating activities:

                         

Net loss

  $ (15,478 ) $ (32,068 ) $ (8,697 ) $ (11,672 )

Adjustments to reconcile net loss to net cash used in operating activities:

                         

Depreciation and amortization

    185     405     58     103  

Gain from changes in the fair value of Preferred Stock Tranche Liability

    (2,081 )            

Stock-based compensation expense

    391     901     191     524  

Changes in operating assets and liabilities

                         

Prepaid expenses and other current assets

    (73 )   (1,355 )   247     891  

Accounts receivable

    (259 )   (448 )   (47 )   (904 )

Accounts payable

    (1,002 )   (124 )   1,300     1,028  

Accrued expenses and other liabilities

    (1,398 )   (46 )   (459 )   594  

Net cash used in operating activities

    (19,715 )   (32,735 )   (7,407 )   (9,436 )

Cash flows from investing activities:

                         

Purchase of property and equipment

    (371 )   (1,577 )   (263 )   (46 )

Net cash used in investing activities

    (371 )   (1,577 )   (263 )   (46 )

Cash flows from financing activities:

                         

Proceeds from issuance of Series A-1 convertible preferred stock, net of issuance costs                

    24,731              

Proceeds from issuance of Series A-2 convertible preferred stock, net of issuance costs                

        39,979     39,979      

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

        69,989         (232 )

Payment of deferred offering costs

                (72 )

Repurchase of unvested restricted shares

    (25 )            

Net cash provided by (used in) financing activities

    24,706     109,968     39,979     (304 )

Net increase (decrease) in cash, cash equivalents and restricted cash

    4,620     75,656     32,309     (9,786 )

Cash, cash equivalents and restricted cash, at beginning of period

    12,333     16,953     16,953     92,609  

Cash, cash equivalents and restricted cash, at end of period

  $ 16,953   $ 92,609   $ 49,262   $ 82,823  

Supplemental disclosure of non-cash activities

                         

Property and equipment purchases not yet paid

  $   $   $ 277   $ 93  

Deferred initial public offering costs not yet paid

  $   $   $   $ 1,172  

Series B convertible preferred stock financing costs not yet paid

  $   $ 232   $   $  

   

See accompanying notes to financial statements.

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Aptinyx Inc.
Notes to financial statements

1.     Organization

Description of business

Aptinyx Inc. (the "Company" or "Aptinyx") was incorporated in Delaware on June 24, 2015 and maintains its headquarters in Evanston, Illinois.

Aptinyx is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel, proprietary, synthetic small molecules for the treatment of brain and nervous system disorders. Aptinyx has a platform for discovering proprietary compounds that work through a novel mechanism: modulation of the N-methyl-D-aspartate receptor ("NMDAr") which are vital to normal and effective brain and nervous system functions. This mechanism has applicability across a number of brain and nervous system disorders. The Company's first product candidate, NYX-2925, is currently in Phase 2 clinical development for the treatment of painful diabetic peripheral neuropathy and in an exploratory clinical study in subjects with fibromyalgia. Additionally, the Company is currently conducting a Phase 1 study of NYX-783, an NMDAr receptor for the treatment of post-traumatic stress disorder.

Liquidity and capital resources

The Company has incurred losses and negative cash flows from operations since inception and had an accumulated deficit of $52.3 million and $63.9 million as of December 31, 2017 and March 31, 2018 (unaudited), respectively. Since inception through both December 31, 2017 and March 31, 2018 (unaudited), the Company has funded operations primarily with $134.7 million net proceeds from the issuance of convertible preferred stock. The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to complete clinical studies and launch and commercialize any product candidates for which it receives regulatory approval. There can be no assurance that such financing will be available or will be at terms acceptable to the Company.

As of March 30, 2018, the date of issuance of the financial statements for the year ended December 31, 2017, the Company expected that its cash and cash equivalents of $92.1 million as of December 31, 2017 would be sufficient to fund its planned operations for a period of at least twelve months from the date of the issuance of those financial statements.

As of May 4, 2018, the date of issuance of the unaudited interim financial statements for the three months ended March 31, 2018, the Company expects that its cash and cash equivalents of $82.4 million as of March 31, 2018 (unaudited) will be sufficient to funds its planned operations for a period of at least twelve months from the issuance date of the interim financial statements.

2.     Basis of presentation

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), or other standard setting bodies and adopted by the Company 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 statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended ("the JOBS Act"), the Company meets the definition of an

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emerging growth company, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

Recently adopted accounting pronouncements

In November 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-18, Restricted Cash ("ASU 2016-18"), which require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. For entities other than public entities, ASU 2016-18 is effective for fiscal years beginning after December 15, 2018. The Company's adoption of this standard in 2016 on a retrospective basis did not have a material effect on the Company's financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation ("ASU 2016-09"), which amends Accounting Standards Codification ("ASC") 718, Compensation—Stock Compensation . The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statements of cash flows. For entities other than public entities, ASU 2016-09 is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company early adopted ASU 2016-09 in 2017 and the adoption did not have any impact on the Company's financial statements.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40). The new guidance addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern for at least one year after the date that the financial statements are issued and to provide disclosures if necessary. Disclosure is required if conditions give rise to substantial doubt and the type of disclosure will be determined based on whether management's plans will be able to alleviate the substantial doubt. The new standard is effective for all entities for annual periods ending after December 15, 2016. Early adoption is permitted. The adoption of this standard in 2016 did not have a material effect on the Company's financial statements.

Recently issued accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"), which requires a lessee to recognize assets and liabilities on the balance sheet for operating leases and changes many key definitions, including the definition of a lease. The new standard includes a short-term lease exception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize lease assets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance. The new standard will be effective for the Company beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the potential impact ASU 2016-02 may have on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and

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estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2018, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is evaluating the impact of the pending adoption of ASU 2014-09 on the financial statements and has not yet determined the method by which the Company will adopt the standard when required.

3.     Summary of significant accounting policies

Use of estimates

The financial statements are prepared in conformity with GAAP. This process requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Unaudited interim financial information

The accompanying balance sheet as of March 31, 2018, the statements of operations and comprehensive loss, and statements of cash flows for the three months ended March 31, 2017 and 2018, and the statement of convertible preferred stock and stockholders' deficit for the three months ended March 31, 2018, are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements; and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company's financial position as of March 31, 2018, and the results of its operations and its cash flows for the three months ended March 31, 2017 and 2018. The financial data and other information disclosed in these notes related to the three months ended March 31, 2017 and 2018 are unaudited. The results for the three months ended March 31, 2018, are not necessarily indicative of results to be expected for the year ending December 31, 2018, any other interim periods, or any future year or period.

Unaudited pro forma information

Immediately prior to the completion of this offering, all outstanding shares of convertible preferred stock will automatically convert into common stock. Unaudited pro forma balance sheet information as of March 31, 2018 assumes the conversion of all outstanding convertible preferred stock into shares of common stock. The shares of common stock issuable and the proceeds expected to be received in the initial public offering are excluded from such pro forma financial information. Pro forma basic and diluted net loss per share has been computed to give effect to the conversion of all outstanding convertible preferred stock into shares of common stock. The unaudited pro forma net loss per share does not include the shares expected to be sold and related proceeds to be received from the initial public offering. The unaudited pro forma net loss per share for the year ended December 31, 2017 and for the three months ended March 31, 2018 was computed using the weighted-average number of shares of common stock outstanding, including the pro forma effect of the conversion of all outstanding shares of convertible preferred stock into shares of common stock, as if such conversion had occurred at the beginning of the period, or their issuance dates if later.

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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, uncertainty of: future clinical study results, the scope, rate of progress and expense of the Company's ongoing as well as any additional preclinical studies, clinical studies and other research and development activities, clinical study enrollment rate or design, the manufacturing of the Company's product candidates, significant and changing government regulation, and the timing and receipt of any regulatory approvals.

The Company's product candidates require approvals from the U.S. Food and Drug Administration and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

The Company is dependent upon third-party manufacturers to supply product for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and final drug product related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and final drug product.

Revenue recognition

Revenue is recognized when all terms and conditions of the agreements have been met, including that persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

The Company is reimbursed for certain costs incurred on specified research projects under the terms and conditions of a Research Collaboration Agreement and a Development Services Agreement that are reported within collaboration and grant revenue (as discussed in Note 4) in the statements of operations and comprehensive loss. The amounts of the reimbursements are recorded as revenues on a gross basis in accordance with ASC 605-45— Revenue Recognition—Principal Agent Consideration . The core principle is that the entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 605-45 specifies various indicators that support the reporting of revenue on a gross basis. As the Company is considered the primary obligor, is exposed to credit risk, and has discretion in changing and selecting the supplier, the Company recognizes these reimbursements on a gross basis. The related expenses are primarily recorded within research and development expenses in the statements of operations and comprehensive loss.

The Company is also reimbursed for certain costs associated with government grants that provide funding for certain types of expenditures in connection with research and development activities over a contractually-defined period. Revenue related to government grants is recognized in the period during which the related costs are incurred and the related services are rendered, provided that the applicable performance obligations under the government grants have been met. The revenue is reported on a gross basis within collaboration and grant revenue and the related expenses are recorded within both general and administrative expenses and research and development expenses in the statements of operations and comprehensive loss.

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Accounts receivable

Accounts receivable that management has the intent and ability to collect are reported in the balance sheets at outstanding amounts, less an allowance for doubtful accounts. During the years ended December 31, 2016 and 2017, one research collaborator, Allergan plc ("Allergan") represented 99% and 80%, respectively, of the Company's revenues (see Note 4). During the three months ended March 31, 2017 and 2018 (unaudited), Allergan represented 84% and 38%, respectively, of the Company's revenues. The associated accounts receivable were approximately $0.5 million, $0.6 million, and $0.5 million at December 31, 2016, December 31, 2017, and March 31, 2018 (unaudited), respectively. The remaining accounts receivable relate to the Company's grants with the U.S. government. The Company writes off uncollectible receivables based on specific identification when the likelihood of collection is remote. No allowance was deemed necessary at December 31, 2016 and 2017, or as of March 31, 2018 (unaudited).

Cash, cash equivalents and restricted cash

Cash and cash equivalents consist of cash and, if applicable, highly liquid investments with an original maturity of three months or less when purchased. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows (amounts in thousands).

 
   
   
   
 
 
  As of December 31,   As of
March 31,
 
 
  2016
  2017
  2018
 
 
   
   
  (unaudited)
 

Cash and cash equivalents

  $ 16,180   $ 92,136   $ 82,350  

Restricted cash

    773     473     473  

Total cash, cash equivalents, and restricted cash shown in the statements of cash flows

  $ 16,953   $ 92,609   $ 82,823  

Amounts included in restricted cash represent those amounts required to be held as a security deposit in the form of letters of credit for the Company's leased office facility and cash collateral held by credit card.

Concentrations of credit risk

The Company, at times, maintains cash and cash equivalents in accounts with a financial institution in excess of the amount insured by the Federal Deposit Insurance Corporation. The Company monitors the financial stability of this institution regularly and management does not believe there is significant credit risk associated with deposits in excess of federally insured amounts.

Fair value of financial instruments

ASC 820, Fair Value Measurement ("ASC 820"), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company's own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

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participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Refer to Note 5, "Fair Value Measurements", for further information about Level 3 inputs.

The carrying values reported in the Company's balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.

Property and equipment

Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred. Additions, improvements and replacements are capitalized. Depreciation of property and equipment is provided for by the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of property and equipment are as follows:

 
   
Description
  Estimated useful life
Computer software and equipment   3 years
Office equipment and furniture   5 years
Laboratory equipment   5 years
Leasehold improvements   Lesser of the estimated useful life or term of the lease

Impairment of long-lived assets

Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If the sum of the estimated future undiscounted cash flows expected to result from the use and eventual disposition of an asset is less than the carrying amount of the asset group, an impairment loss is recognized. Measurement of an impairment loss is based on the fair value of the asset group. The Company has not recorded any impairment losses on long-lived assets for the years ended December 31, 2016 and 2017 and for the three months ended March 31, 2017 and 2018 (unaudited).

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Deferred initial public offering costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings until such financings are consummated. Deferred initial public offering ("IPO") costs of $1.2 million are capitalized and included within prepaid expenses and other current assets on the balance sheet as of March 31, 2018 (unaudited). There were no deferred IPO costs as of December 31, 2016 or 2017. The deferred IPO costs will be offset against any proceeds from the IPO upon its consummation as a reduction of stockholders' equity (deficit). In the event the IPO is terminated or abandoned, all capitalized deferred IPO costs will be expensed within general and administrative expenses.

Research and development

Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, depreciation, contract services and other related costs. Research and development costs are expensed to operations as the related obligation is incurred.

The Company has entered into various research and development contracts with research institutions, clinical research organizations, clinical manufacturing organizations and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected on the balance sheet as prepaid or accrued expenses. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company's estimates. The Company's historical accrual estimates have not been materially different from the actual costs.

Convertible preferred stock

The Company has applied the guidance in ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities and has therefore classified the Series A-1, Series A-2 and Series B convertible preferred stock (Note 11) as mezzanine equity. The convertible preferred stock is recorded outside of stockholders' deficit because, in the event of certain deemed liquidation events considered not solely within the Company's control, such as a merger, acquisition and sale of all or substantially all of the Company's assets, the convertible preferred stock will become redeemable at the option of the holders. In the event of a change of control of the Company, proceeds received from the sale of such shares will be distributed in accordance with the liquidation preferences set forth in the Company's Amended and Restated Certificate of Incorporation. The Company has determined not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such an event would occur.

Stock-based compensation

The Company has stock-based compensation plans that cover the Company's employees and are more fully described in Note 12. Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period.

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Income taxes

The Company accounts for income taxes under the liability method in accordance with FASB ASC 740, Income Taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and 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. A valuation allowance is established if it is more likely than not that all, or some portion, of deferred income tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero. In the event the Company were to determine that it would be able to realize some or all its deferred income tax assets in the future, an adjustment to the deferred income tax asset valuation allowance would increase income in the period such determination was made.

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination. Any recognized income tax positions would be measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement would be reflected in the period in which the change in judgment occurs. At December 31, 2016 and 2017, and at March 31, 2018 (unaudited), the Company had no liability for income tax associated with uncertain tax positions. The Company would recognize any corresponding interest and penalties associated with its income tax positions in income tax expense. There was no income tax interest or penalties incurred in 2016 or 2017, or in the three months ended March 31, 2018 (unaudited).

Segment data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company's singular focus is on advancing therapies to treat disorders of the brain and nervous system. All tangible assets are held in the United States and all revenue is generated in the United States.

Comprehensive loss

Comprehensive loss is equal to net loss as presented in the accompanying statements of operations and comprehensive loss.

Net loss per share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the Company has reported net losses for each period presented.

4.    Research collaboration and development services agreements with Allergan

On July 24, 2015, the Company entered into a Research Collaboration Agreement ("RCA") with Naurex Inc., a subsidiary of Allergan, focused on the research and discovery of small molecules that modulate NMDArs. The collaboration is supervised by a Joint Steering Committee ("JSC") comprised of an equal number of representatives from both the Company and Allergan. Under the terms of the agreement, Naurex will pay the Company $1.0 million for each option exercised by Naurex. Under the terms of the agreement, the RCA will terminate upon the earlier of a predetermined anniversary of the RCA or on the date on which Allergan exercises three options to acquire molecules from a pool of eligible compounds. As of March 31, 2018, Allergan had not exercised any option on eligible research compounds.

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The Company accounts for the agreement as a joint risk-sharing collaboration in accordance with ASC 808, Collaboration Arrangements . Costs between the Company and Allergan with respect to each party's share of development costs that have been incurred pursuant to the RCA are substantially recorded within research and development in the accompanying statements of operations and comprehensive loss. Reimbursable expenses under the RCA include chemistry, discovery, screening, and profiling efforts around novel NMDAr modulators from the Company's discovery platform as well as salary of full-time employees at a fixed annual rate for each individual assigned to those efforts, consistent with oversight and guidance of the JSC. Such costs for each compound are considered reimbursable up until the point that the compound is selected by one of the collaboration parties. As such, none of the costs reimbursed by Allergan in any period presented were directly related to the Company's lead product candidates, NYX-2925, NYX-783, and NYX-458, which the Company selected under the collaboration.

During the years ended December 31, 2016 and 2017, the Company recorded expenses of $8.0 million and $7.9 million, respectively, for certain development activities in accordance with the terms of the RCA of which 50% was reimbursed by Allergan. The Company received reimbursements of $4.0 million and $3.95 million for the years ended December 31, 2016 and 2017, respectively. Such reimbursements were reported within collaboration and grant revenue in the statements of operations and comprehensive loss.

During each of the three month periods ended March 31, 2017 and 2018 (unaudited), the Company recorded expenses of $1.9 million for certain development activities in accordance with the terms of the RCA of which 50% was reimbursed by Allergan. The Company received reimbursements of $0.95 million during each of the three month periods ended March 31, 2017 and 2018 (unaudited). Such reimbursements were reported within collaboration and grant revenue in the statements of operations and comprehensive loss.

On July 24, 2015, the Company entered into a Development Services Agreement ("DSA") with Allergan to continue certain development activities for a pre-determined period of time, as agreed to by both parties. Under the DSA, the Company was reimbursed for expenses that were incurred as a result of agreed-upon clinical development activities associated with the transition of Naurex's clinical programs, including the salary of certain full-time employees and out-of-pockets costs directly associated with these efforts. The Company incurred $5.7 million of expenses, principally recorded within research and development expenses, for the year ended December 31, 2016 under the DSA, all of which have been reimbursed by Allergan and reported within collaboration and grant revenue in the statements of operations and comprehensive loss. The term of the DSA concluded during the year ended December 31, 2016.

5.     Fair value measurements

Assets measured at fair value as of December 31, 2016 are as follows (in thousands):

 
   
   
   
   
 
 
  December 31,
2016

  Quoted prices
in active
markets for
identical
assets
(level 1)

  Significant
other
observable
inputs
(level 2)

  Significant
unobservable
inputs
(level 3)

 

Assets

                         

Money market funds, included in cash and cash equivalents

  $ 15,923   $ 15,923   $   $  

Money market funds, included in restricted cash

    315     315          

  $ 16,238   $ 16,238   $   $  

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Assets measured at fair value as of December 31, 2017 are as follows (in thousands):

 
   
   
   
   
 
 
  December 31,
2017

  Quoted prices
in active
markets for
identical
assets
(level 1)

  Significant
other
observable
inputs
(level 2)

  Significant
unobservable
inputs
(level 3)

 

Assets

                         

Money market funds, included in cash and cash equivalents

  $ 89,553   $ 89,553   $   $  

Money market funds, included in restricted cash

    317     317          

  $ 89,870   $ 89,870   $   $  

Assets measured at fair value as of March 31, 2018 (unaudited) are as follows (in thousands):

 
  March 31,
2018

  Quoted prices
in active
markets for
identical
assets
(level 1)

  Significant
other
observable
inputs
(level 2)

  Significant
unobservable
inputs
(level 3)

 
 
  (unaudited)
 

Assets

                         

Money market funds, included in cash and cash equivalents

  $ 81,855   $ 81,855   $   $  

Money market funds, included in restricted cash

    317     317          

  $ 82,172   $ 82,172   $   $  

For the year ended December 31, 2016, the Company estimated the fair value of the Series A-2 preferred stock tranche liability at the time of the issuance of the Series A Preferred Stock Agreement (see Note 11) and subsequently remeasured the tranche liability at the end of the year. The Company utilized the Monte Carlo method for option pricing. The simulation considered the timing of achieving the clinical milestone, the post-money valuation as of May 2016, the risk-free rate commensurate with the estimated time until the Series A-2 transaction, and the volatility estimates. The estimates are based, in part, on subjective assumptions.

The following table provides a reconciliation of liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands):

 
   
 
 
  Preferred
stock tranche
liability

 

Balance at December 31, 2015

  $  

Time of issuance of Series A Preferred Stock Agreement (May 2016)

    2,081  

Changes in fair value

    (2,081 )

Balance at December 31, 2016

  $  

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6.     Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following (in thousands):

 
   
   
   
 
 
  As of
December 31,
  As of
March 31,
 
 
  2016
  2017
  2018
 
 
  (unaudited)
 

Prepaid clinical

  $ 234   $ 1,718   $ 783  

Deferred offering costs

            1,243  

Other current assets

    371     242     286  

Total prepaid expenses and other current assets

  $ 605   $ 1,960   $ 2,312  

7.     Property and equipment

Property and equipment are as follows (in thousands):

 
   
   
   
 
 
  As of
December 31,
  As of
March 31,
 
 
  2016
  2017
  2018
 
 
  (unaudited)
 

Computer software and equipment

  $ 15   $ 15   $ 15  

Office equipment and furniture

    25     92     92  

Laboratory equipment

    758     1,529     1,536  

Leasehold improvements

    32     748     748  

Construction in progress

        22     154  

Less accumulated depreciation

    (230 )   (590 )   (712 )

Property and equipment, net

  $ 600   $ 1,816   $ 1,833  

Depreciation expense was $185,000 and $360,000 for the years ended December 31, 2016 and 2017, respectively, and $58,000 and $122,000 for the three months ended March 31, 2017 and 2018 (unaudited), respectively.

8.     Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

 
   
   
   
 
 
  As of
December 31,
  As of
March 31,
 
 
  2016
  2017
  2018
 
 
   
   
  (unaudited)
 

Employee-related expenses

  $ 1,375   $ 1,435   $ 603  

Development costs and sponsored research

    1,212     737     1,295  

Clinical trials

    249     69     709  

Deferred rent

        309     302  

Deferred offering costs

            900  

Other

    115     285     354  

Total accrued expenses and other current liabilities

  $ 2,951   $ 2,835   $ 4,163  

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9.     Operating leases

The Company enters into various non-cancelable, operating lease agreements for its facilities and equipment in order to conduct its operations. The Company expenses rent on a straight-line basis over the life of the lease and has recorded deferred rent on the Company's balance sheets within accrued expenses and other current liabilities.

On October 13, 2016, the Company entered into a lease agreement for office space totaling approximately 16,500 square feet. The term of this lease commenced on April 1, 2017 and continues through August 31, 2022. The Company has an option to renew the lease for one renewal term of 5 years. The lease provided the Company with a tenant improvement allowance of $404,000. The Company recorded the tenant improvement allowance incurred as a deferred lease incentive and is amortizing the deferred lease incentive through a reduction of rent expense ratably over the lease term. The Company provided the landlord with a security deposit in the form of a letter of credit in the amount of $350,000 which is recorded as restricted cash in the Company's balance sheets as of December 31, 2016 and 2017, and as of March 31, 2018 (unaudited).

Total rent expense, inclusive of lease incentives, under the operating lease agreements amounted to $596,000 and $636,000 for the years ended December 31, 2016 and 2017, respectively, and $149,000 and $159,000 for the three months ended March 31, 2017 and 2018 (unaudited), respectively.

Aggregate future minimum annual rental commitments under these non-cancelable lease agreements are as follows at December 31, 2017 (in thousands):

 
   
 
Year ending December 31,
   
 

2018

  $ 619  

2019

    627  

2020

    635  

2021

    643  

2022

    434  

Thereafter

     

  $ 2,958  

10.   Sponsored research agreements

From time to time the Company enters into research agreements with third parties. The Company had the following significant agreement, as described below.

Northwestern University

On August 2, 2016, the Company entered into a five-year Sponsored Research Agreement with Northwestern University (the "University" and the "Northwestern SRA") effective January 1, 2016, for which the approved budgetary spend is subject to annual approval by the Company. Pursuant to the Northwestern SRA, the University has agreed to undertake certain preclinical research projects as defined by the Company and provide laboratory facilities and equipment as necessary to complete the projects. The original term may be terminated early or extended by either party by giving sixty (60) days of written notice to the other. Upon early termination, the Company shall pay all costs incurred by the University as of the date of termination including non-cancelable obligations and any obligations to University personnel appointed to the projects prior to the effective date of termination. Total research and development

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expense associated with the Northwestern SRA was $723,000 and $1,051,000 for the years ended December 31, 2016 and 2017, respectively, and $328,000 and $278,000 for the three months ended March 31, 2017 and 2018 (unaudited), respectively.

11.   Convertible preferred stock, tranche liability and stockholders' deficit

At December 31, 2016, convertible preferred stock consisted of the following (in thousands, except per share amounts):

 
  Shares
authorized

  Shares
issued and
outstanding

  Issuance
price per
share

  Carrying
value

  Liquidation
preference

 

Series A-1

    151,773     151,773   $ 0.16472   $ 22,650   $ 25,000  

Series A-2

    173,453         0.23061          

    325,226     151,773         $ 22,650   $ 25,000  

At December 31, 2017 and March 31, 2018 (unaudited), convertible preferred stock consisted of the following (in thousands, except per share amounts):

 
   
   
   
   
   
 
 
  Shares
authorized

  Shares
issued and
outstanding

  Issuance
price per
share

  Carrying
value

  Liquidation
preference

 

Series A-1

    151,773     151,773   $ 0.16472   $ 22,650   $ 25,000  

Series A-2

    173,453     173,453     0.23061     39,979     40,000  

Series B

    234,955     234,955     0.29793     69,757     70,000  

    560,181     560,181         $ 132,386   $ 135,000  

Series A preferred stock

On May 4, 2016, the Company entered into a purchase agreement (the "Series A Purchase Agreement") for a private placement of up to 151,772,701 shares of Series A-1 Convertible Preferred Stock (the "Series A-1 Preferred Stock") and 173,453,018 shares of Series A-2 Convertible Preferred Stock (the "Series A-2 Preferred Stock" and together with the Series A-1 Preferred Stock, the "Series A Preferred Stock") under the Series A Purchase Agreement. Of the 325,225,719 authorized shares of Series A Preferred Stock, 151,772,701 shares were designated Series A-1 Preferred Stock at $0.16472 per share and 173,453,018 shares were designated Series A-2 Preferred Stock at $0.23061 per share. The Series A Purchase Agreement obligated the investors to purchase, at the election of the Company's board of directors (the "Board of Directors"), the Series A-2 Preferred Stock at $0.23061 per share upon achieving certain clinical milestones. The determination as to whether the milestone event was met was subject to the certification by (i) the Board of Directors and (ii) the holders of at least a majority of the then-outstanding Series A Preferred Stock. The Series A Purchase Agreement also obligated the Company to sell to each investor that elects to purchase such investor's portion of Series A-2 Preferred Stock at any time such number of shares of Series A-2 Preferred Stock pro rata in accordance with the number of Series A-1 Preferred Stock purchased at the initial closing (the "Tranche Rights"). In January 2017, the Company achieved its clinical milestone obligating the Company to sell its Series A-2 Preferred Stock at $0.23061 per share. The milestone closing occurred on February 2, 2017.

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As of December 31, 2017 and March 31, 2018 (unaudited), 151,772,701 shares of the Series A-1 Preferred Stock and 173,453,018 shares of the Series A-2 Preferred Stock were issued and outstanding. These shares were issued in exchange for cash proceeds of $64.7 million, net of issuance costs.

Series B preferred stock

On December 11, 2017, the Company entered into a purchase agreement (the "Series B Purchase Agreement") for a private placement of 234,954,520 shares of Series B Convertible Preferred Stock (the "Series B Preferred Stock"). All 234,954,520 authorized shares of Series B Preferred Stock were designated at $0.29793 per share.

As of December 31, 2017 and March 31, 2018 (unaudited), 234,954,520 shares of the Series B Preferred Stock were issued and outstanding. These shares were issued in exchange for cash proceeds of $69.8 million, net of issuance costs.

Dividends

The holders of the Series A and Series B Preferred Stock are not entitled to receive dividends unless declared by the Board of Directors of the Company in accordance with the Company's certificate of incorporation, as amended from time to time. No dividends have been declared since inception.

Liquidation preference

Upon a liquidation of the Company, the assets of the Company or proceeds available for distribution to the Company's stockholders shall be paid as follows: (a) first, for each share of Series B Preferred Stock the greater of (i) one times the original purchase price plus declared and unpaid dividends on such share, or (ii) such amount as would have been payable had all shares of Series B Preferred Stock been converted to common stock immediately prior to such liquidation; and (b) then, for each share of Series A Preferred Stock the greater of (i) one times the original purchase price plus declared and unpaid dividends on such share, or (ii) such amount as would have been payable had all shares of (A) Series A-1 Preferred Stock been converted to common stock, in the case of Series A-1 Preferred Stock and (B) Series A-2 Preferred Stock been converted to common stock, in the case of Series A-2 Preferred Stock immediately prior to such liquidation. The balance of any proceeds shall be distributed pro rata to holders of common stock. If upon liquidation, the assets of the Company or proceeds available for distribution to its stockholders are insufficient to pay the holders of the Series B Preferred Stock as to their respective liquidation preferences the full amount entitled, the holders of the Series B Preferred Stock shall share ratably any distribution of the assets or proceeds available for distribution. If upon liquidation, the assets of the Company or proceeds available for distribution to its stockholders, after payment in full of the liquidation preferences to holders of the Series B Preferred Stock, are insufficient to pay the holders of the Series A Preferred Stock as to their respective liquidation preferences the full amount entitled, the holders of the Series A Preferred Stock shall share ratably any distribution of the remaining assets or proceeds available for distribution.

Conversion

Shares of preferred stock are convertible into such number of fully paid and non-assessable shares of common stock as determined by dividing the original issuance price by the conversion price at the time in effect, subject to adjustment. The original conversion price is $0.16472 for Series A-1 Preferred Stock, $0.23061 for Series A-2 Preferred Stock, and $0.29793 for Series B Preferred Stock, in each case, subject to adjustments to reflect the issuance of common stock, options, warrants, or other rights to subscribe for or to purchase common stock for a consideration per share, less than the conversion price then in effect and subsequent stock dividends, stock splits, combinations, or recapitalizations.

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Conversion is at the option of the respective holders of Series A and Series B Preferred Stock, although conversion is automatic upon the earlier of (a) the consummation of an underwritten public offering resulting in gross proceeds to the Company of at least $70 million and a share price of at least $0.446895 per share, or (b) the date and time, or the occurrence of an event, specified by the vote or written consent of the holders of at least majority of the then outstanding shares of Series A and Series B Preferred Stock, respectively; provided, that the outstanding shares of Series B Preferred Stock will not convert into shares of common stock pursuant to clause (b) without the approval of at least a majority of the then-outstanding Series B Preferred Stock, including one or more holders of Series B Preferred Stock that (i) individually, or together with such holders' affiliates, do not hold any Series A Preferred Stock and (ii) individually or collectively are the record holders of at least 30,208,439 shares of Series B Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock.

Voting rights

Holders of the Series A and Series B Preferred Stock are entitled to vote as a single class with the holders of common stock and shall have one vote for each equivalent common share into which the preferred stock is convertible. The holders of Series B Preferred Stock are entitled to elect one director to the Board of Directors; the holders of Series A Preferred Stock are entitled to elect four directors to the Board of Directors; and the holders of Preferred Stock and the holders of common stock on an as-converted to common stock basis, are entitled to elect the remaining directors.

Tranche rights with Series A preferred stock

The Company concluded that the Tranche Rights met the definition of a freestanding financial instrument, as the Tranche Rights were legally detachable and separately exercisable from the Series A-1 Preferred Stock. Since the Series A Preferred Stock was contingently redeemable upon the occurrence of a deemed liquidation event, the Tranche Rights are classified as an asset or liability under ASC 480, Distinguishing Liabilities from Equity and are initially recorded at fair value. The Tranche Rights were measured at fair value at each reporting period. Since the Tranche Rights were subject to fair value accounting, the Company allocated the proceeds to the Tranche Rights based on the fair value at the date of issuance with the remaining proceeds being allocated to the Series A-1 Preferred Stock.

The estimated fair value of the Tranche Rights was determined using a Monte Carlo simulation. The simulation considered the timing of achieving the successful clinical milestone, the post-money valuation as of May 2016, the risk-free rate commensurate with the estimated time until the Series A-2 transaction, and the volatility estimates.

Based on the analysis, the Company recorded a preferred stock tranche liability of $2.1 million at the issue date to account for the obligation to issue shares of the Series A-2 Preferred Stock at a predetermined fixed price at the future settlement date. At December 31, 2016, the Company remeasured the fair value of the Tranche Rights and recognized a non-cash gain of $2.1 million which was included in other income in the statements of operations and comprehensive loss. The milestone event obligating the Company to issue the Series A-2 Preferred Stock as of December 31, 2016 had been substantially achieved, and there was only a short amount of remaining time until the anticipated Series A-2 transaction. The Company concluded that the estimated fair value of the Series A-2 Preferred Stock was commensurate with the predetermined fixed price. As such, the preferred stock tranche liability had no value as of December 31, 2016. The milestone event occurred in January 2017, and the Company's Board of Directors and the holders of at least a majority of the then-outstanding Series A Preferred Stock certified that the milestone event had been achieved. The Series A-2 Preferred Stock was issued on February 2, 2017.

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Common stock

As of December 31, 2016 and 2017, and as of March 31, 2018 (unaudited), the Company had reserved common stock, on an as if converted basis, for issuance as follows (in thousands):

 
   
   
   
 
 
  As of December 31,
  As of March 31,
 
 
  2016
  2017
  2018
 
 
   
   
  (unaudited)
 

Series A-1 convertible preferred stock

    151,773     151,773     151,773  

Series A-2 convertible preferred stock

        173,453     173,453  

Series B convertible preferred stock

        234,955     234,955  

Stock options issued and outstanding

    7,592     41,313     90,356  

Unvested restricted stock

    21,522     13,451     11,433  

Stock options available for future grant

    13,714     66,746     17,703  

Total

    194,601     681,691     679,673  

12.   Stock incentive plan

In October 2015, the Company established a stock option plan ("2015 Plan") to provide for the issuance of shares of common stock pursuant to stock options, stock appreciation rights, stock purchase rights, restricted stock agreements and long-term performance awards granted to key employees, directors and consultants of the Company. The Company increased the number of shares reserved for issuance in the 2015 Plan in connection with each private placement of convertible preferred stock in May 2016, February 2017 and December 2017.

The number of shares available for grant under the Company's stock option plan were as follows (in thousands):

 
   
 

Available for grant as of December 31, 2015

    4,444  

Plan amendment

    10,408  

Grants

    (2,640 )

Forfeitures and cancellations

    1,502  

Available for grant as of December 31, 2016

    13,714  

Plan amendment

    86,753  

Grants

    (33,829 )

Forfeitures and cancellations

    108  

Available for grant as of December 31, 2017

    66,746  

Grants (unaudited)

    (49,085 )

Forfeitures and cancellations (unaudited)

    42  

Available for grant as of March 31, 2018 (unaudited)

    17,703  

Stock-based compensation expense

Non-cash stock-based compensation expense recognized in the accompanying statements of operations and comprehensive loss relating to both stock options and restricted stock awards for the years ended

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December 31, 2016 and 2017, and for the three months ended March 31, 2017 and 2018 (unaudited) was as follows (in thousands):

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 
 
   
   
  (unaudited)
 

Research and development

  $ 171   $ 325   $ 67   $ 132  

General and administrative

    220     576     124     392  

Total stock-based compensation expense

  $ 391   $ 901   $ 191   $ 524  

Restricted stock awards

A summary of the status and changes of unvested restricted stock is presented below (in thousands, except per share amounts).

 
   
   
 
 
  Shares
  Weighted-
average
grant date
fair value
per share

 

Outstanding as of December 31, 2015

    30,222   $ 0.04  

Granted

         

Vested

    (8,113 ) $ 0.04  

Repurchased

    (587 ) $ 0.04  

Forfeited and canceled

         

Outstanding as of December 31, 2016

    21,522   $ 0.04  

Granted

         

Vested

    (8,071 ) $ 0.04  

Repurchased

         

Forfeited and canceled

         

Outstanding as of December 31, 2017

    13,451   $ 0.04  

Granted (unaudited)

         

Vested (unaudited)

    (2,018 ) $ 0.04  

Repurchased (unaudited)

         

Forfeited and canceled (unaudited)

         

Outstanding as of March 31, 2018 (unaudited)

    11,433   $ 0.04  

In 2015, the Company granted 41.7 million restricted stock awards with a weighted-average grant date fair value per share of $0.04. The restricted stock awards generally vest over four years, or a change in the control of the Company, subject to continued employment with the Company. In the event of a change in control, the unvested restricted stock awards will be accelerated and fully vested immediately prior to the change in control. There are no performance-based features or market conditions in the Company's outstanding restricted stock awards. The fair value of restricted stock awards is determined based on the number of restricted stock awards granted and the fair value of the Company's stock on the date of grant.

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Non-cash restricted stock award expense recognized in the accompanying statements of operations and comprehensive loss was $358,000 and $338,000 for the years ended December 31, 2016 and 2017, respectively, and $83,000 for each of the three month periods ended March 31, 2017 and 2018 (unaudited). The total fair value of shares that vested in 2017 was $339,000. At December 31, 2017, there was $561,000 of unrecognized compensation cost related to unvested restricted stock awards that will be recognized as expense over a weighted-average period of 1.66 years. At March 31, 2018 (unaudited), there was $478,000 of unrecognized compensation cost related to unvested restricted stock awards that will be recognized over a weighted-average period of 1.41 years.

Stock options

During the years ended December 31, 2016 and 2017, the Company granted 2.6 million and 33.8 million stock options, respectively. During the three months ended March 31, 2018 (unaudited), the Company granted 49.1 million stock options. The options have a ten-year life and generally vest over a period of four years, subject to continuous employment. Once the options are exercised, the shares are subject to transfer restrictions under the terms of the Company's Stockholders' Agreement.

The weighted-average grant date fair value per share of each option granted under the 2015 Plan for the years ended December 31, 2016 and 2017, and for the three months ended March 31, 2018 (unaudited) was $0.04, $0.06, and $0.13, respectively. As of December 31, 2017, there was $1.79 million of total unrecognized stock-based compensation expense related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.98 years. As of March 31, 2018 (unaudited), there was $7.6 million of total unrecognized stock-based compensation expense related to non-vested stock options which is expected to be recognized over a weighted-average period of 3.42 years.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option pricing valuation model that uses various assumptions regarding the: (1) expected volatility, (2) expected life of the option, (3) expected dividend yield, and (4) risk-free interest rate.

Because the Company's common stock is privately held and is not traded in an active market, it is not practicable to determine the volatility of the Company's stock. Accordingly, the Company uses the historical volatility of the share values of publicly traded companies within the biotech industry as a surrogate for the expected volatility of the Company's common stock. A zero dividend yield is also assumed in the stock option fair value computations. The expected life of the options represents the period of time that the options granted are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

The specific assumptions used to determine the fair value of the stock options granted during the years ended December 31, 2016 and 2017, and during the three months ended March 31, 2017 and 2018 (unaudited) were as follows:

 
 
 
 
 
 
Year ended December 31,
Three months ended March 31,
 
2016

2017

2017

2018

 
 
 
(unaudited)

Expected volatility

75% 75% 75% 75%

Expected dividends

None None None None

Expected option life

5.79 - 6.08 Years 6.08 Years 6.08 Years 6.08 Years

Risk-free rate

1.36 - 2.03% 2.02 - 2.40% 2.23 - 2.40% 2.74 - 2.81%

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The table below summarizes activity related to stock options (in thousands, except per share amounts):

 
   
   
   
   
 
Options
  Shares
  Weighted-
average
exercise
price

  Weighted-
average
remaining
contractual
term

  Aggregate
intrinsic
value

 

Outstanding, December 31, 2015

    5,867   $ 0.04     9.84        

Granted

    2,640     0.06              

Forfeited and canceled

    (915 )   0.04              

Outstanding, December 31, 2016

    7,592   $ 0.05     9.19   $ 89  

Granted

    33,829     0.09              

Forfeited and canceled

    (108 )   0.07              

Outstanding, December 31, 2017

    41,313   $ 0.09     8.93   $ 4,146  

Granted (unaudited)

    49,085     0.19              

Forfeited and canceled (unaudited)

    (42 )   0.10              

Outstanding, March 31, 2018 (unaudited)

    90,356   $ 0.14     9.34   $ 13,090  

Vested and expected to vest at December 31, 2017

    41,313   $ 0.09     8.93   $ 4,146  

Exercisable at December 31, 2017

    4,059   $ 0.05     8.04   $ 564  

Vested and expected to vest at March 31, 2018 (unaudited)

    90,356   $ 0.14     9.34   $ 13,090  

Exercisable at March 31, 2018 (unaudited)

    13,590   $ 0.08     8.50   $ 2,804  

13.   Net loss and unaudited pro forma net loss per share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows for the years ended December 31, 2016 and 2017, and for the three months ended March 31, 2017 and 2018 (unaudited) (in thousands, except per share data):

 
   
   
   
   
 
 
  Year ended
December 31,
  Three months ended
March 31,
 
 
  2016
  2017
  2017
  2018
 
 
   
   
  (unaudited)
 

Numerator:

                         

Net loss attributable to common stockholders

  $ (15,478 ) $ (32,068 ) $ (8,697 ) $ (11,672 )

Denominator:

                         

Weighted-average common shares outstanding—basic and diluted

    135,252     143,336     140,287     148,357  

Net loss per share attributable to common stockholders—basic and diluted

  $ (0.11 ) $ (0.22 ) $ (0.06 ) $ (0.08 )

The following common stock equivalents outstanding as of December 31, 2016 and 2017, and as of March 31, 2017 and 2018 (unaudited), were excluded from the computation of diluted net loss per share

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attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

 
   
   
   
   
 
 
  As of December 31,
  As of March 31,
 
 
  2016
  2017
  2017
  2018
 
 
   
   
  (unaudited)
 

Series A-1 convertible preferred stock

    151,773     151,773     151,773     151,773  

Series A-2 convertible preferred stock

        173,453     173,453     173,453  

Series B convertible preferred stock

        234,955         234,955  

Stock options issued and outstanding

    7,592     41,313     38,567     90,356  

Unvested restricted stock

    21,522     13,451     19,505     11,433  

    180,887     614,945     383,298     661,970  

Unaudited pro forma net loss per share

The following table sets forth the computation of basic and diluted pro forma net loss per share attributable to common stockholders, giving effect to the conversion of all outstanding shares of preferred stock into common stock upon an assumed initial public offering (in thousands, except per share data):

 
   
   
 
 
  Year ended
December 31,
2017

  Three months
ended
March 31, 2018

 
 
  (unaudited)
 

Numerator:

             

Net loss

  $ (32,068 ) $ (11,672 )

Denominator:

             

Shares used in computing net loss per share, basic and diluted

    143,336     148,357  

Pro forma adjustments to reflect assumed conversion of preferred stock

    320,961     560,181  

Shares used to compute pro forma net loss per share, basic and diluted

    464,297     708,538  

Pro forma net loss per share, basic and diluted

  $ (0.07 ) $ (0.02 )

14.   Employee benefit plan

Effective December 31, 2015, the Company established a defined contribution 401(k) plan (the "401(k) Plan") for the benefit of its employees. All of the employees of the Company are eligible to participate in the 401(k) Plan which permits employees to make voluntary contributions up to the dollar limit allowed under the Internal Revenue Code. The 401(k) Plan also provides for matching contributions as defined by the Company of up to a combined total of 4% of an employee's eligible annual compensation. The Company has recorded matching contributions of $153,000 and $213,000 for the years ended December 31, 2016 and 2017, respectively. The Company has recorded matching contributions of $89,000 and $117,000 for the three months ended March 31, 2017 and 2018 (unaudited), respectively.

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15.   Income taxes

Provision for income taxes

There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The reported amount of income tax expense for the years differs from the amount that would result from applying domestic federal statutory tax rates and pretax losses primarily because of changes in valuation allowance.

Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act ("the Act") enacted on December 22, 2017 resulted in provisional net tax expense of $6.1 million from remeasuring federal net deferred tax assets from 34 percent to 21 percent, which is fully offset by a valuation allowance. While the final impact from the Act has not been completed, reasonable estimates can be made and therefore, this provisional estimate is reflected in the Company's financial statements. Pursuant to SEC Staff Accounting Bulletin No. 118, the final determination of the Act and the remeasurement of the Company's deferred tax assets and liabilities will be completed as additional information becomes available, but no later than one year from the enactment of the Act. The Company did not record any adjustments to this provisional amount during the three months ended March 31, 2018 (unaudited) and will continue to analyze and refine its calculations related to the remeasurement as the impact of the Act is finalized.

Deferred tax assets and valuation allowance

Deferred tax assets reflect the tax effects of net operating losses ("NOLs"), tax credit carryovers, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The most significant item of deferred tax assets is derived from the Company's federal NOLs. At December 31, 2016 and 2017, the Company had a U.S. NOL carryforward of $20.1 million and $48.8 million, respectively. As of December 31, 2016 and 2017, the Company had state NOL carryforwards of $1.5 million and $4.6 million, respectively. The federal NOL carryforwards have a 20 year carryforward period and will begin to expire starting in 2035. The state NOL carryforwards have a 12 year carryforward period and will begin to expire starting in 2027.

A reconciliation of U.S statutory rate to the Company's effective tax rate is as follows:

 
   
   
 
Year ended December 31,
  2016
  2017
 

Federal rate

    34.0%     34.0%  

State rate

    5.8     5.7  

Effects of the Tax Cuts and Jobs Act

        (18.9 )

Valuation allowance

    (26.1 )   (18.8 )

Provision to return

    (13.3 )   (2.6 )

Other

    (0.4 )   0.6  

    0.0%     0.0%  

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The significant components of the Company's net deferred tax assets are as follows (in thousands):

 
   
   
 
December 31,
  2016
  2017
 

Deferred tax assets

             

Net operating loss

  $ 7,849   $ 13,920  

Accrued clinical trials

    197     82  

Accrued compensation

    538     409  

Accrued expenses and other, net

    431     456  

Total deferred tax assets

    9,015     14,867  

Less valuation allowance

    (8,650 )   (14,688 )

Net deferred tax assets

    365     179  

Deferred tax liabilities

             

Stock-based compensation and other, net

    (365 )   (179 )

Net deferred taxes

  $   $  

Pursuant to Section 382 of the Internal Revenue Code, certain substantial changes in the Company's ownership may result in a limitation on the amount of NOL carryforwards and tax carryforwards that may be used in future years. Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since its formation. There could also be additional ownership changes in the future which may result in additional limitations on the utilization of NOL carryforwards and credits.

The Company files federal and state income tax returns and, in the normal course of business, the Company is subject to examination by these taxing authorities. As of December 31, 2017, the Company's tax years through December 31, 2015 are subject to examination by the U.S. federal and state taxing authorities.

16.   Commitments and contingencies

From time to time, the Company is subject to occasional lawsuits, investigations and claims arising out of the normal conduct of business. The Company has no significant pending or threatened litigation as of December 31, 2017, or as of March 31, 2018 (unaudited).

In the normal course of business, the Company enters into contracts that contain a variety of indemnifications with its employees, licensors, suppliers and service providers. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company's request in such capacities. The Company's maximum exposure under these arrangements is unknown at December 31, 2017, and at March 31, 2018 (unaudited). The Company does not anticipate recognizing any significant losses relating to these arrangements.

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17.   Related party transactions

The Company received consulting services from PharmaKey, LLC ("PharmaKey") during the years ended December 31, 2016 and 2017, and during the three months ended March 31, 2017 and 2018, where the Company's Vice President of Drug Development Operations is founder, owner, chairman, and former president. The transactions engaged between the Company and PharmaKey have been reviewed and approved by the Company's Board of Directors and transacted on an arm's length basis. As of December 31, 2016, the Company had a balance of $7,000 recorded within accounts payable. No amounts were unpaid as of December 31, 2017 or March 31, 2018 (unaudited). The Company incurred consulting services totaling $156,000 and $82,000 for the years ended December 31, 2016 and 2017, respectively, and $5,000 and $3,000 for the three months ended March 31, 2017 and 2018 (unaudited), respectively, which are included within research and development expenses in the statements of operations and comprehensive loss.

18.   Subsequent events

In February 2018, the Company granted options for the purchase of 49.1 million shares of common stock at a weighted-average exercise price of $0.19 per share.

For its financial statements as of December 31, 2017 and for the year then ended, the Company evaluated subsequent events through March 30, 2018, the date that those financial statements were issued. Except for the matter disclosed above, no additional subsequent events had occurred that would require recognition or disclosure in those financial statements.

19.   Subsequent events (unaudited)

For its interim financial statements as of March 31, 2018 and for the three months then ended, the Company has evaluated subsequent events through May 4, 2018, the date that these financial statements were issued. No subsequent events had occurred that would require recognition or disclosure in these financial statements.

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Shares

Aptinyx Inc.

Common Stock

LOGO



J.P. Morgan   Cowen   Leerink Partners   BMO Capital Markets

Through and including                             , 2018 (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 delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


Table of Contents

Part II
Information Not Required In Prospectus

Item 13.    Other expenses of issuance and distribution.

The following table sets forth the fees and expenses, other than the underwriting discount, payable in connection with the registration of the common stock hereunder. All amounts are estimates except the SEC registration fee, the FINRA filing fee, and The Nasdaq Global Market listing fee.

 
  Amount
to be Paid

 

SEC registration fee

  $ 9,960  

FINRA filing fee

    12,450 *

Nasdaq Global Market listing fee

      *

Printing and mailing

      *

Legal fees and expenses

      *

Accounting fees and expenses

      *

Transfer agent and registrar fees and expenses

      *

Miscellaneous

      *

Total

  $   *

*      To be completed by amendment.

Item 14.    Indemnification of directors and officers.

Section 145 of the Delaware General Corporation Law, or the DGCL, authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings to which they are made or threatened to be made a party by reason of the fact that they have served or are currently serving as a director or officer to a corporation. The indemnity may cover expenses (including attorneys' fees) judgments, fines and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with any such action, suit or proceeding if the director or officer acted in good faith and in a manner the director or officer 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 no reasonable cause to believe the director or officer's conduct was unlawful. Section 145 permits corporations to pay expenses (including attorneys' fees) incurred by directors and officers in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in Section 145. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer, or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability under Section 145.

We have adopted provisions, in our amended and restated certificate of incorporation to be in effect upon the closing of this offering and amended and restated bylaws to be in effect upon the effectiveness of the registration statement of which this prospectus is a part, that limit or eliminate the personal liability of our directors to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended.

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Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

any breach of the director's duty of loyalty to us or our stockholders;

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

any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions; or

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

These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.

In addition, our bylaws provide that:

we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended; and

we will advance reasonable expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings relating to their service for or on behalf of us, subject to limited exceptions.

We have entered into indemnification agreements with each of our directors and intend to enter into such agreements with certain of our executive officers. These agreements provide that we will indemnify each of our directors, certain of our executive officers and, at times, their affiliates to the fullest extent permitted by Delaware law. We will advance expenses, including attorneys' fees (but excluding judgments, fines and settlement amounts), to each indemnified director, executive officer or affiliate in connection with any proceeding in which indemnification is available and we will indemnify our directors and officers for any action or proceeding arising out of that person's services as a director or officer brought on behalf of us or in furtherance of our rights. Additionally, certain of our directors or officers may have certain rights to indemnification, advancement of expenses or insurance provided by their affiliates or other third parties, which indemnification relates to and might apply to the same proceedings arising out of such director's or officer's services as a director referenced herein. Nonetheless, we have agreed in the indemnification agreements that our obligations to those same directors or officers are primary and any obligation of such affiliates or other third parties to advance expenses or to provide indemnification for the expenses or liabilities incurred by those directors are secondary.

We also maintain general liability insurance which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act.

The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of us and our directors and officers by the underwriters against certain liabilities under the Securities Act and the Exchange Act.

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Item 15.    Recent sales of unregistered securities.

In the three years preceding the filing of this registration statement, we have issued the following securities that were not registered under the Securities Act:

(a)
Issuances of capital stock

In May 2016, we issued and sold to investors an aggregate of 151,772,701 shares of Series A-1 convertible preferred stock at a purchase price of $0.16472 per share, for an aggregate purchase price of approximately $25 million.

In February 2017, we issued and sold to investors an aggregate of 173,453,018 shares of Series A-2 convertible preferred stock at a purchase price of $0.23061 per share, for an aggregate purchase price of approximately $40 million.

In December 2017, we issued and sold to investors an aggregate of 234,954,520 shares of Series B convertible preferred stock at a purchase price of $0.29793 per share, for an aggregate purchase price of approximately $70 million.

We deemed the offer, sale and issuance of the securities described in this Section (a) to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, regarding transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.

(b)
Grants and exercises of stock options

In the three years preceding the filing of this registration statement, we have granted stock options to purchase an aggregate of 94,127,912 shares of our common stock, with exercise prices ranging from $0.04 to $0.29 per share, to employees and consultants pursuant to our 2015 Plan.

In the three years preceding the filing of this registration statement, we have not issued any shares of common stock to employees, directors, and consultants.

In the three years preceding the filing of this registration statement, we have issued an aggregate of 41,728,202 shares of restricted common stock to employees for consideration in the aggregate amount of $0. We have repurchased 586,713 shares of such shares for an aggregate of $24,643.

We deemed the grants and exercises of stock options described in this Section (b) as exempt pursuant to Section 4(a)(2) of the Securities Act or in reliance on Rule 701 of the Securities Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.

All certificates representing the securities issued in the transactions described in this Item 15 included appropriate legends setting forth that the securities had not been offered or sold pursuant to a registration statement and describing the applicable restrictions on transfer of the securities. There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

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Item 16.    Exhibits and financial statement schedules.

(a)    Exhibits

Exhibit No.   Exhibit Index
  1.1 * Form of Underwriting Agreement

 

3.1

 

Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect

 

3.2

*

Amendment to Amended and Restated Certificate of Incorporation of the Registrant (to be adopted prior to the effectiveness of this registration statement)

 

3.3

*

Form of Amended and Restated Certificate of Incorporation of the Registrant (to be effective upon the closing of this offering)

 

3.4

 

Bylaws of the Registrant, as currently in effect

 

3.5

*

Form of Amended and Restated Bylaws (to be effective upon the effectiveness of the registration statement of which this prospectus is a part)

 

4.1

*

Specimen stock certificate evidencing the shares of common stock

 

4.2

 

Amended and Restated Investors' Rights Agreement among the Registrant and certain of its stockholders, dated December 11, 2017

 

5.1

*

Opinion of Goodwin Procter LLP

 

10.1

#

2015 Stock Option and Grant Plan, amendments thereto, and forms of award agreements thereunder

 

10.2

#*

2018 Stock Option and Incentive Plan and forms of award agreements thereunder

 

10.3

#*

2018 Employee Stock Purchase Plan

 

10.4

#*

2018 Senior Executive Cash Bonus Plan

 

10.5

#*

Non-Employee Director Compensation Policy

 

10.6

#*

Form of Indemnification Agreement

 

10.7


Research Collaboration Agreement by and between Naurex Inc. (a wholly-owned subsidiary of Allergan plc) and the Registrant, dated as of July 24, 2015, as amended by Amendment No. 1, dated July 15, 2016

 

10.8

#*

Form of Employment Agreement

 

10.9

 

Office Lease Agreement by and between FSP 909 Davis Street LLC and Registrant, dated as of October 13, 2016

 

21.1

 

Subsidiaries of the Registrant

 

23.1

 

Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

 

23.2

*

Consent of Goodwin Procter LLP (included in Exhibit 5.1)

 

24.1

 

Power of Attorney (included on the signature page hereto)

*      To be included by amendment.

†      Application has been made to the Securities and Exchange Commission for confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

#      Indicates a management contract or any compensatory plan, contract or arrangement.

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(b)    Financial statements schedules:

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17.    Undertakings.

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 Securities 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 Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

(a)
The Registrant will provide to the underwriters at the closing as 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.

(b)
For purposes of determining any liability under the Securities Act of 1933, as amended, 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 of 1933, as amended, shall be deemed to be part of this registration statement as of the time it was declared effective.

(c)
For the purpose of determining any liability under the Securities Act of 1933, as amended, 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, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Evanston, in the state of Illinois, on the 23rd day of May, 2018.

    APTINYX INC.

 

 

By:

 

/s/ NORBERT G. RIEDEL

Norbert G. Riedel, Ph.D.
President and Chief Executive Officer

Power of attorney and signatures

Each individual whose signature appears below hereby constitutes and appoints each of Norbert G. Riedel, Ph.D. and Ashish Khanna as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement (or any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any said attorney-in-fact and agent, or any substitute or substitutes of any of them, 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 and Power of Attorney has been signed by the following person in the capacities and on the date indicated.

Name
 
Title
 
Date

 

 

 

 

 
/s/ NORBERT G. RIEDEL

Norbert G. Riedel, Ph.D.
  Director, President, and Chief Executive Officer (Principal Executive Officer)   May 23, 2018

/s/ ASHISH KHANNA

Ashish Khanna

 

Chief Financial Officer and Chief Business Officer (Principal Financial Officer and Principal Accounting Officer)

 

May 23, 2018

/s/ WILBUR H. GANTZ III

Wilbur H. Gantz III

 

Chairman of the Board of Directors

 

May 23, 2018

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Name
 
Title
 
Date

 

 

 

 

 
/s/ PATRICK G. ENRIGHT

Patrick G. Enright
  Director   May 23, 2018

/s/ ELISHA P. GOULD III

Elisha P. Gould III

 

Director

 

May 23, 2018

/s/ ROBERT J. HOMBACH

Robert J. Hombach

 

Director

 

May 23, 2018

/s/ ADAM M. KOPPEL

Adam M. Koppel, M.D., Ph.D.

 

Director

 

May 23, 2018

/s/ LIAM RATCLIFFE

Liam Ratcliffe, M.D., Ph.D.

 

Director

 

May 23, 2018

/s/ JAMES N. TOPPER

James N. Topper, M.D., Ph.D.

 

Director

 

May 23, 2018

II-7




Exhibit 3.1

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
APTINYX INC.

 

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

 

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

 

DOES HEREBY CERTIFY:

 

1.                                       That the name of this corporation is Aptinyx Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on June 24, 2015 under the name Enarex, Inc.

 

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

 

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

 

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

 

Second: The address of the registered office of the Corporation in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801.  The name of its registered agent at such address is The Corporation Trust Company.

 

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

 

Fourth:   The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 900,000,000 shares of Common Stock, $0.01 par value per share (“ Common Stock ”) and (ii) 560,180,239 shares of Preferred Stock, $0.01 par value per share (“ Preferred Stock ”).

 

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

 



 

A.                                     COMMON STOCK

 

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

 

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

 

B.                                     PREFERRED STOCK

 

Of the 560,180,239 authorized shares of Preferred Stock, 151,772,701 shares are hereby designated “ Series A-1 Preferred Stock ”, 173,453,018 shares are hereby designated “ Series A-2 Preferred Stock ” (together with Series A-1 Preferred Stock, the “ Series A Preferred Stock ”) and 234,954,520 shares are hereby designated “ Series B Preferred Stock ”, with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.

 

1.                                       Dividends .

 

1.1                                The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Amended and Restated Certificate of Incorporation) the holders of Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of such series of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of such series of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of each series of Preferred Stock

 

2



 

determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest dividend to such holders of each series of Preferred Stock.

 

1.2                                The “ Series A-1 Original Issue Price ” shall mean $0.16472 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A-1 Preferred Stock.  The “ S eries A-2 Original Issue Price ” shall mean $0.23061 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A-2 Preferred Stock. The “ Series B Original Issue Price ” shall mean $0.29793 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock. For purposes hereof, the “ Original Issue Price ” shall mean the Series A-1 Original Issue Price, in the case of the Series A-1 Preferred Stock, the Series A-2 Original Issue Price, in the case of the Series A-2 Preferred Stock, and the Series B Original Issue Price, in the case of the Series B Preferred Stock, as applicable.

 

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

 

2.1                                Preferential Payments to Holders of Series B Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined below), the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, out of the consideration payable to stockholders in such Deemed Liquidation Event, or the Available Proceeds (as defined below), before any payment shall be made to the holders of other classes of Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to in the case of the Series B Preferred Stock, the greater of (i) the Series B Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series B Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this clause is hereinafter referred to as the “ Series B Liquidation Amount ”).  If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1 , the holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

3



 

2.2                                Preferential Payments to Holders of Series A Preferred Stock .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event (as defined below), after payment in full of all Series B Liquidation Amounts, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, out of the consideration payable to stockholders in such Deemed Liquidation Event, or the Available Proceeds (as defined below), before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to (a) in the case of the Series A-1 Preferred Stock, the greater of (i) the Series A-1 Original Issue Price, plus any dividends declared but unpaid thereon, or (ii)  such amount per share as would have been payable had all shares of Series A-1 Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this clause is hereinafter referred to as the “ S eries A-1 Liquidation Amount ”), (b) in the case of the Series A-2 Preferred Stock, the greater of (i) the Series A-2 Original Issue Price, plus any dividends declared but unpaid thereon, or (ii)  such amount per share as would have been payable had all shares of Series A-2 Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this clause is hereinafter referred to as the “ S eries A-2 Liquidation Amount ” and together with the Series A-1 Liquidation Amount, the “ Series A Liquidation Amounts ” and with the Series B Liquidation Amount, the “ Liquidation Amounts ”).  If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.2 , the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

2.3                                Payments to Holders of Common Stock .  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment in full of all Liquidation Amounts required to be paid to the holders of shares of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock pursuant to Subsections 2.1 and 2.2 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

 

2.4                                Deemed Liquidation Events .

 

2.4.1                      Definition .  Each of the following events shall be considered a “ Deemed Liquidation Event ” unless the holders of at least a majority of the then outstanding shares of Preferred Stock, voting together as a single class, on an as converted basis (the “ Requisite Preferred ”, and, for the purpose of this Section 2.4 only, the Requisite Preferred shall include one or more holders of Series B Preferred Stock that (i) individually, or together with such holders’ affiliates, do not hold any Series A Preferred Stock and (ii) individually or collectively are the record holders of least 30,208,439 shares of Series B Preferred Stock (subject

 

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to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock) (such holders of Series B Preferred Stock are sometimes referred to herein as “ Requisite Series B Investors ”)), elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event:

 

(a)                                  a merger or consolidation in which

 

(i)                                      the Corporation is a constituent party or

 

(ii)                                   a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

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

 

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

 

2.4.2                      Effecting a Deemed Liquidation Event .

 

(a)                                  The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.4.1(a)(i)  unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be paid to the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 .

 

(b)                                  In the event of a Deemed Liquidation Event referred to in Subsection 2.4.1(a)(ii)  or 2.4.1(b) , if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90 th ) day after the Deemed Liquidation Event advising such

 

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holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Preferred Stock, and (iii) if the Requisite Preferred so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation) , together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “ Available Proceeds ”), on the one hundred fiftieth (150 th ) day after such Deemed Liquidation Event (such date, the “ Redemption Date ”), to redeem all outstanding shares of Preferred Stock at a price per share equal to the applicable Liquidation Amount for such share of Preferred Stock, as applicable.  Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall first redeem all outstanding shares of Series B Preferred Stock (or, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series B Preferred Stock, a pro rata portion of each holder’s shares of Series B Preferred Stock in a manner consistent with the last sentence of Subsection 2.1 above), and then second, to the extent Available Proceeds remain available for redemption, redeem all outstanding shares of Series A Preferred Stock (or, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, a pro rata portion of each holder’s shares of Series A Preferred Stock in a manner consistent with the last sentence of Subsection 2.2 above).

 

(c)                                   In the event of a Redemption Request pursuant to Subsection 2.4.2(b) , the Corporation shall send written notice of the redemption (the “ Redemption Notice ”) to each holder of record of Preferred Stock not less than forty (40) days prior to the Redemption Date.  Each Redemption Notice shall state the number of shares of Preferred Stock held by the holder that the Corporation shall redeem, the Redemption Date, the applicable redemption price, the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1 ), and for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.  On or before the Redemption Date, each holder of shares of Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4 , shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the redemption price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

 

(d)                                  In the event less than all of the shares of Preferred Stock, as applicable, represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock, as applicable, shall promptly be issued to such holder.  If the Redemption Notice shall have been duly given, and if on the date

 

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of redemption the redemption price payable upon redemption of the shares of Preferred Stock, as applicable, to be redeemed on such date of redemption is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of Preferred Stock, as applicable, so called for redemption shall not have been surrendered, dividends with respect to such shares of Preferred Stock, as applicable, shall cease to accrue after such date of redemption and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the redemption price without interest upon surrender of their certificate or certificates therefor.

 

(e)                                   Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred.  Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.

 

(f)                                    Prior to the distribution or redemption provided for in this Subsection 2.4.2(a)  and 2.4.2(b) , the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

 

2.4.3                      Amount Deemed Paid or Distributed .  The consideration or Available Proceeds deemed paid or distributed to the holders of capital stock of the Corporation upon any such Deemed Liquidation Event shall be the aggregate cash and/or the aggregate value of the property, rights or securities to be paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity pursuant to such Deemed Liquidation Event.  The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

 

2.4.4                      Allocation of Escrow and Contingent Consideration . In the event of a Deemed Liquidation Event pursuant to Subsection 2.4.1(a)(i) , if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow and/or is payable only upon satisfaction of contingencies (the “ Additional Consideration ”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 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 and/or satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2 and 2.3 after taking into account the previous payment of the Initial Consideration as part of the same transaction.  For the purposes of this Subsection 2.4.4 , consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

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3.                                       Voting .

 

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

 

3.2                                Election of Directors .  The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect four directors of the Corporation (the “ S eries A Directors ”).  The holders of record of the shares of Series B Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Corporation (the “ S eries B Director ”, together with the Series A Directors, the “ Preferred Directors ”).  Any director elected as provided in the preceding sentences may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.  If the holders of shares of a series of Preferred Stock fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2 , then any directorship not so filled shall remain vacant until such time as the holders of the such series of Preferred Stock elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including Preferred Stock), voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation.  At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.  Except as otherwise provided in this Subsection 3.2 , a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2 .

 

3.3                                Preferred Stock Protective Provisions .  In addition to any approvals that may be required pursuant to Subsections 3.4 and 3.5 , at any time when at least 46,990,903 shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the Requisite Preferred and any such act or transaction entered into without such consent or vote shall be null and void ab initio , and of no force or effect:

 

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

 

3.3.2                      amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of Preferred Stock;

 

3.3.3                      (i) create, or authorize the creation of, or issue or obligate itself to issue, shares of any additional class or series of capital stock, or any other security convertible into or exercisable for any equity security, unless the same ranks junior to the Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption; (ii) increase the authorized number of shares of Preferred Stock, or (iii) increase the authorized number of shares of any additional class or series of capital stock, or any other security convertible into or exercisable for any equity security of the Corporation, unless the same ranks junior to the Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption;

 

3.3.4                      reclassify, alter or amend any existing security of the Corporation that is junior to the Series B Preferred Stock or the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with either the Series B Preferred Stock or the Series A Preferred Stock in respect of any such right, preference or privilege;

 

3.3.5                      purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on Preferred Stock as expressly authorized herein, and (ii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

 

3.3.6                      create, or authorize the creation of, or issue, or authorize the issuance of any debt security or other indebtedness, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt security or other indebtedness, if the aggregate indebtedness of the Corporation and its subsidiaries for borrowed money following such action would exceed $5,000,000; or

 

3.3.7                      increase or decrease the authorized number of directors constituting the Board of Directors.

 

3.4                                Series B Preferred Stock Protective Provisions. In addition to any approvals that may be required pursuant to Subsections 3.3 and 3.5 , at any time when at least 46,990,903 shares of Series B Preferred Stock (subject to appropriate adjustment in the event of

 

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any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition any vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of at least a majority of the then-outstanding Series B Preferred Stock, including the Requisite Series B Investors (the “ Requisite Series B Majority ”), given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio , and of no force or effect:

 

3.4.1                      waive, amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series B Preferred Stock (including without limitation any consent rights contained in this Subsection 3.4 );

 

3.4.2                      waive, amend, alter or repeal the right of the holders of the Series B Preferred Stock pursuant to Subsection 3.2 to elect the Series B Director;

 

3.4.3                      waive, amend, alter or repeal (a) the Series B Original Issue Price, the Series B Conversion Price (as defined below) or the Series B Liquidation Amount, provided that no consent shall be required for (x) any alteration of the Series B Conversion Price that results from the automatic operation of the provisions of Section 4 hereof and (y) any alteration of the Series B Original Issue Price that results from the automatic operation of the provisions of Subsection 1.2 hereof; (b) the definition of Exempted Securities (as defined below); or (c)  Subsection 5.1 to the extent such action would reduce the rights, privileges and protections applicable to the Series B Preferred Stock as in effect on the date hereof;

 

3.4.4                      (a) reclassify, alter or amend any existing security of the Corporation that is junior to the Series B Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series B Preferred Stock in respect of any such right, preference or privilege, or (b) purchase or redeem (or permit any subsidiary to purchase or redeem) any shares of Series A Preferred Stock other than in accordance with the requirements of Subsection 2.4.2(b)  above or any shares of Common Stock other than as permitted by Subsection 3.3.5(ii)  above;

 

3.4.5                      increase the authorized number of shares of Series B Preferred Stock; or

 

3.4.6                      waive, amend, alter or repeal the definition of Requisite Series B Investors or the use thereof in Subsection 2.4.1 , the definition of Requisite Series B Majority or the last sentence of Section 7 .

 

3.5                                Series A Preferred Stock Protective Provisions . In addition to any approvals that may be required pursuant to Subsections 3.3 and 3.4 , at any time when at least 95,000,000 shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the

 

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Series A Preferred Stock) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition any vote required by law or this Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of at least a majority of the Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) as a separate class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio , and of no force or effect:

 

3.5.1                      waive, amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock (including without limitation any consent rights contained in this Subsection 3.5 );

 

3.5.2                      waive, amend, alter or repeal the right of the holders of the Series A Preferred Stock pursuant to Subsection 3.2 to elect the Series A Director;

 

3.5.3                      waive, amend, alter or repeal (a) the Series A Original Issue Price, the Series A Conversion Price (as defined below) or the Series A Liquidation Amount, provided that no consent shall be required for (x) any alteration of the Series A Conversion Price that results from the automatic operation of the provisions of Section 4 hereof and (y) any alteration of the Series A Original Issue Price that results from the automatic operation of the provisions of Subsection 1.2 hereof; (b) the definition of Exempted Securities (as defined below); or (c)  Subsection 5.1 to the extent such action would reduce the rights, privileges and protections applicable to the Series A Preferred Stock as in effect on the date hereof;

 

3.5.4                      (a) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege; or (b) purchase or redeem (or permit any subsidiary to purchase or redeem) any shares of Common Stock other than as permitted by Subsection 3.3.5(ii)  above; or

 

3.5.5                      increase the authorized number of shares of Series A Preferred Stock.

 

4.                                       Optional Conversion .

 

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

 

4.1                                Right to Convert .

 

4.1.1                      Conversion Ratio .  Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (as defined below) in effect at the time of

 

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conversion.  The “ Series A-1 Conversion Price ” shall initially be equal to $0.16472.  The “ Series A-2 Conversion Price ” shall initially be equal to $0.23061.  The “ Series B Conversion Price ” shall initially be equal to $0.29793.  The applicable “ Conversion Price ” shall be (a) the Series A-1 Conversion Price with respect to Series A-1 Preferred Stock, (b) the Series A-2 Conversion Price with respect to Series A-2 Preferred Stock or (c) the Series B Conversion Price with respect to Series B Preferred Stock.  Such initial applicable Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2                      Termination of Conversion Rights .  In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.

 

4.2                                Fractional Shares .  No fractional shares of Common Stock shall be issued upon conversion of 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 fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3                                Mechanics of Conversion .

 

4.3.1                      Notice of Conversion .  In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent).  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued.  If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing.  The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date.  The Corporation shall, as soon as

 

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practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

 

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

 

4.3.3                      Effect of Conversion .  All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon.  Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

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

 

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

 

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issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4                                Adjustments to Conversion Price for Diluting Issues .

 

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

 

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

 

(b)                                  S eries B Original Issue Date ” shall mean the date on which the first share of Series B Preferred Stock was issued.

 

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

 

(d)                                  Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series B Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “ Exempted Securities ”):

 

(i)                                      shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;

 

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

 

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

 

(iv)                               shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to

 

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the terms of such Option or Convertible Security;

 

(v)                                  shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including two Preferred Directors, and not principally for the purpose of equity financing;

 

(vi)                               shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including two Preferred Directors, and not principally for the purpose of equity financing;

 

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

 

(viii)                         shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including two Preferred Directors, and not principally for the purpose of equity financing.

 

4.4.2                      No Adjustment of Conversion Price .  No adjustment in the Series A-1 Conversion Price or Series A-2 Conversion Price, as the case may be, shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the

 

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Corporation receives written notice from the holders of at least a majority of all holders of the Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.  No adjustment in the Series B Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Series B Majority that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3                      Deemed Issue of Additional Shares of Common Stock .

 

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

 

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

 

(c)                                   If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the applicable Conversion Price of a series of

 

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Preferred Stock pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5 ) of the Additional Shares of Common Stock subject thereto was equal to or greater than the applicable Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series B Original Issue Date), are revised after the Series B Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

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

 

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

 

4.4.4                      Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock .  In the event the Corporation shall at any time after the Series B Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3 ), without consideration or for a consideration per share less than the applicable Conversion Price of a series of Preferred Stock in effect immediately prior to such issuance or deemed issuance, then the Conversion Price of such series of Preferred Stock shall be reduced, concurrently with such

 

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issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

 

CP 2  = (CP 1 * (A + B)) ÷ (A + C).

 

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

 

(a)                                  “CP 2 ” shall mean the applicable Conversion Price of such series of Preferred Stock in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock;

 

(b)                                  “CP 1 ” shall mean the applicable Conversion Price of such series of Preferred Stock in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;

 

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

 

(d)                                  “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP 1  (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP 1 ); and

 

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

 

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

 

(a)                                  Cash and Property :  Such consideration shall:

 

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

 

(ii)                                   insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

 

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

 

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

 

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

 

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

 

4.4.6                      Multiple Closing Dates .  In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the

 

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applicable Conversion Price of a series of Preferred Stock pursuant to the terms of Subsection 4.4.4 , and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, such Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

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

 

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

 

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

 

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

 

Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Conversion Price of each series of Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the

 

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number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

 

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

 

4.8                                Adjustment for Merger or Reorganization, etc .  Subject to the provisions of Subsection 2.3 , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4 , 4.6 or 4.7 ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the applicable Conversion Price of each series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of Preferred Stock.  For the avoidance of doubt, nothing in this Subsection 4.8 shall be construed as preventing the holders of Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the General Corporation Law in connection with a merger triggering an adjustment hereunder, nor shall this Subsection 4.8 be deemed conclusive evidence of the fair value of the shares of Preferred Stock in any such appraisal proceeding.

 

4.9                                Certificate as to Adjustments .  Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price of a series of Preferred Stock pursuant to this Section 4 , the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based.  The Corporation shall, as promptly as reasonably practicable after the written request at

 

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any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the applicable Conversion Price of such series of Preferred Stock then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.

 

4.10                         Notice of Record Date .  In the event:

 

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

 

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

 

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

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to Preferred Stock and the Common Stock.  Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

 

5.                                       Mandatory Conversion .

 

5.1                                Trigger Events .  Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $0.446895 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $70,000,000 of gross proceeds or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Preferred (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “ Mandatory Conversion Time ”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation; provided, however, that the outstanding

 

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shares of Series B Preferred Stock shall not be automatically converted into shares of Common Stock pursuant to Section 5.1(b)  without the approval of the Requisite Series B Majority.

 

5.2                                Procedural Requirements .  All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5 .  Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time.  Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice.  If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing.  All rights with respect to Preferred Stock converted pursuant to Subsection 5.1 , including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2 .  As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay any declared but unpaid dividends on the shares of Preferred Stock converted.  Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

 

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

 

7.                                       Waiver .  Except as specifically stated herein, any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of at least a majority of the holders of Series A Preferred Stock; provided, that any such waiver that by its terms would treat the Series A-1 Preferred Stock differently from the Series A-2 Preferred Stock, such that either the Series A-1 Preferred Stock or the Series A-2 Preferred Stock would be differently adversely affected relative to the other, then such waiver shall require the consent of holders of at least a majority of the Series A-1 Preferred Stock or the Series A-2 Preferred Stock,

 

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as the case may be. Except as specifically stated herein, any of the rights, powers, preferences and other terms of the Series B Preferred Stock set forth herein may be waived on behalf of all holders of Series B Preferred Stock by the affirmative written consent or vote of the Requisite Series B Majority.

 

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

 

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

 

Sixth:   Subject to any additional vote required by this Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

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

 

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

 

Ninth:   To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.  If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

 

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

 

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

 

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the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

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

 

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

 

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

 

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any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

*     *     *

 

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

 

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

 

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IN WITNESS WHEREOF , this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 11 th  day of December, 2017.

 

 

By:

/s/ Norbert Riedel, Ph.D.

 

Name:

Norbert Riedel, Ph.D.

 

Title:

President

 

[Signature Page to Amended and Restated Certificate of Incorporation]

 




Exhibit 3.4

 

ENAREX, INC.

 

BY-LAWS

 

ARTICLE I - STOCKHOLDERS

 

Section I .               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 I .               Number, Election, Tenure and Qualification.

 

Except as otherwise specified in the Certificate of Incorporation of the Corporation, 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 (1/3) 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 such officer of the Corporation as it may designate, 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 an officer designated by the Board of Directors to elect or appoint such officer, 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 may be removed from office with or without cause by vote of a majority of the directors.  Any officer appointed by an officer designated by the Board of Directors to elect or appoint such officer, if any, may be removed with or without cause by such officer.

 

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.

 

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 4.2

 

Execution Version

 

AMENDED AND RESTATED

 

INVESTORS’ RIGHTS AGREEMENT

 



 

TABLE OF CONTENTS

 

 

 

Page

1.

Definitions

1

 

 

 

2.

Registration Rights

4

 

2.1

Demand Registration

5

 

2.2

Company Registration

6

 

2.3

Underwriting Requirements

7

 

2.4

Obligations of the Company

8

 

2.5

Furnish Information

10

 

2.6

Expenses of Registration

10

 

2.7

Delay of Registration

10

 

2.8

Indemnification

10

 

2.9

Reports Under Exchange Act

12

 

2.10

Limitations on Subsequent Registration Rights

13

 

2.11

“Market Stand-off” Agreement

13

 

2.12

Restrictions on Transfer

14

 

2.13

Termination of Registration Rights

15

 

 

 

3.

Information Rights

16

 

3.1

Delivery of Financial Statements

16

 

3.2

Inspection

17

 

3.3

Termination of Information Rights

17

 

3.4

Confidentiality

17

 

 

 

4.

Rights to Future Stock Issuances

18

 

4.1

Right of First Offer

18

 

4.2

Termination

19

 

 

 

5.

Additional Covenants

19

 

5.1

Insurance

19

 

5.2

Employee Agreements

20

 

5.3

Employee Stock

20

 

5.4

Board Matters

20

 

5.5

Successor Indemnification

20

 

5.6

Termination of Covenants

21

 

 

 

6.

Miscellaneous

21

 

6.1

Successors and Assigns

21

 

6.2

Governing Law

21

 

6.3

Counterparts

21

 

6.4

Titles and Subtitles

22

 

6.5

Notices

22

 

6.6

Amendments and Waivers

22

 

6.7

Severability

23

 

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6.8

Aggregation of Stock

23

 

6.9

Additional Investors

23

 

6.10

Entire Agreement

24

 

6.11

Dispute Resolution

24

 

6.12

Delays or Omissions

24

 

6.13

Acknowledgment

25

 

6.14

Termination of the Prior Agreement

25

 

Schedule A

-

Schedule of Investors

 

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AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “ Agreement ”), is made as of the 11 th  day of December, 2017, by and among Aptinyx Inc., a Delaware corporation (the “ Company ”) and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “ Investor .”

 

RECITALS

 

WHEREAS , certain of the Investors (the “ Existing Investors ”) hold shares of the Company’s Series A Preferred Stock, and/or shares of Common Stock issued upon conversion thereof, and possess rights to cause the Company to register shares of Common Stock issuable to the Existing Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, pursuant to an Investors’ Rights Agreement dated May 3, 2016 by and between the Company and such Existing Investors (the “ Prior Agreement ”);

 

WHEREAS , the Existing Investors are holders of a majority of the Registrable Securities (as defined in the Prior Agreement) outstanding, and desire to amend and restate the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement and the other Transaction Agreements (as such term is defined in the Purchase Agreement (as defined below)) in lieu of the rights granted to them under the Prior Agreement;

 

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

 

WHEREAS , in order to induce the Company to enter into the Purchase Agreement and to induce the Investors to invest funds in the Company pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock issuable to the Investors, to receive certain information from the Company, and to participate in future equity offerings by the Company, and shall govern certain other matters as set forth in this Agreement.

 

NOW, THEREFORE , the parties hereby agree as follows:

 

1.                                       Definitions .  For purposes of this Agreement:

 

1.1                                              Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 



 

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

 

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

 

1.4                                              Common Stock ” means shares of the Company’s common stock, par value $0.01 per share.

 

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

 

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

 

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

 

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

 

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

 

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

 

2


 

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

 

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

 

1.13                                       Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

 

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

 

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

 

1.16                                       Major Investor ” means a Holder that individually, or together with such Holder’s Affiliates, is the record holder of least 16,782,465 shares of Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock).

 

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

 

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

 

1.19                                       Preferred Stock ” means shares of the Company’s Series A Preferred Stock and Series B Preferred Stock.

 

1.20                                       Registrable Securities ” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company , acquired by the Investors after the date hereof; and (iii) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i)  and (ii)  above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 6.1 , and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Subsection 2.13 of this Agreement.

 

1.21                                       Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are

 

3



 

Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

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

 

1.23                                       SEC ” means the Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

1.28                                       Series A Preferred Stock ” means shares of the Company’s Series A-1 Preferred Stock, par value $0.01 per share and Series A-2 Preferred Stock, par value $0.01 per share.

 

1.29                                       Requisite Series B Investors ” means one or more holders of Series B Preferred Stock that (i) individually, or together with such holders’ Affiliates, does not own any Series A Preferred Stock and (ii) individually or collectively are the record holders of least 30,208,439 shares of Series B Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock).

 

1.30                                       Series B Preferred Stock ” means shares of the Company’s Series B Preferred Stock, par value $0.01 per share.

 

1.31                                       Series B Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that resulted from the conversion of shares of Series B Preferred Stock and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then outstanding shares of Series B Preferred Stock.

 

2.                                       Registration Rights .  The Company covenants and agrees as follows:

 

4



 

2.1                                Demand Registration .

 

(a)                                  Form S-1 Demand .  If at any time after one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from either (i) Holders of at least fifty percent (50%) of the Registrable Securities then outstanding or (ii) Holders of at least fifty percent (50%) of the Series B Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to the Registrable Securities then outstanding (if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (x) within ten (10) days after the date such request is given, give notice thereof (the “ Demand Notice ”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c)  and 2.3.

 

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

 

(c)                                   Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided , however , that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not

 

5



 

register any securities for its own account or that of any other equity holder during such one hundred twenty (120) day period other than an Excluded Registration .

 

(d)                                  The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a)  (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Subsection 2.1 (b) .  The Company shall not be obligated to effect, or to take any action to effect, any registration requested by the Initiating Holders specified in Subsection 2.1(a)(i)  pursuant to Subsection 2.1(a)  after the Company has effected one registration pursuant to Subsection 2.1(a)  requested by the Initiating Holders specified in Subsection 2.1(a)(i) . The Company shall not be obligated to effect, or to take any action to effect, any registration requested by the Initiating Holders specified in Subsection 2.1(a)(ii)  pursuant to Subsection 2.1(a)  after the Company has effected one registration pursuant to Subsection 2.1(a)  requested by the Initiating Holders specified in Subsection 2.1(a)(ii) . The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1 (b)  (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two registrations pursuant to Subsection 2.1 (b)  within the twelve (12) month period immediately preceding the date of such request.  A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d)  until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Subsection 2.6 , in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1(d) ; provided , that if such withdrawal is during a delay initiated by the Company pursuant to Subsection 2.1(c) , then the Initiating Holders may withdraw their request for registration without invoking the consequences set forth in the portion of this sentence preceding this proviso.

 

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

 

6



 

Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.6 .

 

2.3                                Underwriting Requirements .

 

(a)                                  If, pursuant to Subsection 2.1 , the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1 , and the Company shall include such information in the Demand Notice.  The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders.  In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.4(e) ) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting.  Notwithstanding any other provision of this Subsection 2.3 , if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided , however , that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

 

(b)                                  In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Subsection 2.2 , the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company.  If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering.  If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all

 

7



 

such selling Holders.  To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.  Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering.  For purposes of the provision in this Subsection 2.3 (b)  concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)                                   For purposes of Subsection 2.1 , a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a) , fewer than thirty percent (30%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

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

 

(a)                                  prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided , however , that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended for up to an additional one hundred twenty (120) days, if necessary, to keep the registration statement effective until all such Registrable Securities are sold;

 

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

 

8



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.6                                Expenses of Registration .  All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $50,000, of one counsel for the selling Holders (“ Selling Holder Counsel ”), shall be borne and paid by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Subsections 2.1(a)  or 2.1(b) , as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Subsections 2.1(a)  or 2.1(b) .  All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

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

 

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

 

(a)                                  To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided , however , that the indemnity agreement contained in this Subsection 2.8 (a)  shall not apply to amounts paid in settlement of

 

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any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

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

 

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

 

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it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.8 .

 

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

 

(e)                                   Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

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

 

2.9                                Reports Under Exchange Act .  With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at

 

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any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

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

 

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

 

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

 

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

 

2.11                         “Market Stand-off” Agreement .  Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 in connection with its IPO, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days plus such additional period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports, and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or

 

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contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for the IPO or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise.  The foregoing provisions of this Subsection 2.11 shall apply only to the IPO, and shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of the Holder or the immediate family of the Holder, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Holders only if all officers, directors and stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to the same restrictions.  The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.  Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto.

 

2.12                         Restrictions on Transfer .

 

(a)                                  The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act.  A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                  the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, provided that for the purpose of this Section 2.13(a), the sale of substantially all the assets or intellectual property of the Company and its subsidiaries shall not be considered a Deemed Liquidation Event, until such time as the Company effects a dissolution in connection with such transaction;

 

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(b)                                  such time after consummation of the IPO as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration; and

 

(c)                                   the fifth anniversary of the IPO.

 

3.                                       Information Rights .

 

3.1                                Delivery of Financial Statements .  The Company shall deliver to each Investor, provided that the Board of Directors has not reasonably determined that such Investor is a competitor of the Company, provided further that any financial investment firm or collective investment vehicle shall not be deemed a competitor of the Company solely by virtue of its ownership (and/or its Affiliates’ ownership) of an equity interest in any competitor held solely for investment purposes.

 

(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 (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined herein) for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company;

 

(b)                                  as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP);

 

(c)                                   as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct; and

 

(d)                                  as soon as practicable, but in any event thirty (30) days after the end of each fiscal year, a draft budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the

 

 

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Company, and as soon as practicable thereafter, the version of such budget and business plan for the next fiscal year approved by the Board (such approved version, collectively, the “ Budget ”).

 

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

 

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

 

3.2                                Inspection .  The Company shall permit each Investor ( provided that the Board of Directors has not reasonably determined that such Investor is a competitor of the Company, provided further that any financial investment firm or collective investment vehicle shall not be deemed a competitor of the Company solely by virtue of its ownership (and/or its Affiliates’ ownership) of an equity interest in any competitor held solely for investment purposes), at such Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Investor; provided , however , that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

3.3                                Termination of Information Rights .  The covenants set forth in Subsection 3.1 and Subsection 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.  For the purpose of this Section 3.3, the sale of substantially all the assets or intellectual property of the Company and its subsidiaries shall not be considered a Deemed Liquidation Event, until such time as the Company effects a dissolution in connection with such transaction.

 

3.4                                Confidentiality .  Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in

 

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general (other than as a result of a breach of this Subsection 3.4 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided , however , that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.4 ; (iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

4.                                       Rights to Future Stock Issuances .

 

4.1                                Right of First Offer .  Subject to the terms and conditions of this Subsection 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Investor.  An Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself and (ii) its Affiliates.

 

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

 

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

 

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by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares.  The closing of any sale pursuant to this Subsection 4.1(b)  shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Subsection 4.1(c) .

 

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

 

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

 

(e)                                   Notwithstanding any provision hereof to the contrary, in lieu of complying with the provisions of this Subsection 4.1 , the Company may elect to give notice to the Investors within thirty (30) days after the issuance of New Securities.  Such notice shall describe the type, price, and terms of the New Securities.  Each Investor shall have twenty (20) days from the date notice is given to elect to purchase up to the number of New Securities that would, if purchased by such Investor, maintain such Investor’s percentage-ownership position, calculated as set forth in Subsection 4.1(b)  before giving effect to the issuance of such New Securities.

 

4.2                                Termination .  The covenants set forth in Subsection 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Certificate of Incorporation, whichever event occurs first.

 

5.                                       Additional Covenants .

 

5.1                                Insurance .  The Company shall use its commercially reasonable efforts to obtain, within ninety (90) days of the date hereof, from financially sound and reputable insurers Directors and Officers liability insurance and term “key-person” insurance on Norbert G. Riedel and such other individuals identified by the Board of Directors, each in an amount and on terms and conditions satisfactory to the Board of Directors, and will use commercially

 

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reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors determines that such insurance should be discontinued.  The key-person policy shall name the Company as loss payee, and neither policy shall be cancelable by the Company without prior approval by the Board of Directors.

 

5.2                                Employee Agreements .  The Company will cause each Person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement.

 

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

 

5.4                                Board Matters .  Unless otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least quarterly in accordance with an agreed-upon schedule.  The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors.  The Company shall maintain an audit and compensation committee, each of which shall consist solely of non-management directors.  Each non-employee director shall be entitled in such person’s discretion to be a member of any committee of the Board of Directors.

 

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

 

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5.6                                Termination of Covenants . The covenants set forth in this Section 5 , except for Subsection 5.5 , shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

 

6.                                       Miscellaneous .

 

6.1                                Successors and Assigns .  The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 1,000,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided , however , that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11 .  For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement.  The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

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

 

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

 

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

 

6.5                                Notices .  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail (unless otherwise indicated on Schedule A hereto) or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 6.5 .  If notice is given to the Company, a copy shall also be sent to Goodwin Procter LLP, Attn: Mitchell S. Bloom, Esq. 100 Northern Avenue, Boston, MA  02210. If notice is given to the Investors, a copy (which shall not constitute notice) shall also be given to (i) Michael Flynn, Norton Rose Fulbright US LLP, 1301 Avenue of the Americas, New York, NY 10019, Facsimile: (212) 318-3400, E-mail: michael.flynn@nortonrosefulbright.com and (ii) Choate Hall & Stewart LLP, Attn: Brian P. Lenihan, Esq., Two International Place, Boston, MA 02110, Facsimile: 617-502-4929. Notwithstanding any of the foregoing, with respect to HBM Healthcare Investments (Cayman) Ltd., only a nationally recognized overnight courier shall be used to effectuate the delivery of any notices pursuant to this Subsection 6.5 , and such notice or other communication for purposes of this Agreement shall not be treated as effective or having been given if some other delivery method is utilized.

 

6.6                                Amendments and Waivers .  Any term of this Agreement (other than Subsections 1.29, 1.31, and 2.1(a)(ii) , the third sentence of Subsection 2.1(d)  and the last sentence of the first paragraph of this Section 6.6 ) may be amended, modified or terminated and the observance of any term of this Agreement (other than Subsections 1.29, 1.31, 2.1(a)(ii) , the third sentence of Subsection 2.1(d)   and the last sentence of the first paragraph of this Section 6.6 ) may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least a majority of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c)  (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c)  shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party.  The terms of Subsections 1.29, 1.31, 2.1(a)(ii) , the third sentence of Subsection 2.1(d)  and the last sentence of the first paragraph of this Section 6.6 may be amended, modified or terminated and the observance of any term of such sections may be waived only with the written consent of the Company and the holders of at least a majority of Series B Registrable Securities then outstanding, including the Requisite Series B Investors.

 

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Notwithstanding the foregoing, this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, modification, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction; provided , however , that if, after giving effect to such waiver of Section 4 with respect to a particular transaction, an Investor purchases securities in such transaction or issuance (such Investor, a “ Participating Investor ”), such waiver of the provisions of Section 4 shall be deemed to apply to each Major Investor  only if the Major Investors have been provided the opportunity to purchase a proportional number of the securities in such transaction based on the pro rata purchase right of each Major Investor set forth in Section 4, assuming a transaction size determined based upon the amount purchased by the Participating Investor that invested the largest percentage in such transaction.  Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time without the consent of the other parties hereto (i) to add transferees of any Registrable Securities in compliance with the terms of this Agreement, and (ii) to add information regarding any additional Investor who becomes a party to this Agreement in accordance with Subsection 6.9 .  The Company shall give prompt notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver.  Any amendment, modification, termination, or waiver effected in accordance with this Subsection 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto.  No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

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

 

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

 

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

 

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6.10                         Entire Agreement .  This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

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

 

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

 

The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the District of Delaware or any court of the State of Delaware having subject matter jurisdiction.

 

6.12                         Delays or Omissions .  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default

 

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theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.13                         Acknowledgment .  The Company acknowledges that certain of the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company.  Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

 

6.14                         Termination of the Prior Agreement . Upon execution of this Agreement by the Company and the holders of a majority of the Registrable Securities (as defined in the Prior Agreement) then outstanding, the Prior Agreement shall be amended and restated on the terms and in the form set forth herein, and shall be terminated and of no further force and effect and shall be superseded by this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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

 

 

APTINYX INC.

 

 

 

By:

/s/ Norbert Riedel

 

Name: Norbert Riedel, Ph.D.

 

Title: President

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 




Exhibit 10.1

 

APTINYX INC.

 

2015 STOCK OPTION AND GRANT PLAN

 

SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS

 

The name of the plan is the Aptinyx Inc. 2015 Stock Option and Grant Plan (the “Plan”).  The purpose of the Plan is to encourage and enable the officers, employees, directors, Consultants and other key persons of Aptinyx Inc., a Delaware corporation (including any successor entity, the “Company”) and its Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business, to acquire a proprietary interest in the Company.

 

The following terms shall be defined as set forth below:

 

Affiliate of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the first mentioned Person.  A Person shall be deemed to control another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.

 

Award ” or “ Awards, ” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, Restricted Stock Units or any combination of the foregoing.

 

“Award Agreement” means a written or electronic agreement setting forth the terms and provisions applicable to an Award granted under the Plan.  Each Award Agreement may contain terms and conditions in addition to those set forth in the Plan; provided, however, in the event of any conflict in the terms of the Plan and the Award Agreement, the terms of the Plan shall govern .

 

Board ” means the Board of Directors of the Company.

 

Cause ” shall have the meaning as set forth in the Award Agreement(s).  In the case that any Award Agreement does not contain a definition of “Cause,” it shall mean (i) the grantee’s dishonest statements or acts with respect to the Company or any Affiliate of the Company, or any current or prospective customers, suppliers vendors or other third parties with which such entity does business; (ii) the grantee’s commission of (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (iii) the grantee’s failure to perform his assigned duties and responsibilities to the reasonable satisfaction of the Company which failure continues, in the reasonable judgment of the Company, after written notice given to the grantee by the Company; (iv) the grantee’s gross negligence, willful misconduct or insubordination with respect to the Company or any Affiliate of the Company; or (v) the grantee’s material violation of any provision of any agreement(s) between the grantee and the Company relating to noncompetition, nonsolicitation, nondisclosure and/or assignment of inventions.

 



 

“Chief Executive Officer” means the Chief Executive Officer of the Company or, if there is no Chief Executive Officer, then the President of the Company.

 

Code ” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

 

Committee ” means the Committee of the Board referred to in Section 2.

 

“Consultant” means any natural person that provides bona fide services to the Company (including a Subsidiary), and such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

 

Disability ” means “disability” as defined in Section 422(c) of the Code.

 

Effective Date ” means the date on which the Plan is adopted as set forth on the final page of the Plan.

 

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

 

Fair Market Value ” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Committee based on the reasonable application of a reasonable valuation method not inconsistent with Section 409A of the Code. If the Stock is admitted to trade on a national securities exchange, the determination shall be made by reference to the closing price reported on such exchange.  If there is no closing price for such date, the determination shall be made by reference to the last date preceding such date for which there is a closing price.  If the date for which Fair Market Value is determined is the first day when trading prices for the Stock are reported on a national securities exchange, the Fair Market Value shall be the “Price to the Public” (or equivalent) set forth on the cover page for the final prospectus relating to the Company’s Initial Public Offering.

 

“Good Reason” shall have the meaning as set forth in the Award Agreement(s).  In the case that any Award Agreement does not contain a definition of “Good Reason,” it shall mean (i) a material diminution in the grantee’s base salary except for across-the-board salary reductions similarly affecting all or substantially all similarly situated employees of the Company or (ii) a change of more than 50 miles in the geographic location at which the grantee provides services to the Company, so long as the grantee provides at least 90 days notice to the Company following the initial occurrence of any such event and the Company fails to cure such event within 30 days thereafter.

 

Grant Date” means the date that the Committee designates in its approval of an Award in accordance with applicable law as the date on which the Award is granted, which date may not precede the date of such Committee approval.

 

“Holder” means, with respect to an Award or any Shares, the Person holding such Award or Shares, including the initial recipient of the Award or any Permitted Transferee.

 

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Incentive Stock Option ” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

 

Initial Public Offering ” means the consummation of the first firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale by the Company of its equity securities, as a result of or following which the Stock shall be publicly held.

 

Non-Qualified Stock Option ” means any Stock Option that is not an Incentive Stock Option.

 

Option ” or “ Stock Option ” means any option to purchase shares of Stock granted pursuant to Section 5.

 

Permitted Transferees ” shall mean any of the following to whom a Holder may transfer Shares hereunder (as set forth in Section 9(a)(ii)(A)): the Holder’s 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, any person sharing the Holder’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons control the management of assets, and any other entity in which these persons own more than fifty percent of the voting interests ; provided, however, that any such trust does not require or permit distribution of any Shares during the term of the Award Agreement unless subject to its terms.  Upon the death of the Holder, the term Permitted Transferees shall also include such deceased Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees, as the case may be.

 

Person ” shall mean any individual, corporation, partnership (limited or general), limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization or any similar entity.

 

“Restricted Stock Award” means Awards granted pursuant to Section 6 and “Restricted Stock” means Shares issued pursuant to such Awards.

 

Restricted Stock Unit means an Award of phantom stock units to a grantee, which may be settled in cash or Shares as determined by the Committee, pursuant to Section 8.

 

Sale Event” means the consummation of (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the surviving or resulting entity (or its ultimate parent, if applicable), (iii) the acquisition of all or a majority of the outstanding voting stock of the Company in a single transaction or a series of related transactions by a Person or group of Persons, or (iv) any other acquisition of the business of the Company, as determined by the Board; provided, however, that the Company’s Initial Public Offering, any subsequent public offering or another capital raising event, or a merger effected solely to change the Company’s domicile shall not constitute a “Sale Event.”

 

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Sale Price ” means the value as determined by the Committee of the consideration payable, or otherwise to be received by stockholders, per share of Stock pursuant to a Sale Event.

 

“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.

 

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

 

“Service Relationship” means any relationship as a full-time employee, part-time employee, director or other key person (including Consultants) of the Company or any Subsidiary or any successor entity (e.g., a Service Relationship shall be deemed to continue without interruption in the event an individual’s status changes from full-time employee to part-time employee or Consultant).

 

“Shares” means shares of Stock.

 

Stock ” means the Common Stock, par value $0.01 per share, of the Company.

 

Subsidiary ” means any corporation or other entity (other than the Company) in which the Company has more than a 50 percent interest, either directly or indirectly.

 

“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent of the Company or any Subsidiary.

 

“Termination Event” means the termination of the Award recipient’s Service Relationship with the Company and its Subsidiaries for any reason whatsoever, regardless of the circumstances thereof, and including, without limitation, upon death, disability, retirement, discharge or resignation for any reason, whether voluntarily or involuntarily.  The following shall not constitute a Termination Event:  (i) a transfer to the service of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another Subsidiary or (ii) an approved leave of absence for military service or sickness, or for any other purpose approved by the Committee, if the individual’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.

 

Unrestricted Stock Award means any Award granted pursuant to Section 7 and “Unrestricted Stock” means Shares issued pursuant to such Awards.

 

SECTION 2.                             ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

 

(a)                                            Administration of Plan .  The Plan shall be administered by the Board, or at the discretion of the Board, by a committee of the Board, comprised of not less than two directors.  All references herein to the “Committee” shall be deemed to refer to the group then responsible for administration of the Plan at the relevant time (i.e., either the Board of Directors or a committee or committees of the Board, as applicable).

 

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(b)                                            Powers of Committee .  The Committee shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:

 

(i)                                      to select the individuals to whom Awards may from time to time be granted;

 

(ii)                                   to determine the time or times of grant, and the amount, if any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock Awards, Restricted Stock Units, or any combination of the foregoing, granted to any one or more grantees;

 

(iii)                                to determine the number of Shares to be covered by any Award and, subject to the provisions of the Plan, the price, exercise price, conversion ratio or other price relating thereto;

 

(iv)                               to determine and, subject to Section 12, to modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the form of Award Agreements;

 

(v)                                  to accelerate at any time the exercisability or vesting of all or any portion of any Award;

 

(vi)                               to impose any limitations on Awards, including limitations on transfers, repurchase provisions and the like, and to exercise repurchase rights or obligations;

 

(vii)                            subject to Section 5(a)(ii) and any restrictions imposed by Section 409A, to extend at any time the period in which Stock Options may be exercised; and

 

(viii)                         at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including Award Agreements); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

 

All decisions and interpretations of the Committee shall be binding on all persons, including the Company and all Holders.

 

(c)                                             Award Agreement .  Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award.

 

(d)                                            Indemnification .  Neither the Board nor the Committee, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Committee (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent

 

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permitted by law and/or under the Company’s governing documents, including its certificate of incorporation or bylaws, or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.

 

(e)                                             Foreign Award Recipients .  Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and any Subsidiary operate or have employees or other individuals eligible for Awards, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries, if any, shall be covered by the Plan; (ii) determine which individuals, if any, outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to the Plan as appendices); provided , however , that no such subplans and/or modifications shall increase the share limitation contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals.

 

SECTION 3.                             STOCK ISSUABLE UNDER THE PLAN; MERGERS AND OTHER TRANSACTIONS; SUBSTITUTION

 

(a)                                            Stock Issuable .  The maximum number of Shares reserved and available for issuance under the Plan shall be 52,040,047 Shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the Shares underlying any Awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) and Shares that are withheld upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall be added back to the Shares available for issuance under the Plan. Subject to such overall limitations, Shares may be issued up to such maximum number pursuant to any type or types of Award, and no more than 52,040,047 Shares may be issued pursuant to Incentive Stock Options.  The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.  Beginning on the date that the Company becomes subject to Section 162(m) of the Code, Options with respect to no more than 52,040,047 Shares shall be granted to any one individual in any calendar year period.

 

(b)                                            Changes in Stock .  Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding Shares are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or 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 or other securities, in each case, without the receipt of consideration by the Company, or, if, as a result of any merger or consolidation, or sale of all or substantially all of the assets of the Company, the outstanding Shares are converted into or exchanged for other securities of the Company or any successor entity (or a parent or subsidiary thereof), the Committee shall make an appropriate and

 

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proportionate adjustment in (i) the maximum number of Shares reserved for issuance under the Plan, (ii) the number and kind of Shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per Share subject to each outstanding Award, and (iv) the exercise price for each Share subject to any then outstanding Stock Options under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options) as to which such Stock Options remain exercisable. The adjustment by the Committee shall be final, binding and conclusive.  No fractional Shares shall be issued under the Plan resulting from any such adjustment, but the Committee in its discretion may make a cash payment in lieu of fractional shares.

 

(c)                                             Mergers and Other Transactions .  In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree.  To the extent the parties to such Sale Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate.  Except as may be otherwise provided in the relevant Award Agreement, all Options that are not exercisable immediately prior to the effective time of the Sale Event shall become fully exercisable as of the effective time of the Sale Event, all other Awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event, and all Awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Sale Event in the Committee’s discretion or to the extent specified in the relevant Award Agreement.  In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a cash payment to the grantees holding Options, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of shares of Stock subject to outstanding Options (to the extent then exercisable  at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options; or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Committee, to exercise all outstanding Options (to the extent then exercisable) held by such grantee.  The Company shall also have the option (in its sole discretion) to make or provide for a cash payment for all other Awards.

 

SECTION 4.                             ELIGIBILITY

 

Grantees under the Plan will be such full or part-time officers and other employees, directors, Consultants and key persons of the Company and any Subsidiary who are selected from time to time by the Committee in its sole discretion; provided , however , that Awards shall be granted only to those individuals described in Rule 701(c) of the Securities Act.

 

SECTION 5.                             STOCK OPTIONS

 

Upon the grant of a Stock Option, the Company and the grantee shall enter into an Award Agreement.  The terms and conditions of each such Award Agreement shall be determined by

 

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the Committee, and such terms and conditions may differ among individual Awards and grantees.

 

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options.  Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code.  To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

 

(a)                                            Terms of Stock Options .  The Committee in its discretion may grant Stock Options to those individuals who meet the eligibility requirements of Section 4.  Stock Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

 

(i)                                      Exercise Price .  The exercise price per share for the Shares covered by a Stock Option shall be determined by the Committee at the time of grant but shall not be less than 100 percent of the Fair Market Value on the Grant Date.  In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the exercise price per share for the Shares covered by such Incentive Stock Option shall not be less than 110 percent of the Fair Market Value on the Grant Date.

 

(ii)                                   Option Term .  The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years from the Grant Date.  In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the Grant Date.

 

(iii)                                Exercisability; Rights of a Stockholder .  Stock Options shall become exercisable and/or vested at such time or times, whether or not in installments, as shall be determined by the Committee at or after the Grant Date. The Award Agreement may permit a grantee to exercise all or a portion of a Stock Option immediately at grant; provided that the Shares issued upon such exercise shall be subject to restrictions and a vesting schedule identical to the vesting schedule of the related Stock Option, such Shares shall be deemed to be Restricted Stock for purposes of the Plan, and the optionee may be required to enter into an additional or new Award Agreement as a condition to exercise of such Stock Option.  An optionee shall have the rights of a stockholder only as to Shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.  An optionee shall not be deemed to have acquired any Shares unless and until a Stock Option shall have been exercised pursuant to the terms of the Award Agreement and this Plan and the optionee’s name has been entered on the books of the Company as a stockholder.

 

(iv)                               Method of Exercise .  Stock Options may be exercised by an optionee in whole or in part, by the optionee giving written or electronic notice of exercise to the Company, specifying the number of Shares to be purchased.  Payment of the purchase price may be made by one or more of the following methods (or any combination thereof) to the extent provided in the Award Agreement:

 

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(A)           In cash, by certified or bank check, by wire transfer of immediately available funds, or other instrument acceptable to the Committee;

 

(B)           If permitted by the Committee, by the optionee delivering to the Company a promissory note, if the Board has expressly authorized the loan of funds to the optionee for the purpose of enabling or assisting the optionee to effect the exercise of his or her Stock Option; provided , that at least so much of the exercise price as represents the par value of the Stock shall be paid in cash if required by state law;

 

(C)           If permitted by the Committee and the Initial Public Offering has occurred (or the Stock otherwise becomes publicly-traded), through the delivery (or attestation to the ownership) of Shares that have been purchased by the optionee on the open market or that are beneficially owned by the optionee and are not then subject to restrictions under any Company plan. To the extent required to avoid variable accounting treatment under ASC 718 or other applicable accounting rules, such surrendered Shares if originally purchased from the Company shall have been owned by the optionee for at least six months.  Such surrendered Shares shall be valued at Fair Market Value on the exercise date;

 

(D)           If permitted by the Committee and the Initial Public Offering has occurred (or the Stock otherwise becomes publicly-traded), by the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure; or

 

(E)            If permitted by the Committee, and only with respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate exercise price.

 

Payment instruments will be received subject to collection.  No certificates for Shares so purchased will be issued to the optionee or, with respect to uncertificated Stock, no transfer to the optionee on the records of the Company will take place, until the Company has completed all steps it has deemed necessary to satisfy legal requirements relating to the issuance and sale of the Shares, which steps may include, without limitation, (i) receipt of a representation from the optionee at the time of exercise of the Option that the optionee is purchasing the Shares for the optionee’s own account and not with a view to any sale or distribution of the Shares or other representations relating to compliance with applicable law governing the issuance of securities, (ii) the legending of the certificate (or notation on any book entry) representing the Shares to evidence the foregoing restrictions, and (iii) obtaining from optionee payment or provision for all withholding taxes due as a result of the exercise of the Option.  The delivery of certificates representing the shares of Stock (or the transfer to the optionee on the records of the Company with respect to uncertificated Stock) to be purchased pursuant to the exercise of a Stock Option

 

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will be contingent upon (A) receipt from the optionee (or a purchaser acting in his or her stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such Shares and the fulfillment of any other requirements contained in the Award Agreement or applicable provisions of laws and (B) if required by the Company, the optionee shall have entered into any stockholders agreements or other agreements with the Company and/or certain other of the Company’s stockholders relating to the Stock.  In the event an optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the optionee upon the exercise of the Stock Option shall be net of the number of Shares attested to.

 

(b)                                            Annual Limit on Incentive Stock Options .  To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the Grant Date) of the Shares with respect to which Incentive Stock Options granted under the Plan and any other plan of the Company or its parent and any Subsidiary that become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000 or such other limit as may be in effect from time to time under Section 422 of the Code.  To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.

 

(c)                                             Termination .  Any portion of a Stock Option that is not vested and exercisable on the date of termination of an optionee’s Service Relationship shall immediately expire and be null and void.  Once any portion of the Stock Option becomes vested and exercisable, the optionee’s right to exercise such portion of the Stock Option (or the optionee’s representatives and legatees as applicable) in the event of a termination of the optionee’s Service Relationship shall continue until the earliest of: (i) the date which is: (A) 12 months following the date on which the optionee’s Service Relationship terminates due to death or Disability (or such longer period of time as determined by the Committee and set forth in the applicable Award Agreement), or (B) three months following the date on which the optionee’s Service Relationship terminates if the termination is due to any reason other than death or Disability (or such longer period of time as determined by the Committee and set forth in the applicable Award Agreement), or (ii) the Expiration Date set forth in the Award Agreement; provided that notwithstanding the foregoing, an Award Agreement may provide that if the optionee’s Service Relationship is terminated for Cause, the Stock Option shall terminate immediately and be null and void upon the date of the optionee’s termination and shall not thereafter be exercisable.

 

SECTION 6.                             RESTRICTED STOCK AWARDS

 

(a)                                            Nature of Restricted Stock Awards .   The Committee may, in its sole discretion, grant (or sell at par value or such other purchase price determined by the Committee) to an eligible individual under Section 4 hereof a Restricted Stock Award under the Plan.  The Committee shall determine the restrictions and conditions applicable to each Restricted Stock Award at the time of grant.  Conditions may be based on continuing employment (or other Service Relationship), achievement of pre-established performance goals and objectives and/or such other criteria as the Committee may determine.  Upon the grant of a Restricted Stock Award, the Company and the grantee shall enter into an Award Agreement.  The terms and conditions of each such Award Agreement shall be determined by the Committee, and such terms and conditions may differ among individual Awards and grantees.

 

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(b)                                            Rights as a Stockholder .  Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee of Restricted Stock shall be considered the record owner of and shall be entitled to vote the Restricted Stock if, and to the extent, such Shares are entitled to voting rights, subject to such conditions contained in the Award Agreement.  The grantee shall be entitled to receive all dividends and any other distributions declared on the Shares; provided , however , that the Company is under no duty to declare any such dividends or to make any such distribution.  Unless the Committee shall otherwise determine, certificates evidencing the Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in subsection (d) below of this Section, and the grantee shall be required, as a condition of the grant, to deliver to the Company a stock power endorsed in blank and such other instruments of transfer as the Committee may prescribe.

 

(c)                                             Restrictions .  Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Award Agreement.  Except as may otherwise be provided by the Committee either in the Award Agreement or, subject to Section 12 below, in writing after the Award Agreement is issued, if a grantee’s Service Relationship with the Company and any Subsidiary terminates, the Company or its assigns shall have the right, as may be specified in the relevant instrument, to repurchase some or all of the Shares subject to the Award at such purchase price as is set forth in the Award Agreement.

 

(d)                                            Vesting of Restricted Stock . The Committee at the time of grant shall specify in the Award Agreement the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the substantial risk of forfeiture imposed shall lapse and the Restricted Stock shall become vested, subject to such further rights of the Company or its assigns as may be specified in the Award Agreement.

 

SECTION 7.                             UNRESTRICTED STOCK AWARDS

 

The Committee may, in its sole discretion, grant (or sell at par value or such other purchase price determined by the Committee) to an eligible person under Section 4 hereof an Unrestricted Stock Award under the Plan.  Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.

 

SECTION 8.                             RESTRICTED STOCK UNITS

 

(a)                                            Nature of Restricted Stock Units .  The Committee may, in its sole discretion, grant to an eligible person under Section 4 hereof Restricted Stock Units under the Plan.  The Committee shall determine the restrictions and conditions applicable to each Restricted Stock Unit at the time of grant.  Vesting conditions may be based on continuing employment (or other Service Relationship), achievement of pre-established performance goals and objectives and/or other such criteria as the Committee may determine.  Upon the grant of Restricted Stock Units, the grantee and the Company shall enter into an Award Agreement.  The terms and conditions of each such Award Agreement shall be determined by the Committee and may differ among individual Awards and grantees.  On or promptly following the vesting date or dates applicable to any Restricted Stock Unit, but in no event later than March 15 of the year following the year

 

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in which such vesting occurs, such Restricted Stock Unit(s) shall be settled in the form of cash or shares of Stock, as specified in the Award Agreement.  Restricted Stock Units may not be sold, assigned, transferred, pledged, or otherwise encumbered or disposed of.

 

(b)                                            Rights as a Stockholder .  A grantee shall have the rights of a stockholder only as to Shares, if any, acquired upon settlement of Restricted Stock Units. A grantee shall not be deemed to have acquired any such Shares unless and until the Restricted Stock Units shall have been settled in Shares pursuant to the terms of the Plan and the Award Agreement, the Company shall have issued and delivered a certificate representing the Shares to the grantee (or transferred on the records of the Company with respect to uncertificated stock), and the grantee’s name has been entered in the books of the Company as a stockholder.

 

(c)                                             Termination .  Except as may otherwise be provided by the Committee either in the Award Agreement or in writing after the Award Agreement is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s cessation of Service Relationship with the Company and any Subsidiary for any reason.

 

SECTION 9.                             TRANSFER RESTRICTIONS; COMPANY RIGHT OF FIRST REFUSAL; COMPANY REPURCHASE RIGHTS

 

(a)                                            Restrictions on Transfer .

 

(i)                                      Non-Transferability of Stock Options .  Stock Options and, prior to exercise, the Shares issuable upon exercise of such Stock Option, shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the optionee’s lifetime, only by the optionee, or by the optionee’s legal representative or guardian in the event of the optionee’s incapacity.  Notwithstanding the foregoing, the Committee, in its sole discretion, may provide in the Award Agreement regarding a given Stock Option that the optionee may transfer by gift, without consideration for the transfer, his or her Non-Qualified Stock Options to his or her family members (as defined in Rule 701 of the Securities Act), to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners (to the extent such trusts or partnerships are considered “family members” for purposes of Rule 701 of the Securities Act), provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award Agreement, including the execution of a stock power upon the issuance of Shares.  Stock Options, and the Shares issuable upon exercise of such Stock Options, shall be restricted as to any pledge, hypothecation, or other transfer, including any short position, any “put equivalent position” (as defined in the Exchange Act) or any “call equivalent position” (as defined in the Exchange Act) prior to exercise.

 

(ii)                                   Shares .  No Shares shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law, unless (i) the transfer is in compliance with the terms of the applicable Award Agreement, all applicable securities laws (including, without limitation, the Securities Act), and with the terms and conditions of this Section 9, (ii) the transfer does not cause the Company to become subject to the reporting requirements of the Exchange Act, and (iii) the transferee consents in writing to be bound by the provisions of the Plan and the Award

 

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Agreement, including this Section 9.  In connection with any proposed transfer, the Committee may require the transferor to provide at the transferor’s own expense an opinion of counsel to the transferor, satisfactory to the Committee, that such transfer is in compliance with all foreign, federal and state securities laws (including, without limitation, the Securities Act).  Any attempted transfer of Shares not in accordance with the terms and conditions of this Section 9 shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Shares as a result of any such transfer, shall otherwise refuse to recognize any such transfer and shall not in any way give effect to any such transfer of Shares.  The Company shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity including, without limitation, seeking specific performance or the rescission of any transfer not made in strict compliance with the provisions of this Section 9.  Subject to the foregoing general provisions, and unless otherwise provided in the applicable Award Agreement, Shares may be transferred pursuant to the following specific terms and conditions (provided that with respect to any transfer of Restricted Stock, all vesting and forfeiture provisions shall continue to apply with respect to the original recipient):

 

(A)           Transfers to Permitted Transferees .  The Holder may transfer any or all of the Shares to one or more Permitted Transferees; provided, however , that following such transfer, such Shares shall continue to be subject to the terms of this Plan (including this Section 9) and such Permitted Transferee(s) shall, as a condition to any such transfer, deliver a written acknowledgment to that effect to the Company and shall deliver a stock power to the Company with respect to the Shares.  Notwithstanding the foregoing, the Holder may not transfer any of the Shares to a Person whom the Company reasonably determines is a direct competitor or a potential competitor of the Company or any of its Subsidiaries.

 

(B)           Transfers Upon Death .  Upon the death of the Holder, any Shares then held by the Holder at the time of such death and any Shares acquired after the Holder’s death by the Holder’s legal representative shall be subject to the provisions of this Plan, and the Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees shall be obligated to convey such Shares to the Company or its assigns under the terms contemplated by the Plan and the Award Agreement.

 

(b)                                            Right of First Refusal .  In the event that a Holder desires at any time to sell or otherwise transfer all or any part of his or her Shares (other than shares of Restricted Stock which by their terms are not transferrable), the Holder first shall give written notice to the Company of the Holder’s intention to make such transfer.  Such notice shall state the number of Shares that the Holder proposes to sell (the “Offered Shares”), the price and the terms at which the proposed sale is to be made and the name and address of the proposed transferee.  At any time within 30 days after the receipt of such notice by the Company, the Company or its assigns may elect to purchase all or any portion of the Offered Shares at the price and on the terms offered by the proposed transferee and specified in the notice.  The Company or its assigns shall exercise this right by mailing or delivering written notice to the Holder within the foregoing 30-day period.  If the Company or its assigns elect to exercise its purchase rights under this Section 9(b), the closing for such purchase shall, in any event, take place within 45 days after the receipt by the Company of the initial notice from the Holder.  In the event that the Company or its assigns do not elect to exercise such purchase right, or in the event that the Company or its

 

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assigns do not pay the full purchase price within such 45-day period, the Holder may, within 60 days thereafter, sell the Offered Shares to the proposed transferee and at the same price and on the same terms as specified in the Holder’s notice.  Any Shares not sold to the proposed transferee shall remain subject to the Plan.  If the Holder is a party to any stockholders agreements or other agreements with the Company and/or certain other of the Company’s stockholders relating to the Shares, (i) the transferring Holder shall comply with the requirements of such stockholders agreements or other agreements relating to any proposed transfer of the Offered Shares, and (ii) any proposed transferee that purchases Offered Shares shall enter into such stockholders agreements or other agreements with the Company and/or certain of the Company’s stockholders relating to the Offered Shares on the same terms and in the same capacity as the transferring Holder.

 

(c)                                             Company’s Right of Repurchase .

 

(i)                                      Right of Repurchase for Unvested Shares Issued Upon the Exercise of an Option .  Upon a Termination Event, the Company or its assigns shall have the right and option to repurchase from a Holder of Shares acquired upon exercise of a Stock Option which are still subject to a risk of forfeiture as of the Termination Event.  Such repurchase rights may be exercised by the Company within the later of (A) six months following the date of such Termination Event or (B) seven months after the acquisition of Shares upon exercise of a Stock Option.  The repurchase price shall be equal to the lower of the original per share price paid by the Holder, subject to adjustment as provided in Section 3(b) of the Plan, or the current Fair Market Value of such Shares as of the date the Company elects to exercise its repurchase rights.

 

(ii)                                   Right of Repurchase With Respect to Restricted Stock .  Upon a Termination Event, the Company or its assigns shall have the right and option to repurchase from a Holder of Shares received pursuant to a Restricted Stock Award any Shares that are still subject to a risk of forfeiture as of the Termination Event.  Such repurchase right may be exercised by the Company within six months following the date of such Termination Event.  The repurchase price shall be the lower of the original per share purchase price paid by the Holder, subject to adjustment as provided in Section 3(b) of the Plan, or the current Fair Market Value of such Shares as of the date the Company elects to exercise its repurchase rights.

 

(iii)                                Procedure.  Any repurchase right of the Company shall be exercised by the Company or its assigns by giving the Holder written notice on or before the last day of the repurchase period of its intention to exercise such repurchase right.  Upon such notification, the Holder shall promptly surrender to the Company, free and clear of any liens or encumbrances, any certificates representing the Shares being purchased, together with a duly executed stock power for the transfer of such Shares to the Company or the Company’s assignee or assignees.  Upon the Company’s or its assignee’s receipt of the certificates from the Holder, the Company or its assignee or assignees shall deliver to him, her or them a check for the applicable repurchase price; provided, however , that the Company may pay the repurchase price  by offsetting and canceling any indebtedness then owed by the Holder to the Company.

 

(d)                                            Drag Along Right .  In the event the holders of a majority of the Company’s equity securities then outstanding (the “Majority Shareholders”) determine to enter into a Sale Event in a bona fide negotiated transaction (a “Sale”), with any non-Affiliate of the Company or any

 

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majority shareholder (in each case, the “Buyer”), a Holder of Shares, including any Permitted Transferee, shall be obligated to and shall upon the written request of the Majority Shareholders: (a) sell, transfer and deliver, or cause to be sold, transferred and delivered, to the Buyer, his or her Shares (including for this purpose all of such Holder’s Shares that presently or as a result of any such transaction may be acquired upon the exercise of an Option (following the payment of the exercise price therefor)) on substantially the same terms applicable to the Majority Shareholders (with appropriate adjustments to reflect the conversion of convertible securities, the redemption of redeemable securities and the exercise of exercisable securities as well as the relative preferences and priorities of preferred stock); and (b) execute and deliver such instruments of conveyance and transfer and take such other action, including voting such Shares in favor of any Sale proposed by the Majority Shareholders and executing any purchase agreements, merger agreements, indemnity agreements, escrow agreements or related documents as the Majority Shareholders or the Buyer may reasonably require in order to carry out the terms and provisions of this Section 9(d).

 

(e)                                             Escrow Arrangement .

 

(i)                                      Escrow .  In order to carry out the provisions of this Section 9 of this Plan more effectively, the Company shall hold any Shares issued pursuant to Awards granted under the Plan in escrow together with separate stock powers executed by the Holder in blank for transfer.  The Company shall not dispose of the Shares except as otherwise provided in this Plan.  In the event of any repurchase by the Company (or any of its assigns), the Company is hereby authorized by the Holder, as the Holder’s attorney-in-fact, to date and complete the stock powers necessary for the transfer of the Shares being purchased and to transfer such Shares in accordance with the terms hereof.  At such time as any Shares are no longer subject to the Company’s repurchase and first refusal rights, the Company shall, at the written request of the Holder, deliver to the Holder a certificate representing such Shares with the balance of the Shares to be held in escrow pursuant to this Section.

 

(ii)                                   Remedy .  Without limitation of any other provision of this Plan or other rights, in the event that a Holder or any other Person is required to sell a Holder’s Shares pursuant to the provisions of Sections 9(b) or (c) hereof and in the further event that he or she refuses or for any reason fails to deliver to the Company or its designated purchaser of such Shares the certificate or certificates evidencing such Shares together with a related stock power, the Company or such designated purchaser may deposit the applicable purchase price for such Shares with a bank designated by the Company, or with the Company’s independent public accounting firm, as agent or trustee, or in escrow, for such Holder or other Person, to be held by such bank or accounting firm for the benefit of and for delivery to him, her, them or it, and/or, in its discretion, pay such purchase price by offsetting any indebtedness then owed by such Holder as provided above.  Upon any such deposit and/or offset by the Company or its designated purchaser of such amount and upon notice to the Person who was required to sell the Shares to be sold pursuant to the provisions of Sections 9(b) or (c), such Shares shall at such time be deemed to have been sold, assigned, transferred and conveyed to such purchaser, such Holder shall have no further rights thereto (other than the right to withdraw the payment thereof held in escrow, if applicable), and the Company shall record such transfer in its stock transfer book or in any appropriate manner.

 

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(f)                                              Lockup Provision .  If requested by the Company, a Holder shall not sell or otherwise transfer or dispose of any Shares (including, without limitation, pursuant to Rule 144 under the Securities Act) held by him or her for such period following the effective date of a public offering by the Company of Shares as the Company shall specify reasonably and in good faith.  If requested by the underwriter engaged by the Company, each Holder shall execute a separate letter confirming his or her agreement to comply with this Section.

 

(g)                                             Adjustments for Changes in Capital Structure .  If, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Common Stock, the outstanding Shares are increased or decreased or are exchanged for a different number or kind of securities of the Company, the restrictions contained in this Section 9 shall apply with equal force to additional and/or substitute securities, if any, received by Holder in exchange for, or by virtue of his or her ownership of, Shares.

 

(h)                                            Termination .  The terms and provisions of Section 9(b) and Section 9(c) (except for the Company’s right to repurchase Shares still subject to a risk of forfeiture upon a Termination Event) shall terminate upon the closing of the Company’s Initial Public Offering or upon consummation of any Sale Event, in either case as a result of which Shares are registered under Section 12 of the Exchange Act and publicly-traded on any national security exchange.

 

SECTION 10.                      TAX WITHHOLDING

 

(a)                                            Payment by Grantee .  Each grantee shall, no later than the date as of which the value of an Award or of any Shares or other amounts received thereunder first becomes includable in the gross income of the grantee for income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income.  The Company and any Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee.  The Company’s obligation to deliver stock certificates (or evidence of book entry) to any grantee is subject to and conditioned on any such tax withholding obligations being satisfied by the grantee.

 

(b)                                            Payment in Stock .  The Company’s minimum required tax withholding obligation may be satisfied, in whole or in part, by the Company withholding from Shares to be issued pursuant to an Award a number of Shares having an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.

 

SECTION 11.                      SECTION 409A AWARDS.

 

To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as may be specified by the Committee from time to time.  In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a grantee who is considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from

 

16



 

service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A.  The Company makes no representation or warranty and shall have no liability to any grantee under the Plan or any other Person with respect to any penalties or taxes under Section 409A that are, or may be, imposed with respect to any Award.

 

SECTION 12.                      AMENDMENTS AND TERMINATION

 

The Board may, at any time, amend or discontinue the Plan and the Committee may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the consent of the holder of the Award.  The Committee may exercise its discretion to reduce the exercise price of outstanding Stock Options or effect repricing through cancellation of outstanding Stock Options and by granting such holders new Awards in replacement of the cancelled Stock Options.  To the extent determined by the Committee to be required either by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or otherwise, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders.  Nothing in this Section 12 shall limit the Board’s or Committee’s authority to take any action permitted pursuant to Section 3(c).  The Board reserves the right to amend the Plan and/or the terms of any outstanding Stock Options to the extent reasonably necessary to comply with the requirements of the exemption pursuant to paragraph (f)(4) of Rule 12h-1 of the Exchange Act.

 

SECTION 13.                      STATUS OF PLAN

 

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Committee shall otherwise expressly so determine in connection with any Award.

 

SECTION 14.                      GENERAL PROVISIONS

 

(a)                                            No Distribution; Compliance with Legal Requirements . The Committee may require each person acquiring Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof.  No Shares shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied.  The Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.

 

(b)                                            Delivery of Stock Certificates .  Stock certificates to grantees under the Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company; provided that stock certificates to be held in escrow pursuant to Section 9 of the Plan shall be deemed delivered when the Company shall have recorded the issuance in its records.  Uncertificated Stock shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall

 

17



 

have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records).

 

(c)                                             No Employment Rights The adoption of the Plan and the grant of Awards do not confer upon any Person any right to continued employment or Service Relationship with the Company or any Subsidiary.

 

(d)                                            Trading Policy Restrictions .  Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policy-related restrictions, terms and conditions as may be established by the Committee, or in accordance with policies set by the Committee, from time to time.

 

(e)                                             Designation of Beneficiary .  Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award on or after the grantee’s death or receive any payment under any Award payable on or after the grantee’s death.  Any such designation shall be on a form provided for that purpose by the Committee and shall not be effective until received by the Committee.  If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.

 

(f)                                              Legend .  Any certificate(s) representing the Shares shall carry substantially the following legend (and with respect to uncertificated Stock, the book entries evidencing such shares shall contain the following notation):

 

The transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms and conditions (including repurchase and restrictions against transfers) contained in the Aptinyx Inc. 2015 Stock Option and Grant Plan and any agreements entered into thereunder by and between the company and the holder of this certificate (a copy of which is available at the offices of the company for examination).

 

(g)                                             Information to Holders of Options .  In the event the Company is relying on the exemption from the registration requirements of Section 12(g) of the Exchange Act contained in paragraph (f)(1) of Rule 12h-1 of the Exchange Act, the Company shall provide the information described in Rule 701(e)(3), (4) and (5) of the Securities Act to all holders of Options in accordance with the requirements thereunder.  The foregoing notwithstanding, the Company shall not be required to provide such information unless the optionholder has agreed in writing, on a form prescribed by the Company, to keep such information confidential.

 

SECTION 15.                      EFFECTIVE DATE OF PLAN

 

The Plan shall become effective upon adoption by the Board and shall be approved by stockholders in accordance with applicable state law and the Company’s articles of incorporation and bylaws within 12 months thereafter.  If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any Awards granted or sold under the

 

18



 

Plan shall be rescinded and no additional grants or sales shall thereafter be made under the Plan.  Subject to such approval by stockholders and to the requirement that no Shares may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of the Plan by the Board.  No grants of Stock Options and other Awards may be made hereunder after the tenth anniversary of the date the Plan is adopted by the Board or the date the Plan is approved by the Company’s stockholders, whichever is earlier.

 

SECTION 16.                      GOVERNING LAW

 

This Plan, all Awards and any controversy arising out of or relating to this Plan and all Awards shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of Illinois, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Illinois.

 

DATE ADOPTED BY THE BOARD OF DIRECTORS:            OCTOBER 30, 2015

 

DATE APPROVED BY THE STOCKHOLDERS:                                          NOVEMBER 10, 2015

 

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INCENTIVE STOCK OPTION GRANT NOTICE

UNDER THE APTINYX INC.
2015 STOCK OPTION AND GRANT PLAN

 

Pursuant to the Aptinyx Inc. 2015 Stock Option and Grant Plan (the “Plan”), Aptinyx Inc. a Delaware corporation (together with any successor, the “Company”), has granted to the individual named below, an option (the “Stock Option”) to purchase on or prior to the Expiration Date, or such earlier date as is specified herein, all or any part of the number of shares of Common Stock, par value $0.01 per share (“Common Stock”), of the Company indicated below (the “Shares”), at the Option Exercise Price per share, subject to the terms and conditions set forth in this Incentive Stock Option Grant Notice (the “Grant Notice”), the attached Incentive Stock Option Agreement (the “Agreement”) and the Plan.  This Stock Option is intended to qualify as an “incentive stock option” as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).  To the extent that any portion of the Stock Option does not so qualify, it shall be deemed a non-qualified stock option.

 

Name of Optionee:

 

                                         (the “Optionee”)

 

 

 

 

 

No. of Shares:

 

                          Shares of Common Stock

 

 

 

 

 

Grant Date:

 

                            

 

 

 

 

 

Vesting Commencement Date:

 

                                         (the “Vesting Commencement Date”)

 

 

 

 

 

Expiration Date:

 

                                         (the “Expiration Date”)

 

 

 

 

 

Option Exercise Price/Share:

 

$                                       (the “Option Exercise Price”)

 

 

 

 

 

Vesting Schedule:

 

25 percent of the Shares shall vest and become exercisable on the first anniversary of the Vesting Commencement Date; provided that the Optionee continues to have a Service Relationship with the Company at such time. Thereafter, the remaining 75 percent of the Shares shall vest and become exercisable in 36 equal monthly installments following the first anniversary of the Vesting Commencement Date, provided the Optionee continues to have a Service Relationship with the Company at such time. Notwithstanding anything in the Agreement to the contrary, in the case of a Sale Event, this Stock Option and the Shares shall be treated as provided in Section 3(c) of the Plan.

 

 

 

 

 

Attachments :                       Incentive Stock Option Agreement, 2015 Stock Option and Grant Plan

 



 

INCENTIVE STOCK OPTION AGREEMENT

UNDER THE APTINYX INC.

2015 STOCK OPTION AND GRANT PLAN

 

All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Grant Notice and the Plan.

 

1.                                       Vesting, Exercisability and Termination .

 

(a)                                  No portion of this Stock Option may be exercised until such portion shall have vested and become exercisable.

 

(b)                                  Except as set forth below, and subject to the determination of the Committee in its sole discretion to accelerate the vesting schedule hereunder, this Stock Option shall be vested and exercisable on the respective dates indicated below:

 

(i)                                      This Stock Option shall initially be unvested and unexercisable.

 

(ii)                                   This Stock Option shall vest and become exercisable in accordance with the Vesting Schedule set forth in the Grant Notice.

 

(c)                                   Termination .  Except as may otherwise be provided by the Committee, if the Optionee’s Service Relationship is terminated, the period within which to exercise this Stock Option will be subject to earlier termination as set forth below (and if not exercised within such period, shall thereafter terminate subject, in each case, to Section 3(c) of the Plan):

 

(i)                                      Termination Due to Death or Disability .  If the Optionee’s Service Relationship terminates by reason of such Optionee’s death or Disability, this Stock Option may be exercised, to the extent exercisable on the date of such termination, by the Optionee, the Optionee’s legal representative or legatee for a period of 12 months from the date of death or Disability or until the Expiration Date, if earlier.

 

(ii)                                   Other Termination .  If the Optionee’s Service Relationship terminates for any reason other than death or Disability, and unless otherwise determined by the Committee, this Stock Option may be exercised, to the extent exercisable on the date of termination, for a period of 90 days from the date of termination or until the Expiration Date, if earlier; provided however , if the Optionee’s Service Relationship is terminated for Cause, this Stock Option shall terminate immediately upon the date of such termination.

 

For purposes hereof, the Committee’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees.  Any portion of this Stock Option that is not vested and exercisable on the date of termination of the Service Relationship shall terminate immediately and be null and void.

 

2



 

(d)                                  It is understood and intended that this Stock Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code to the extent permitted under applicable law.  Accordingly, the Optionee understands that in order to obtain the benefits of an incentive stock option under Section 422 of the Code, no sale or other disposition may be made of Shares for which incentive stock option treatment is desired within the one-year period beginning on the day after the day of the transfer of such Shares to him or her, nor within the two-year period beginning on the day after Grant Date of this Stock Option and further that this Stock Option must be exercised within three months after termination of employment as an employee (or 12 months in the case of death or disability) to qualify as an incentive stock option.  If the Optionee disposes (whether by sale, gift, transfer or otherwise) of any such Shares within either of these periods, he or she will notify the Company within 30 days after such disposition.  The Optionee also agrees to provide the Company with any information concerning any such dispositions required by the Company for tax purposes.  Further, to the extent this Stock Option and any other incentive stock options of the Optionee having an aggregate Fair Market Value in excess of $100,000 (determined as of the Grant Date) first become exercisable in any year, such options will not qualify as incentive stock options.

 

2.                                       Exercise of Stock Option .

 

(a)                                  The Optionee may exercise this Stock Option only in the following manner:  Prior to the Expiration Date, the Optionee may deliver a Stock Option exercise notice (an “Exercise Notice”) in the form of Appendix A hereto indicating his or her election to purchase some or all of the Shares with respect to which this Stock Option is then exercisable.  Such notice shall specify the number of Shares to be purchased.  Payment of the purchase price may be made by one or more of the methods described in Section 5 of the Plan, subject to the limitations contained in such Section of the Plan, including the requirement that the Committee specifically approve in advance certain payment methods.

 

(b)                                  Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date.

 

3.                                       Incorporation of Plan .  Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan.

 

4.                                       Transferability of Stock Option .  This Stock Option is personal to the Optionee and is not transferable by the Optionee in any manner other than by will or by the laws of descent and distribution.  The Stock Option may be exercised during the Optionee’s lifetime only by the Optionee (or by the Optionee’s guardian or personal representative in the event of the Optionee’s incapacity).  The Optionee may elect to designate a beneficiary by providing written notice of the name of such beneficiary to the Company, and may revoke or change such designation at any time by filing written notice of revocation or change with the Company; such beneficiary may exercise the Optionee’s Stock Option in the event of the Optionee’s death to the extent provided herein.  If the Optionee does not designate a beneficiary, or if the designated beneficiary predeceases the Optionee, the legal representative of the Optionee may exercise this Stock Option to the extent provided herein in the event of the Optionee’s death.

 

3



 

5.                                       Restrictions on Transfer of Shares .  The Shares acquired upon exercise of the Stock Option shall be subject to certain transfer restrictions and other limitations including, without limitation, the provisions contained in Section 9 of the Plan.

 

6.                                       Miscellaneous Provisions .

 

(a)                                  Equitable Relief .  The parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement.

 

(b)                                  Adjustments for Changes in Capital Structure .  If, as a result of any reorganization, recapitalization, reincorporation, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Common Stock, the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of securities of the Company, the restrictions contained in this Agreement shall apply with equal force to additional and/or substitute securities, if any, received by the Optionee in exchange for, or by virtue of his or her ownership of, this Stock Option or Shares acquired pursuant thereto.

 

(c)                                   Change and Modifications .  This Agreement may not be orally changed, modified or terminated, nor shall any oral waiver of any of its terms be effective.  This Agreement may be changed, modified or terminated only by an agreement in writing signed by the Company and the Optionee.

 

(d)                                  Governing Law .  This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of Illinois, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Illinois.

 

(e)                                   Headings .  The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Agreement and shall not be considered in the interpretation of this Agreement.

 

(f)                                    Saving Clause .  If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.

 

(g)                                   Notices .  All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid.  Notices to the Company or the Optionee shall be addressed as set forth underneath their signatures below, or to such other address or addresses as may have been furnished by such party in writing to the other.

 

(h)                                  Benefit and Binding Effect .  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, and legal

 

4



 

representatives.  The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

 

(i)                                      Counterparts .  For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

 

(j)                                     Integration .  This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

 

7.                                       Dispute Resolution .

 

(a)                                  Except as provided below, any dispute arising out of or relating to the Plan or this Stock Option, this Agreement, or the breach, termination or validity of the Plan, this Stock Option or this Agreement, shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the “J.A.M.S. Rules”).  The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1 16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  The place of arbitration shall be the State of Illinois.

 

(b)                                  The arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto.  In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses.  In addition, each party may take up to three depositions as of right, and the arbitrator may in his or her discretion allow additional depositions upon good cause shown by the moving party.  However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission.  In connection with any arbitration, each party to the arbitration shall provide to the other, no later than seven business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert.  The arbitrator’s decision and award shall be made and delivered within six months of the selection of the arbitrator.  The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability.  The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages, and each party hereby irrevocably waives any claim to such damages.

 

(c)                                   The Company, the Optionee, each party to the Agreement and any other holder of Shares issued pursuant to this Agreement (each, a “Party”) covenants and agrees that such party will participate in the arbitration in good faith.  This Section 7 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm.

 

(d)                                  Each Party (i) hereby irrevocably submits to the jurisdiction of any United States District Court of competent jurisdiction for the purpose of enforcing the award or decision

 

5



 

in any such proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution (except as protected by applicable law), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (iii) hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court.  Each Party hereby consents to service of process by registered mail at the address to which notices are to be given.  Each Party agrees that its, his or her submission to jurisdiction and its, his or her consent to service of process by mail is made for the express benefit of each other Party.  Final judgment against any Party in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

 

[SIGNATURE PAGE FOLLOWS]

 

6



 

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned as of the date first above written.

 

 

APTINYX INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Address:

 

 

 

 

 

The undersigned hereby acknowledges receiving and reviewing a copy of the Plan, including, without limitation, Section 9 thereof, and understands that this Stock Option is subject to the terms of the Plan and of this Agreement.  This Agreement is hereby accepted, and the terms and conditions of the Plan, the Grant Notice and this Agreement, SPECIFICALLY INCLUDING THE ARBITRATION PROVISIONS SET FORTH IN SECTION 7 OF THIS AGREEMENT, are hereby agreed to, by the undersigned as of the date first above written.

 

 

OPTIONEE:

 

 

 

 

 

Name:

 

 

 

Address:

 

 

 

 

 

7



 

[SPOUSE’S CONSENT(1)

 

I acknowledge that I have read the

 

foregoing Incentive Stock Option Agreement

 

and understand the contents thereof.

 

 

 

 

 

                                                                                  ]

 

 


(1)  A spouse’s consent is recommended only if the Optionee’s state of residence is one of the following community property states:  Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

 

8



 

 

DESIGNATED BENEFICIARY:

 

 

 

 

 

 

 

 

 

Beneficiary’s Address:

 

 

 

 

 

9


 

Appendix A

 

STOCK OPTION EXERCISE NOTICE

 

Aptinyx Inc.

 

Attention: [                    ]

 

 

 

Pursuant to the terms of the grant notice and stock option agreement between the undersigned and APTINYX INC. (the “Company”) dated            (the “Agreement”) under the Aptinyx Inc. 2015 Stock Option and Grant Plan, I, [Insert Name]                 , hereby [Circle One] partially/fully exercise such option by including herein payment in the amount of $       representing the purchase price for [Fill in number of Shares]         Shares.  I have chosen the following form(s) of payment:

 

o                                     1.                                       Cash

 

o                                     2.                                       Certified or bank check payable to Aptinyx Inc.

 

o                                     3.                                       Other (as referenced in the Agreement and described in the Plan (please describe))

.

 

In connection with my exercise of the option as set forth above, I hereby represent and warrant to the Company as follows:

 

(i)                                      I am purchasing the Shares for my own account for investment only, and not for resale or with a view to the distribution thereof.

 

(ii)                                   I have had such an opportunity as I have deemed adequate to obtain from the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company and have consulted with my own advisers with respect to my investment in the Company.

 

(iii)                                I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

(iv)                               I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period of time.

 

(v)                                  I understand that the Shares may not be registered under the Securities Act of 1933 (it being understood that the Shares are being issued and sold in reliance on the exemption provided in Rule 701 thereunder) or any applicable state securities or “blue sky” laws and may not be sold or otherwise transferred or disposed of in the absence of an effective registration statement under the Securities Act of 1933 and under any applicable state securities or “blue sky” laws (or exemptions from the

 

10



 

registration requirement thereof).  I further acknowledge that certificates representing Shares will bear restrictive legends reflecting the foregoing and/or that book entries for uncertificated Shares will include similar restrictive notations.

 

(vi)                               I have read and understand the Plan and acknowledge and agree that the Shares are subject to all of the relevant terms of the Plan, including without limitation, the transfer restrictions set forth in Section 9 of the Plan.

 

(vii)                            I understand and agree that the Company has a right of first refusal with respect to the Shares pursuant to Section 9(b) of the Plan.

 

(viii)                         I understand and agree that the Company has certain repurchase rights with respect to the Shares pursuant to Section 9(c) of the Plan.

 

(ix)                               I understand and agree that I may not sell or otherwise transfer or dispose of the Shares for a period of time following the effective date of a public offering by the Company as described in Section 9(f) of the Plan.

 

 

Sincerely yours,

 

 

 

 

 

Name:

 

 

 

Address:

 

 

 

 

 

11



 

NON-QUALIFIED STOCK OPTION GRANT NOTICE

UNDER THE APTINYX INC.
2015 STOCK OPTION AND GRANT PLAN

 

Pursuant to the Aptinyx Inc. 2015 Stock Option and Grant Plan (the “Plan”), Aptinyx Inc. a Delaware corporation (together with any successor, the “Company”), has granted to the individual named below, an option (the “Stock Option”) to purchase on or prior to the Expiration Date, or such earlier date as is specified herein, all or any part of the number of shares of Common Stock, par value $0.01 per share (“Common Stock”), of the Company indicated below (the “Shares”), at the Option Exercise Price per share, subject to the terms and conditions set forth in this Non-Qualified Stock Option Grant Notice (the “Grant Notice”), the attached Non-Qualified Stock Option Agreement (the “Agreement”) and the Plan.  This Stock Option is not intended to qualify as an “incentive stock option” as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).

 

Name of Optionee:

 

 

(the “Optionee”)

 

 

 

No. of Shares:

 

 

Shares of Common Stock

 

 

 

Grant Date:

 

 

 

 

 

Vesting Commencement Date:

 

 

(the “Vesting Commencement Date”)

 

 

 

 

Expiration Date:

 

 

(the “Expiration Date”)

 

 

 

Option Exercise Price/Share:

 

$

(the “Option Exercise Price”)

 

 

 

Vesting Schedule:

 

25 percent of the Shares shall vest and become exercisable on the first anniversary of the Vesting Commencement Date; provided that the Optionee continues to have a Service Relationship with the Company at such time. Thereafter, the remaining 75 percent of the Shares shall vest and become exercisable in 36 equal monthly installments following the first anniversary of the Vesting Commencement Date, provided the Optionee continues to have a Service Relationship with the Company at such time. Notwithstanding anything in the Agreement to the contrary, in the case of a Sale Event, this Stock Option and the Shares shall be treated as provided in Section 3(c) of the Plan.

 

 

Attachments :  Non-Qualified Stock Option Agreement, 2015 Stock Option and Grant Plan

 



 

NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE APTINYX INC.
2015 STOCK OPTION AND GRANT PLAN

 

All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Grant Notice and the Plan.

 

1.                                       Vesting, Exercisability and Termination .

 

(a)                                  No portion of this Stock Option may be exercised until such portion shall have vested and become exercisable.

 

(b)                                  Except as set forth below, and subject to the determination of the Committee in its sole discretion to accelerate the vesting schedule hereunder, this Stock Option shall be vested and exercisable on the respective dates indicated below:

 

(i)                                      This Stock Option shall initially be unvested and unexercisable.

 

(ii)                                   This Stock Option shall vest and become exercisable in accordance with the Vesting Schedule set forth in the Grant Notice.

 

(c)                                   Termination .  Except as may otherwise be provided by the Committee, if the Optionee’s Service Relationship is terminated, the period within which to exercise this Stock Option will be subject to earlier termination as set forth below (and if not exercised within such period, shall thereafter terminate subject, in each case, to Section 3(c) of the Plan):

 

(i)                                      Termination Due to Death or Disability .  If the Optionee’s Service Relationship terminates by reason of such Optionee’s death or Disability, this Stock Option may be exercised, to the extent exercisable on the date of such termination, by the Optionee, the Optionee’s legal representative or legatee for a period of 12 months from the date of death or Disability or until the Expiration Date, if earlier.

 

(ii)                                   Other Termination .  If the Optionee’s Service Relationship terminates for any reason other than death or Disability, and unless otherwise determined by the Committee, this Stock Option may be exercised, to the extent exercisable on the date of termination, for a period of 90 days from the date of termination or until the Expiration Date, if earlier; provided however , if the Optionee’s Service Relationship is terminated for Cause, this Stock Option shall terminate immediately upon the date of such termination.

 

For purposes hereof, the Committee’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees and any Permitted Transferee.  Any portion of this Stock Option that is not vested and exercisable on the date of termination of the Service Relationship shall terminate immediately and be null and void.

 

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2.                                       Exercise of Stock Option .

 

(a)                                  The Optionee may exercise this Stock Option only in the following manner:  Prior to the Expiration Date, the Optionee may deliver a Stock Option exercise notice (an “Exercise Notice”) in the form of Appendix A hereto indicating his or her election to purchase some or all of the Shares with respect to which this Stock Option is then exercisable.  Such notice shall specify the number of Shares to be purchased.  Payment of the purchase price may be made by one or more of the methods described in Section 5 of the Plan, subject to the limitations contained in such Section of the Plan, including the requirement that the Committee specifically approve in advance certain payment methods.

 

(b)                                  Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date.

 

3.                                       Incorporation of Plan .  Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan.

 

4.                                       Transferability of Stock Option .  This Stock Option is personal to the Optionee and is not transferable by the Optionee in any manner other than by will or by the laws of descent and distribution.  The Stock Option may be exercised during the Optionee’s lifetime only by the Optionee (or by the Optionee’s guardian or personal representative in the event of the Optionee’s incapacity).  The Optionee may elect to designate a beneficiary by providing written notice of the name of such beneficiary to the Company, and may revoke or change such designation at any time by filing written notice of revocation or change with the Company; such beneficiary may exercise the Optionee’s Stock Option in the event of the Optionee’s death to the extent provided herein.  If the Optionee does not designate a beneficiary, or if the designated beneficiary predeceases the Optionee, the legal representative of the Optionee may exercise this Stock Option to the extent provided herein in the event of the Optionee’s death.

 

5.                                       Restrictions on Transfer of Shares .  The Shares acquired upon exercise of the Stock Option shall be subject to certain transfer restrictions and other limitations including, without limitation, the provisions contained in Section 9 of the Plan.

 

6.                                       Miscellaneous Provisions .

 

(a)                                  Equitable Relief .  The parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Agreement and that equitable relief, including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement.

 

(b)                                  Adjustments for Changes in Capital Structure .  If, as a result of any reorganization, recapitalization, reincorporation, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Common Stock, the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of securities of the Company, the restrictions contained in this Agreement shall apply with equal force to additional and/or substitute securities, if any, received by the Optionee in exchange for, or by virtue of his or her ownership of, this Stock Option or Shares acquired pursuant thereto.

 

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(c)                                   Change and Modifications .  This Agreement may not be orally changed, modified or terminated, nor shall any oral waiver of any of its terms be effective.  This Agreement may be changed, modified or terminated only by an agreement in writing signed by the Company and the Optionee.

 

(d)                                  Governing Law .  This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of Illinois, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Illinois.

 

(e)                                   Headings .  The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Agreement and shall not be considered in the interpretation of this Agreement.

 

(f)                                    Saving Clause .  If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.

 

(g)                                   Notices .  All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid.  Notices to the Company or the Optionee shall be addressed as set forth underneath their signatures below, or to such other address or addresses as may have been furnished by such party in writing to the other.

 

(h)                                  Benefit and Binding Effect .  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, and legal representatives.  The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

 

(i)                                      Counterparts .  For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

 

(j)                                     Integration .  This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

 

7.                                       Dispute Resolution .

 

(a)                                  Except as provided below, any dispute arising out of or relating to the Plan or this Stock Option, this Agreement, or the breach, termination or validity of the Plan, this Stock Option or this Agreement, shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the “J.A.M.S. Rules”).  The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  The place of arbitration shall be the State of Illinois.

 

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(b)                                  The arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto.  In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses.  In addition, each party may take up to three depositions as of right, and the arbitrator may in his or her discretion allow additional depositions upon good cause shown by the moving party.  However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission.  In connection with any arbitration, each party to the arbitration shall provide to the other, no later than seven business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert.  The arbitrator’s decision and award shall be made and delivered within six months of the selection of the arbitrator.  The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability.  The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages, and each party hereby irrevocably waives any claim to such damages.

 

(c)                                   The Company, the Optionee, each party to the Agreement and any other holder of Shares issued pursuant to this Agreement (each, a “Party”) covenants and agrees that such party will participate in the arbitration in good faith.  This Section 7 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm.

 

(d)                                  Each Party (i) hereby irrevocably submits to the jurisdiction of any United States District Court of competent jurisdiction for the purpose of enforcing the award or decision in any such proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution (except as protected by applicable law), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (iii) hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court.  Each Party hereby consents to service of process by registered mail at the address to which notices are to be given.  Each Party agrees that its, his or her submission to jurisdiction and its, his or her consent to service of process by mail is made for the express benefit of each other Party.  Final judgment against any Party in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

 

[SIGNATURE PAGE FOLLOWS]

 

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The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned as of the date first above written.

 

 

APTINYX INC.

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

Address:

 

 

 

 

 

The undersigned hereby acknowledges receiving and reviewing a copy of the Plan, including, without limitation, Section 9 thereof, and understands that this Stock Option is subject to the terms of the Plan and of this Agreement.  This Agreement is hereby accepted, and the terms and conditions of the Plan, the Grant Notice and this Agreement, SPECIFICALLY INCLUDING THE ARBITRATION PROVISIONS SET FORTH IN SECTION 7 OF THIS AGREEMENT, are hereby agreed to, by the undersigned as of the date first above written.

 

 

OPTIONEE:

 

 

 

 

 

Name:

 

 

 

Address:

 

 

 

 

 

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[SPOUSE’S CONSENT(1)

 

I acknowledge that I have read the

 

foregoing Non-Qualified Stock Option Agreement

 

and understand the contents thereof.

 

 

 

                                                                      ]

 

 


(1)  A spouse’s consent is recommended only if the Optionee’s state of residence is one of the following community property states:  Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

 

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DESIGNATED BENEFICIARY:

 

 

 

 

 

 

 

Beneficiary’s Address:

 

 

 

 

 

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Appendix A

 

STOCK OPTION EXERCISE NOTICE

 

Aptinyx Inc.

Attention: [                    ]

 

 

Pursuant to the terms of the grant notice and stock option agreement between the undersigned and APTINYX INC. (the “Company”) dated            (the “Agreement”) under the Aptinyx Inc. 2015 Stock Option and Grant Plan, I, [Insert Name]                 , hereby [Circle One] partially/fully exercise such option by including herein payment in the amount of $       representing the purchase price for [Fill in number of Shares]         Shares.  I have chosen the following form(s) of payment:

 

o                                     1.                                       Cash

 

o                                     2.                                       Certified or bank check payable to Aptinyx Inc.

 

o                                     3.                                       Other (as referenced in the Agreement and described in the Plan (please describe))

.

 

In connection with my exercise of the option as set forth above, I hereby represent and warrant to the Company as follows:

 

(i)                                      I am purchasing the Shares for my own account for investment only, and not for resale or with a view to the distribution thereof.

 

(ii)                                   I have had such an opportunity as I have deemed adequate to obtain from the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company and have consulted with my own advisers with respect to my investment in the Company.

 

(iii)                                I have sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

(iv)                               I can afford a complete loss of the value of the Shares and am able to bear the economic risk of holding such Shares for an indefinite period of time.

 

(v)                                  I understand that the Shares may not be registered under the Securities Act of 1933 (it being understood that the Shares are being issued and sold in reliance on the exemption provided in Rule 701 thereunder) or any applicable state securities or “blue sky” laws and may not be sold or otherwise transferred or disposed of in the absence of an effective registration statement under the Securities Act of 1933 and under any applicable state securities or “blue sky” laws (or exemptions from the

 

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registration requirement thereof).  I further acknowledge that certificates representing Shares will bear restrictive legends reflecting the foregoing and/or that book entries for uncertificated Shares will include similar restrictive notations.

 

(vi)                               I have read and understand the Plan and acknowledge and agree that the Shares are subject to all of the relevant terms of the Plan, including without limitation, the transfer restrictions set forth in Section 9 of the Plan.

 

(vii)                            I understand and agree that the Company has a right of first refusal with respect to the Shares pursuant to Section 9(b) of the Plan.

 

(viii)                         I understand and agree that the Company has certain repurchase rights with respect to the Shares pursuant to Section 9(c) of the Plan.

 

(ix)                               I understand and agree that I may not sell or otherwise transfer or dispose of the Shares for a period of time following the effective date of a public offering by the Company as described in Section 9(f) of the Plan.

 

 

Sincerely yours,

 

 

 

 

 

Name:

 

 

 

Address:

 

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RESTRICTED STOCK AWARD NOTICE
UNDER THE APTINYX INC.
2015 STOCK OPTION AND GRANT PLAN

 

Pursuant to the Aptinyx Inc. 2015 Stock Option and Grant Plan (the “Plan”), Aptinyx Inc., a Delaware corporation (together with any successor, the “Company”), hereby grants, sells and issues to the individual named below, the Shares at the Per Share Purchase Price, subject to the terms and conditions set forth in this Restricted Stock Award Notice (the “Award Notice”), the attached Restricted Stock Agreement (the “Agreement”) and the Plan.  The Grantee agrees to the provisions set forth herein and acknowledges that each such provision is a material condition of the Company’s agreement to issue and sell the Shares to him or her.  The Company hereby acknowledges receipt of $ [       ] in full payment for the Shares.  All references to share prices and amounts herein shall be equitably adjusted to reflect stock splits, stock dividends, recapitalizations, mergers, reorganizations and similar changes affecting the capital stock of the Company, and any shares of capital stock of the Company received on or in respect of Shares in connection with any such event (including any shares of capital stock or any right, option or warrant to receive the same or any security convertible into or exchangeable for any such shares or received upon conversion of any such shares) shall be subject to this Agreement on the same basis and extent at the relevant time as the Shares in respect of which they were issued, and shall be deemed Shares as if and to the same extent they were issued at the date hereof.

 

Name of Grantee:                                                                                                                                                (the “Grantee”)

 

No. of Shares:                                                                                                                                                   Shares of Common Stock (the “Shares”)

 

Grant Date:                                                                                                                                                                            ,

 

Vesting Commencement Date:                                                                   ,         (the “Vesting Commencement Date”)

 

Per Share Purchase Price:                                                                         $            (the “Per Share Purchase Price”)

 

Vesting Schedule:                                                                                                                 25 percent of the Shares shall vest on the first anniversary of the Vesting Commencement Date; provided that the Grantee continues to have a Service Relationship with the Company at such time.  Thereafter, the remaining 75 percent of the Shares shall vest in 36 equal monthly installments following the first anniversary of the Vesting Commencement Date, provided the Grantee continues to have a Service Relationship with the Company at such time.  Notwithstanding anything in the Agreement to the contrary in the case of a Sale Event, the Shares of Restricted Stock shall be treated as provided in Section 3(c) of the Plan.

 

Attachments:  Restricted Stock Agreement, 2015 Stock Option and Grant Plan

 



 

RESTRICTED STOCK AGREEMENT
UNDER THE APTINYX INC.
2015 STOCK OPTION AND GRANT PLAN

 

All capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Award Notice and the Plan.

 

1.                                       Purchase and Sale of Shares; Vesting; Investment Representations .

 

(a)                                  Purchase and Sale .  The Company hereby sells to the Grantee, and the Grantee hereby purchases from the Company, the number of Shares set forth in the Award Notice for the Per Share Purchase Price.

 

(b)                                  Vesting .  Initially, all of the Shares are non-transferable and subject to a substantial risk of forfeiture and are Shares of Restricted Stock.  The risk of forfeiture shall lapse with respect to the Shares on the respective dates indicated on the Vesting Schedule set forth in the Award Notice.

 

(c)                                   Investment Representations .  In connection with the purchase and sale of the Shares contemplated by Section 1(a) above, the Grantee hereby represents and warrants to the Company as follows:

 

(i)                                      The Grantee is purchasing the Shares for the Grantee’s own account for investment only, and not for resale or with a view to the distribution thereof.

 

(ii)                                   The Grantee has had such an opportunity as he or she has deemed adequate to obtain from the Company such information as is necessary to permit him or her to evaluate the merits and risks of the Grantee’s investment in the Company and has consulted with the Grantee’s own advisers with respect to the Grantee’s investment in the Company.

 

(iii)                                The Grantee has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Shares and to make an informed investment decision with respect to such purchase.

 

(iv)                               The Grantee can afford a complete loss of the value of the Shares and is able to bear the economic risk of holding such Shares for an indefinite period.

 

(v)                                  The Grantee understands that the Shares are not registered under the Act (it being understood that the Shares are being issued and sold in reliance on the exemption provided in Rule 701 thereunder) or any applicable state securities or “blue sky” laws and may not be sold or otherwise transferred or disposed of in the absence of an effective registration statement under the Act and under any applicable state securities or “blue sky” laws (or exemptions from the registration requirements thereof).  The Grantee further acknowledges that certificates representing the Shares will bear

 

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restrictive legends reflecting the foregoing and/or that book entries for uncertificated Shares will include similar restrictive notations.

 

(vi)                               The Grantee has read and understands the Plan and acknowledges and agrees that the Shares are subject to all of the relevant terms of the Plan, including without limitation, the transfer restrictions set forth in Section 9 of the Plan.

 

(vii)                            The Grantee understands and agrees that the Company has a right of first refusal with respect to the Shares pursuant to Section 9(b) of the Plan.

 

(viii)                         The Grantee understands and agree that the Company has certain repurchase rights with respect to the Shares pursuant to Section 9(c) of the Plan.

 

(ix)                               The Grantee understands and agrees that the Grantee may not sell or otherwise transfer or dispose of the Shares for a period of time following the effective date of a public offering by the Company as described in Section 9(f) of the Plan.

 

2.                                       Repurchase Right .  Upon a Termination Event, the Company shall have the right to repurchase Shares of Restricted Stock that are unvested as of the date of such Termination Event as set forth in Section 9(c) of the Plan.

 

3.                                       Restrictions on Transfer of Shares .  The Shares (whether or not vested) shall be subject to certain transfer restrictions and other limitations including, without limitation, the provisions contained in Section 9 of the Plan

 

4.                                       Incorporation of Plan .  Notwithstanding anything herein to the contrary, this Restricted Stock Award shall be subject to and governed by all the terms and conditions of the Plan.

 

5.                                       Miscellaneous Provisions .

 

(a)                                  Record Owner; Dividends .  The Grantee and any Permitted Transferees, during the duration of this Agreement, shall be considered the record owners of and shall be entitled to vote the Shares if and to the extent the Shares are entitled to voting rights.  The Grantee and any Permitted Transferees shall be entitled to receive all dividends and any other distributions declared on the Shares; provided , however , that the Company is under no duty to declare any such dividends or to make any such distribution.

 

(b)                                  Section 83(b) Election .  The Grantee shall consult with the Grantee’s tax advisor to determine whether it would be appropriate for the Grantee to make an election under Section 83(b) of the Code with respect to this Award.  Any such election must be filed with the Internal Revenue Service within 30 days of the date of this Award.  If the Grantee makes an election under Section 83(b) of the Code, the Grantee shall give prompt notice to the Company (and provide a copy of such election to the Company).

 

(c)                                   Equitable Relief .  The parties hereto agree and declare that legal remedies may be inadequate to enforce the provisions of this Agreement and that equitable relief,

 

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including specific performance and injunctive relief, may be used to enforce the provisions of this Agreement.

 

(d)                                  Change and Modifications .  This Agreement may not be orally changed, modified or terminated, nor shall any oral waiver of any of its terms be effective. This Agreement may be changed, modified or terminated only by an agreement in writing signed by the Company and the Grantee.

 

(e)                                   Governing Law .  This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of Illinois, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Illinois.

 

(f)                                    Headings .  The headings are intended only for convenience in finding the subject matter and do not constitute part of the text of this Agreement and shall not be considered in the interpretation of this Agreement.

 

(g)                                   Saving Clause .  If any provision(s) of this Agreement shall be determined to be illegal or unenforceable, such determination shall in no manner affect the legality or enforceability of any other provision hereof.

 

(h)                                  Notices .  All notices, requests, consents and other communications shall be in writing and be deemed given when delivered personally, by telex or facsimile transmission or when received if mailed by first class registered or certified mail, postage prepaid.  Notices to the Company or the Grantee shall be addressed as set forth underneath their signatures below, or to such other address or addresses as may have been furnished by such party in writing to the other.

 

(i)                                      Benefit and Binding Effect .  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors, assigns, and legal representatives.  The Company has the right to assign this Agreement, and such assignee shall become entitled to all the rights of the Company hereunder to the extent of such assignment.

 

(j)                                     Counterparts .  For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document.

 

(k)                                  Integration .  This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.

 

6.                                       Dispute Resolution .

 

(a)                                  Except as provided below, any dispute arising out of or relating to the Plan or the Shares, this Agreement, or the breach, termination or validity of the Plan, the Shares or this Agreement, shall be finally settled by binding arbitration conducted expeditiously in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the

 

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“J.A.M.S. Rules”).  The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Sections 1 - 16, and judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.  The place of arbitration shall be the State of Illinois.

 

(b)                                  The arbitration shall commence within 60 days of the date on which a written demand for arbitration is filed by any party hereto.  In connection with the arbitration proceeding, the arbitrator shall have the power to order the production of documents by each party and any third-party witnesses.  In addition, each party may take up to three depositions as of right, and the arbitrator may in his or her discretion allow additional depositions upon good cause shown by the moving party.  However, the arbitrator shall not have the power to order the answering of interrogatories or the response to requests for admission.  In connection with any arbitration, each party to the arbitration shall provide to the other, no later than seven business days before the date of the arbitration, the identity of all persons that may testify at the arbitration and a copy of all documents that may be introduced at the arbitration or considered or used by a party’s witness or expert.  The arbitrator’s decision and award shall be made and delivered within six months of the selection of the arbitrator.  The arbitrator’s decision shall set forth a reasoned basis for any award of damages or finding of liability.  The arbitrator shall not have power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages, and each party hereby irrevocably waives any claim to such damages.

 

(c)                                   The Company, the Grantee, each party to the Agreement and any other holder of Shares issued pursuant to this Agreement (each, a “Party”) covenants and agrees that such party will participate in the arbitration in good faith.  This Section 6 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm.

 

(d)                                  Each Party (i) hereby irrevocably submits to the jurisdiction of any United States District Court of competent jurisdiction for the purpose of enforcing the award or decision in any such proceeding, (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment or execution (except as protected by applicable law), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and (iii) hereby waives and agrees not to seek any review by any court of any other jurisdiction which may be called upon to grant an enforcement of the judgment of any such court.  Each Party hereby consents to service of process by registered mail at the address to which notices are to be given.  Each Party agrees that its, his or her submission to jurisdiction and its, his or her consent to service of process by mail is made for the express benefit of each other Party.  Final judgment against any Party in any such action, suit or proceeding may be enforced in other jurisdictions by suit, action or proceeding on the judgment, or in any other manner provided by or pursuant to the laws of such other jurisdiction.

 

[SIGNATURE PAGE FOLLOWS]

 

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The foregoing Restricted Stock Agreement is hereby accepted and the terms and conditions thereof are hereby agreed to by the undersigned as of the date first above written.

 

 

APTINYX INC.

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

Address:

 

 

The undersigned hereby acknowledges receiving and reviewing a copy of the Plan, including, without limitation, Section 9 thereof and understands that the Shares granted hereby are subject to the terms of the Plan and of this Agreement.  This Agreement is hereby accepted, and the terms and conditions of the Plan, the Award Notice and this Agreement, SPECIFICALLY INCLUDING THE ARBITRATION PROVISIONS SET FORTH IN SECTION 6 OF THIS AGREEMENT, are hereby agreed to, by the undersigned as of the date first above written.

 

 

GRANTEE:

 

 

 

 

 

Name:

 

 

 

Address:

 

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[SPOUSE’S CONSENT(1)

 

I acknowledge that I have read the

 

foregoing Restricted Stock Agreement

 

and understand the contents thereof.

 

 

 

                                                                      ]

 

 


(1)  A spouse’s consent is required only if the Grantee’s state of residence is one of the following community property states:  Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington and Wisconsin.

 

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APTINYX INC.

 

FIRST AMENDMENT TO 2015 STOCK OPTION AND GRANT PLAN

 

May 4, 2016

 

In accordance with Section 12 of the Aptinyx Inc. (the “ Company ”) 2015 Stock Option and Grant Plan (the “ Plan ”), the Plan is hereby amended as follows:

 

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

 

“(a)                            Stock Issuable .  The maximum number of Shares reserved and available for issuance under the Plan shall be 62,448,056 Shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the Shares underlying any Awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) and Shares that are withheld upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall be added back to the Shares available for issuance under the Plan. Subject to such overall limitations, Shares may be issued up to such maximum number pursuant to any type or types of Award, and no more than 62,448,056 Shares may be issued pursuant to Incentive Stock Options.  The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.  Beginning on the date that the Company becomes subject to Section 162(m) of the Code, Options with respect to no more 62,448,056 Shares shall be granted to any one individual in any calendar year period.”

 

This First Amendment to the Plan (this “ Amendment ”) constitutes an integral part of the Plan.  For all purposes of this Amendment, capitalized terms used herein without definition shall have the meanings specified in the Plan, as the Plan shall be in effect on the date hereof after giving effect to the Amendment.

 

This Amendment is executed pursuant to Section 12 of the Plan and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Plan, including Section 12 thereof.  Except as expressly amended or waived by the terms of this Amendment, the terms and conditions of the Plan shall remain unamended and unwaived.  The amendment set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment or, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of the Company.

 


 

APTINYX INC.

 

SECOND AMENDMENT TO 2015 STOCK OPTION AND GRANT PLAN

 

January 10, 2017

 

In accordance with Section 12 of the Aptinyx Inc. (the “ Company ”) 2015 Stock Option and Grant Plan (the “ Plan ”), the Plan is hereby amended as follows:

 

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

 

“(a)                            Stock Issuable .  The maximum number of Shares reserved and available for issuance under the Plan shall be 84,108,871 Shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the Shares underlying any Awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) and Shares that are withheld upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall be added back to the Shares available for issuance under the Plan. Subject to such overall limitations, Shares may be issued up to such maximum number pursuant to any type or types of Award, and no more than 84,108,871 Shares may be issued pursuant to Incentive Stock Options.  The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.  Beginning on the date that the Company becomes subject to Section 162(m) of the Code, Options with respect to no more 84,108,871 Shares shall be granted to any one individual in any calendar year period.”

 

This Second Amendment to the Plan (this “ Amendment ”) constitutes an integral part of the Plan.  For all purposes of this Amendment, capitalized terms used herein without definition shall have the meanings specified in the Plan, as the Plan shall be in effect on the date hereof after giving effect to the Amendment.

 

This Amendment is executed pursuant to Section 12 of the Plan and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Plan, including Section 12 thereof.  Except as expressly amended or waived by the terms of this Amendment, the terms and conditions of the Plan shall remain unamended and unwaived.  The amendment set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment or, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of the Company.

 


 

APTINYX INC.

 

THIRD AMENDMENT TO 2015 STOCK OPTION AND GRANT PLAN

 

December 11, 2017

 

In accordance with Section 12 of the Aptinyx Inc. (the “ Company ”) 2015 Stock Option and Grant Plan (the “ Plan ”), the Plan is hereby amended as follows:

 

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

 

“(a)                            Stock Issuable .  The maximum number of Shares reserved and available for issuance under the Plan shall be 149,201,692 Shares, subject to adjustment as provided in Section 3(b). For purposes of this limitation, the Shares underlying any Awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise terminated (other than by exercise) and Shares that are withheld upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall be added back to the Shares available for issuance under the Plan. Subject to such overall limitations, Shares may be issued up to such maximum number pursuant to any type or types of Award, and no more than 149,201,692 Shares may be issued pursuant to Incentive Stock Options.  The Shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.  Beginning on the date that the Company becomes subject to Section 162(m) of the Code, Options with respect to no more 149,201,692 Shares shall be granted to any one individual in any calendar year period.”

 

This Third Amendment to the Plan (this “ Amendment ”) constitutes an integral part of the Plan.  For all purposes of this Amendment, capitalized terms used herein without definition shall have the meanings specified in the Plan, as the Plan shall be in effect on the date hereof after giving effect to the Amendment.

 

This Amendment is executed pursuant to Section 12 of the Plan and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with all of the terms and provisions of the Plan, including Section 12 thereof.  Except as expressly amended or waived by the terms of this Amendment, the terms and conditions of the Plan shall remain unamended and unwaived.  The amendment set forth herein shall be limited precisely as provided for herein to the provisions expressly amended herein and shall not be deemed to be a waiver of, amendment or, consent to or modification of any other term or provision of any other document or of any transaction or further action on the part of the Company.

 




Exhibit 10.7

 

 

 

RESEARCH COLLABORATION AGREEMENT

 

BY AND BETWEEN

 

NAUREX INC.

 

AND

 

APTINYX INC.

 

DATED AS OF JULY 24, 2015

 

 

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

TABLE OF CONTENTS

 

 

 

PAGE

ARTICLE 1

DEFINED TERMS

1

Section 1.1.

Definitions

1

Section 1.2.

Descriptive Headings; Certain Interpretations

13

 

 

 

ARTICLE 2

RESEARCH PROGRAM

14

Section 2.1.

General

14

Section 2.2.

Research Plan and Research Activities

14

Section 2.3.

Conduct of the Research Program; Diligence

19

Section 2.4.

Research Term

20

Section 2.5.

Research Program Personnel; Subcontracting

20

Section 2.6.

Project Personnel

21

Section 2.7.

Facilities and Materials

21

Section 2.8.

Records and Disclosure/Reports

21

Section 2.9.

Additional Activities

22

 

 

 

ARTICLE 3

EXCLUSIVE OPTION OF THE COMPANY

22

Section 3.1.

Exclusive Option

22

Section 3.2.

Assignment of Compound-Specific Technology

23

Section 3.3.

Transfer of Information

25

Section 3.4.

Non-Exercise of the Option

25

Section 3.5.

Preservation of Option

25

Section 3.6.

Exclusivity

26

Section 3.7.

Change of Control

26

Section 3.8.

Restriction on the Company

27

 

 

 

ARTICLE 4

PAYMENTS

28

Section 4.1.

Prepaid Research Expenses

28

Section 4.2.

Funded SpinCo Activities

28

Section 4.3.

FTE Records and Audit Rights

31

Section 4.4.

Option Exercise Fee

32

Section 4.5.

Payment Method; Foreign Exchange

32

Section 4.6.

Taxes

32

Section 4.7.

Interest on Overdue Payments

32

 

 

 

ARTICLE 5

GOVERNANCE

33

Section 5.1.

Research Project Coordinators

33

Section 5.2.

Joint Steering Committee

33

Section 5.3.

Expenses

36

 

 

 

ARTICLE 6

INTELLECTUAL PROPERTY

36

Section 6.1.

Collaboration Inventions

36

Section 6.2.

Inventorship

36

Section 6.3.

Licenses to the Company

36

 

ii



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Section 6.4.

Licenses to SpinCo

39

Section 6.5.

Prosecution and Maintenance of Patent Rights

40

Section 6.6.

Enforcement and Defense of Patent Rights

42

Section 6.7.

Potential Infringement of Third Party Rights

43

Section 6.8.

Section 365(n) of the Bankruptcy Code

44

Section 6.9.

Patent Term Extension and Orange Book Listing

44

Section 6.10.

No Implied Licenses

45

 

 

 

ARTICLE 7

CONFIDENTIALITY

45

Section 7.1.

Confidentiality

45

Section 7.2.

Exceptions

46

Section 7.3.

Authorized Disclosure

47

Section 7.4.

Nondisclosure of Terms

49

Section 7.5.

Press Releases and Announcements

49

Section 7.6.

Publications and Presentations

50

Section 7.7.

Use of Name

50

 

 

 

article 8

REPRESENTATIONS, WARRANTIES AND COVENANTS

50

Section 8.1.

Representations, Warranties and Covenants

50

Section 8.2.

Additional Representations, Warranties and Covenants of SpinCo

51

Section 8.3.

No Other Warranties

53

 

 

 

ARTICLE 9

INDEMNIFICATION

53

Section 9.1.

Indemnification by the Company

53

Section 9.2.

Indemnification by SpinCo

53

Section 9.3.

Indemnification Procedures

54

Section 9.4.

Insurance

55

 

 

 

ARTICLE 10

TERMINATION

56

Section 10.1.

Termination

56

Section 10.2.

Termination Upon Notice

56

Section 10.3.

Termination for Insolvency

56

Section 10.4.

Effect of Termination or Expiration

56

Section 10.5.

Accrued Rights

57

Section 10.6.

Survival

57

Section 10.7.

Termination Not Sole Remedy

57

 

 

 

ARTICLE 11

MISCELLANEOUS

58

Section 11.1.

Notices

58

Section 11.2.

Assignment

59

Section 11.3.

Relationship of the Parties

59

Section 11.4.

Equitable Relief

60

Section 11.5.

Amendment and Waiver

60

Section 11.6.

Entire Agreement

60

Section 11.7.

No Third-Party Beneficiaries

60

 

iii



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Section 11.8

Export Control

60

Section 11.9.

Counterparts

61

Section 11.10.

Dispute Resolution

61

Section 11.11.

Performance Warranty

61

Section 11.12.

Governing Law; Venue

61

Section 11.13.

Severability

61

Section 11.14.

Force Majeure

61

Section 11.15.

Consequential Damages

62

 

EXHIBITS :

 

 

 

Exhibit A

Initial Research Plan

 

 

SCHEDULES :

 

 

 

Schedule 1

Preliminary Data Package Information

 

 

Schedule 2

Exception Compounds

 

 

Schedule 3

Excluded Compounds

 

 

Schedule 4

Disorders and Conditions in the Field

 

 

Schedule 5

Preliminary Initial Screening Results

 

 

Schedule 6

Knowledge Persons

 

 

Schedule 7

Key Personnel

 

 

Schedule 8

SpinCo In-Licenses

 

iv



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

RESEARCH COLLABORATION AGREEMENT

 

This Research Collaboration Agreement (this “ Agreement ”), dated as of July 24, 2015 (the “ Execution Date ”), is entered into by and between Naurex Inc., a Delaware corporation (the “ Company ”) and Aptinyx Inc., a Delaware corporation (“ SpinCo ”).  The Company and SpinCo are each referred to herein by name or as a “ Party ” or, collectively, as “ Parties ”.

 

RECITALS

 

WHEREAS, Actavis W.C. Holding Inc., a Delaware corporation (“ Buyer ”), the Company and SpinCo are parties to that certain Agreement and Plan of Merger of even date herewith among Allergan plc, a public limited company organized under the laws of Ireland, Buyer, Ursa Major Merger Sub Inc., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the Shareholders’ Representative (the “ Merger Agreement ”); and

 

WHEREAS, this Agreement shall become effective only as of the Closing Date (as defined in the Merger Agreement) (the “ Effective Date ”); and

 

WHEREAS, concurrently with the execution and delivery of the Merger Agreement and as a condition and inducement for Buyer to enter into the Merger Agreement, the Company and SpinCo have agreed to enter into this Agreement, pursuant to which, among other things, the Company and SpinCo will collaborate in the research and discovery of small molecules that modulate the NMDA receptors (as defined below).

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the Parties agree as follows:

 

ARTICLE 1
DEFINED TERMS

 

Section 1.1.           Definitions .  As used herein, the following terms shall have the following meanings:

 

Acquired Compound ” means a Company Selected Compound for which the Company exercises an Option pursuant to Section 3.1, and any [***].

 

Acquired Product ” means any product that contains, or otherwise incorporates, an Acquired Compound.

 

Affiliate ” means, with respect to a Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person; provided that, for purposes of this definition, “control” means, with respect to a Person, direct or indirect ownership of fifty percent (50%) or more, including

 

1



 

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ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such Person, or the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, by board of director membership or representation, or otherwise.

 

Agreement ” is defined in the preamble of this Agreement.

 

Assignment Notice ” is defined in Section 3.2(c).

 

Assignment Notice Date ” is defined in Section 3.2(c).

 

Budgeted Amounts ” is defined in Section 2.2(a).

 

Business Day ” means a day other than Saturday, Sunday or any other day on which commercial banks located in the State of New York are authorized or obligated by applicable Laws to close.

 

Buyer ” is defined in the preamble of this Agreement.

 

Calendar Quarter ” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date and the last Calendar Quarter shall end on the last day of the Term.

 

Calendar Year ” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.

 

Change of Control ” means, with respect to a Party, the merger or sale of such Party or the sale or transfer of all or substantially all of the assets of such Party to a Third Party that is not an Affiliate of such Party.

 

Collaboration Compound ” means (a) any Existing Compounds and (b) any other small molecule compounds that are identified, generated, discovered, or developed by or on behalf of SpinCo or its Affiliates in the conduct of the Research Activities, excluding any Excluded Compound or any Company Compound (as defined in the License Agreement).

 

Commercially Reasonable Efforts ” means, with respect to the performance by SpinCo of SpinCo Activities hereunder, the carrying out of such activity in a sustained and diligent manner using efforts and resources comparable to the efforts and resources commonly used by a company in the research-based pharmaceutical industry in pursuing the discovery and research of compounds that are at a similar stage of discovery and research as the compounds included as part of the Research Program.  Without limitation to the foregoing, in the case of

 

2



 

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SpinCo, such efforts and resources shall be no less than the efforts and resources used by SpinCo in relation to its research and other activities with respect to compounds and products for use outside the Field and in other research programs of SpinCo.

 

Company ” is defined in the preamble of this Agreement.

 

Company Collaboration Know-How ” means Information, other than SpinCo Improvements, that is Invented by the Company or its Affiliates (or by Third Parties working on behalf of the Company or its Affiliates) after the Effective Date in connection with the conduct of the Research Activities. Company Collaboration Know-How shall exclude Joint Collaboration Know-How.

 

Company Collaboration Patent Rights ” means Patent Rights that cover or claim inventions or discoveries that are Invented by the Company or its Affiliates (or by Third Parties working on behalf of the Company or its Affiliates) after the Effective Date in connection with the conduct of the Research Activities.  Company Collaboration Patent Rights shall exclude Joint Collaboration Patent Rights.

 

Company Compound ” has the meaning ascribed to such term in the License Agreement.

 

Company Indemnified Party ” is defined in Section 9.2.

 

Company In-License Agreement ” is defined in Section 6.4(b).

 

Company Selected Compounds ” means the Eligible Compounds selected by the Company in accordance with Section 2.2(c)(iii).

 

Competing Business ” is defined in Section 3.6.

 

Compound-Specific Know-How ” means, with respect to an Acquired Compound, [***].

 

Compound-Specific Patent Rights ” means those Patent Rights that solely cover or claim (a) the composition of matter, manufacture or use of any Acquired Compounds or Acquired Products or the other Exploitation of any Acquired Compounds or Acquired Products, or (b) any Compound-Specific Know-How.

 

Compound-Specific Technology ” means, with respect to an Acquired Compound, the Compound-Specific Know-How and Compound-Specific Patent Rights.

 

Confidential Acquired Compound Information ” is defined in Section 7.1(b)(iii).

 

Confidential Information ” is defined in Section 7.1(a).

 

Confidentiality Term ” is defined in Section 7.1(a).

 

3


 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Contributed Intellectual Property ” has the meaning ascribed to such term in the Reorganization Agreement.

 

Control ” means, with respect to any item of Information, Patent Rights or other intellectual property rights, the possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such Information, Patent Rights or other intellectual property rights, as provided for herein without violating the terms of any agreement or other arrangement with any Third Party and without violating any applicable Laws.  For clarity, no Party (or Affiliate of a Party, as applicable) shall be deemed to Control any Information, Patent Rights or other intellectual property rights by virtue of the license grants to that Party by the other Party as set forth in this Agreement.

 

Data Package ” means, with respect to a Company Selected Compound, all Information that is [***].  The Data Package shall include, at a minimum, the types of Information set forth on Schedule 1 .

 

Data Package Delivery Date ” is defined in Section 3.1(b).

 

Declined Compound ” means any Collaboration Compound that (a) as of the end of the Research Term, Company has not selected as a Company Selected Compound, as provided in Section 2.2(c)(iii), or (b) as of the end of the Option Period, is a Company Selected Compound for which Company has not exercised an Option, as provided in Section 3.4.

 

Dedicated FTE Resource ” is defined in Section 4.2(a)(i).

 

Designated Officers ” is defined in Section 5.2(d).

 

Development Services Agreement ” means the development services agreement by and between the Company and SpinCo of even date herewith.

 

Disputed Matter ” is defined in Section 5.2(d).

 

Effective Date ” is defined in the Recitals.

 

Eligible Compound ” is defined in Section 2.2(c)(ii).

 

Eligible Compound Notice ” is defined in Section 2.2(c)(ii).

 

Eligible Compound Pool ” means the collection of Collaboration Compounds consisting of one or more Eligible Compounds as designated from time to time by the JSC.

 

Eligible Compound Pool Satisfaction ” means, with respect to a Party’s Eligible Compound Selection Period, that the Eligible Compound Pool contains at least [***] Eligible Compounds that are not Terminated Compounds, and that at least [***] of such Eligible Compounds has been added to the Eligible Compound Pool after the last Pick of the other Party.

 

4



 

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Eligible Compound Pool Satisfaction Notice ” is defined in Section 2.2(c)(ii).

 

Eligible Compound Selection Period ” means, with respect to a Party, [***].

 

Exception Compound ” means [***].

 

Excluded Compound ” means [***].

 

Exclusivity Period ” means the period commencing on the Effective Date and ending on the [***] anniversary of the last day of the Term.

 

Execution Date ” is defined in the Preamble of this Agreement.

 

Existing Compound ” means any small molecule compound, other than the Excluded Compounds, that is owned or Controlled by SpinCo as of the Effective Date as a result of the Reorganization.

 

Exploit ” and “ Exploitation ” means to research, develop, import, export, make, have made, use, sell, offer for sale and otherwise exploit, including all registration, modification, enhancement, improvement, manufacture, storage, formulation, exportation, transportation, distribution, promotion and marketing activities related thereto.

 

Exploitation License ” is defined in Section 6.3(b).

 

Extended IP Access Period ” means the period commencing on the last day of the Term and ending on the [***] anniversary thereof.

 

Extended IP Access Period Patent Rights ” means any Patent Rights that first meet the definition of SpinCo Background Patent Rights or SpinCo Platform Patent Rights during the Extended IP Access Period and not during the Term.

 

Field ” means any therapeutic, prophylactic or diagnostic use for (a) the psychiatric disorders or conditions set forth on Schedule 4 , or (b) the neurocognitive disorders or conditions set forth on Schedule 4 .

 

FFDCA ” means the United States Federal Food, Drug, and Cosmetic Act.

 

Force Majeure ” means any event that is beyond a non-performing Party’s reasonable control, including an act of God, strike, lock-out or other industrial/labor disputes (whether involving the workforce of the Party so prevented or of any other Person), war, riot, civil commotion, terrorist act, malicious damage, epidemic, quarantine, fire, flood, storm, or natural disaster or compliance with any new, changed (including changed interpretations thereof), or reasonably unanticipated Law or governmental order, rule, regulation or direction (including changes in the requirements of a Governmental Entity), whether or not it is later held to be invalid, except to the extent any such Law or governmental order, rule, regulation or direction operates to delay or prevent the non-performing Party’s performance as a result of or in

 

5



 

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connection with any breach by such Party or any of its Affiliates of any term or condition (including any representation or warranty) of this Agreement.

 

FTE ” means a full-time, equivalent person year, based upon a total of [***] hours per year of scientific or technical work in connection with the Funded SpinCo Activities.

 

FTE Cost ” means, for any period during the Term, the applicable FTE Rate multiplied by the applicable number of FTEs to be expended over such period.

 

FTE Rate ” means [***]. The FTE Rate shall be adjusted annually for each Calendar Year after 2016 to be equal to the FTE Rate as of the Effective Date or the preceding Calendar Year, as the case may be, plus a percentage increase equal to the percentage increase in such Calendar Year in the Consumer Price Index for all Urban Consumers, as published by the U.S. Department of Labor, Bureau of Statistics.

 

Funded SpinCo Activities ” means the conduct by or on behalf of SpinCo of the following activities in accordance with the Research Plan and this Agreement: [***].

 

GAAP ” means United States generally accepted accounting principles, consistently applied.

 

Governmental Entity ” means any instrumentality, subdivision, court, administrative agency, commission, official or other authority of any country, state, province, prefect, municipality, locality or other government or political subdivision thereof, or any multinational organization or authority, or any quasi-governmental, private body or arbitral body exercising any executive, legislative, judicial, quasi-judicial, regulatory, taxing, importing, administrative or other governmental or quasi-governmental authority.

 

Grantback In-License Notice ” is defined in Section 6.4(b).

 

Grantback License ” is defined in Section 6.4(b).

 

Grantback Patent Rights ” means any Compound-Specific Patent Rights that are licensed by SpinCo to the Company pursuant to Section 6.3 or assigned by SpinCo to the Company pursuant to Section 3.2.

 

Grantback Third Party Obligations ” is defined in Section 6.4(b).

 

Indemnification Claim Notice ” is defined in Section 9.3(a).

 

Indemnified Party ” means the Company, in the case of a Company Indemnified Party, or SpinCo, in the case of a SpinCo Indemnified Party.

 

Indemnifying Party ” means the Company or SpinCo, as applicable, as the Party against whom a claim for indemnification is being asserted under Article 9.

 

6



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Independent Accountant ” means an internationally recognized independent registered public accounting firm selected by the Company and reasonably acceptable to SpinCo.

 

Information ” means information, data, discoveries, inventions, methods, and processes (in each case, whether patentable or not), including (a) techniques and data, including screens, models, methods, test data, including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and information and (b) to the extent the term is used in a context which applies to tangible items (as opposed to intangible items), Materials.

 

Infringement/Challenge ” is defined in Section 6.6(a).

 

Initial Eligible Compound Selection Period ” is defined in Section 2.2(c)(iii)(A).

 

Initial Screening Process ” means those tests, assays, studies and other activities to be performed in order for a Collaboration Compound to be designated a Eligible Compound by the JSC, as such tests, assays, studies and other activities are more fully defined in the Research Plan.

 

Initial Screening Results ” means, with respect to a Collaboration Compound, all Information that is (a) generated by or on behalf of SpinCo or its Affiliates under the Research Plan or otherwise in the Control of SpinCo or its Affiliates and (b) reasonably necessary or useful for the JSC to make a fully informed decision about whether or not to designate such Collaboration Compound as an Eligible Compound. The Initial Screening Results shall include, at a minimum, the types of Information set forth on Schedule 5 .  For clarity, as used in the definition of Initial Screening Results, Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

Initial Transfer ” is defined in Section 3.3.

 

Invented ” means invented, developed, generated, discovered, conceived, reduced to practice, created, or otherwise made (with a correlative meaning for “ Invention ”).

 

Joint Collaboration Know-How ” means any Information, other than SpinCo Improvements, that is Invented in connection with the conduct of the Research Activities jointly by (a) the Company or its Affiliates or Third Parties working on behalf of the Company or its Affiliates and (b) SpinCo or its Affiliates or Third Parties working on behalf of SpinCo or its Affiliates. Joint Collaboration Know-How shall exclude, after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

Joint Collaboration Patent Rights ” means any Patent Rights that cover or claim inventions or discoveries that are Invented in connection with the conduct of the Research Activities jointly by (a) the Company or its Affiliates or by Third Parties working on behalf of the Company or its Affiliates and (b) SpinCo or its Affiliates or by Third Parties working on behalf of SpinCo or its Affiliates. Joint Collaboration Patent Rights shall exclude any

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Compound-Specific Patent Rights that are assigned to the Company pursuant to Section 3.2 from and after the effective date of such assignment.

 

Joint Collaboration Technology ” means, collectively, the Joint Collaboration Know-How and the Joint Collaboration Patent Rights .

 

Joint Steering Committee ” or “ JSC ” is defined in Section 5.2.

 

Key Personnel ” is defined in Section 2.6.

 

Knowledge ” or variations thereof means the actual knowledge of those individuals listed on Schedule 6 , including in each case, the knowledge such individuals would reasonably be expected to have after reasonable inquiry.

 

Law ” means any federal, state, territorial, foreign or local law, common law, statute, ordinance, judicial decision, rule, regulation or code of any Governmental Entity or any domestic or foreign institutional review board, privacy board or ethics committee.

 

Lead Litigation Party ” is defined in Section 6.6(a)(iii).

 

Licensed Technology ” is defined in Section 6.3(a).

 

Lien ” means any lien, security interest, mortgage, pledge, lease, adverse claim, levy, charge or other encumbrance or restriction of any kind, whether arising by contract or by operation of Law, or any conditional sale contract, title retention contract or other contract to grant any of the foregoing.

 

Losses ” means any claims, actions, causes of action, Judgments (as defined in the Merger Agreement), suits, fines, Liabilities (as defined in the Merger Agreement), losses, costs (including the costs of defense and enforcement of this Agreement), damages, expenses or amounts paid in settlement (in each case, including reasonable attorneys’ and experts’ fees and expenses).

 

Materials ” means compositions of matter, including (a) compounds and (b) tangible materials used in assays.

 

Merger Agreement ” is defined in the Recitals.

 

NMDA ” means N-methyl-D-aspartate.

 

Non-Acquired Compounds ” means any Collaboration Compounds other than Acquired  Compounds.

 

Non-Acquired Products ” means any products that incorporate a Collaboration Compound, other than any product that contains or otherwise incorporates an Acquired Compound or any Company Compound.

 

Non-Pick Notice ” is defined in Section 2.2(c)(iii)(A).

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Option ” is defined in Section 3.1.

 

Option Exercise Date ” means, with respect to any Company Selected Compound for which the Company exercises an Option, the date on which the Company provides the Option Exercise Notice to SpinCo in accordance with Section 3.1(c) and pays the Option Exercise Fee pursuant to Section 4.4.

 

Option Exercise Fee ” is defined in Section 4.4.

 

Option Exercise Notice ” is defined in Section 3.1(c).

 

Option Period ” means, the period of time beginning on the Effective Date and ending on the date that is one hundred eighty (180) days after the last day of the Research Term, as such period may be adjusted with respect to particular Company Selected Compounds pursuant to Section 3.1(b), or such longer period as the Parties may agree; provided that the Option Period shall be deemed to expire for all Company Selected Compounds on the date on which the Company has exercised Options for a total of three (3) Acquired Compounds.

 

Orange Book ” means the United States Food and Drug Administration’s publication, Approved Drug Products with Therapeutic Equivalence Evaluation , commonly known as the “Orange Book.”

 

Out of Budget Amounts ” is defined in Section 4.2(d).

 

Out-of-Pocket Expenses ” means, with respect to the Funded SpinCo Activities, SpinCo’s actual, reasonably incurred, documented, out-of-pocket expenses incurred in performing the Funded SpinCo Activities to the extent not included in the FTE Cost (or FTE-based funding) with respect to such Funded SpinCo Activities.

 

Party ” and “ Parties ” are defined in the preamble of this Agreement.

 

Patent Cooperation Treaty ” means the Patent Cooperation Treaty, opened for signature June 19, 1970, 28 U.S.T. 7645.

 

Patent Rights ” means any and all (a) issued patents; (b) patent applications, including all applications and filings made pursuant to the Patent Cooperation Treaty, provisional applications, substitutions, continuations, continuations-in-part, divisionals and renewals, and all letters of patent granted with respect to any of the foregoing; (c) patents of addition, restorations, extensions, supplementary protection certificates, registration or confirmation patents, patents resulting from post-grant proceedings, reissues and re-examinations; (d) inventor’s certificates; and (e) other forms of government issued rights substantially similar to any of the foregoing.

 

Permitted Use ” is defined in Section 7.1(a).

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Person ” means an individual, corporation, company, partnership, limited liability company, joint venture, association, trust, business trust, Governmental Entity, unincorporated organization, a division or operating group of any of the foregoing or any other entity or organization.

 

Pick ” is defined in Section 2.2(c)(iii)(A).

 

Pick Notice ” is defined in Section 2.2(c)(iii)(A).

 

Post-Selection Enabling Activities ” means those IND-enabling tests, assays, studies and other activities to be performed by or on behalf of SpinCo with respect to any Company Selected Compound or Acquired Compound, including as such tests, assays, studies and other activities are described in any Research Plan. For clarity, Post-Selection Enabling Activities exclude Preclinical Functional Efficacy Studies.

 

Preclinical Functional Efficacy Studies ” means those tests, assays, studies and other activities to be performed by or on behalf of SpinCo with respect to any Company Selected Compound or SpinCo Selected Compound to determine the suitability within the Field or outside the Field for use in connection with certain diseases, conditions and disorders, including as such tests, assays, studies and other activities are described in any Research Plan.

 

Prepaid Research Expenses ” is defined in Section 4.1.

 

Project Coordinator ” is defined in Section 5.1.

 

Reimbursed FTE Number ” is defined in Section 4.2(a)(i).

 

Reorganization Agreement ” means the asset contribution agreement by and between the Company and SpinCo of even date herewith.

 

Representatives ” means with respect to a Person, such Person’s legal, financial, internal and independent accounting and other professional advisors and representatives.

 

Research Activities ” means those tests, studies and other activities specified to be conducted or actually conducted under or in connection with the Research Plan, including the Initial Screening Process, the Preclinical Functional Efficacy Studies and the Post-Selection Enabling Activities.

 

Research Plan ” is defined in Section 2.2(a).

 

Research Program ” is defined in Section 2.1.

 

Research Program Information ” is defined in Section 7.1(b)(i).

 

Research Program Resource Commitment ” is defined in Section 2.5(a).

 

Research Team ” is defined in Section 4.2(a)(i).

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Research Term ” is defined in Section 2.4.

 

Resource Allocation Principle ” is defined in Section 4.2(a)(i).

 

Selected Compound ” means any SpinCo Selected Compound or any Company Selected Compound, as applicable.

 

Selected In-License Notice ” is defined in Section 6.3(d).

 

Selected SpinCo In-License Agreement ” is defined in Section 6.3(d).

 

SpinCo ” is defined in the preamble of this Agreement.

 

SpinCo Activities ” means those Research Activities conducted or required to be conducted by or on behalf of SpinCo or its Affiliates.

 

SpinCo Background Know-How ” means, subject to Section 11.2(b), (a) Information included in the Contributed Intellectual Property and (b) other Information that is owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo any time during the Term or at any time during the Extended IP Access Period and is reasonably necessary or useful for performance of the Research Plan or the Exploitation of compounds that modulate the NMDA receptors, or any products containing or otherwise incorporating any such compounds (including Company Selected Compounds, Acquired Compounds and Acquired Products), including any SpinCo Platform Know-How.  SpinCo Background Know-How shall exclude (a) Joint Collaboration Know-How, (b) SpinCo Collaboration Know-How, and (c) after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

SpinCo Background Patent Rights ” means, subject to Section 11.2(b), (a) Patent Rights included in the Contributed Intellectual Property and (b) any other Patent Rights owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo during the Term or at any time during the Extended IP Access Period that cover or claim SpinCo Background Know-How, including any SpinCo Platform Patent Rights.  SpinCo Background Patent Rights shall exclude (a) SpinCo Collaboration Patent Rights, (b) Joint Collaboration Patent Rights, and (c) after exercise by the Company of an Option, any Patent Rights that constitute Compound-Specific Patent Rights that are assigned to the Company pursuant to Section 3.2.

 

SpinCo Collaboration Know-How ” means any Information, other than SpinCo Improvements, that is Invented by SpinCo or its Affiliates (or by Third Parties working on behalf of SpinCo or its Affiliates) in connection with the conduct of the Research Activities. SpinCo Collaboration Know-How shall exclude (a) SpinCo Background Know-How, (b) Joint Collaboration Know-How, and (c) after exercise by the Company of an Option, any Information that constitutes Compound-Specific Know-How that is assigned to the Company pursuant to Section 3.2.

 

SpinCo Collaboration Patent Rights ” means Patent Rights that cover or claim inventions or discoveries that are Invented by SpinCo or its Affiliates (or by Third Parties working on behalf of SpinCo or its Affiliates) in connection with the conduct of the Research

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Activities.  SpinCo Collaboration Patent Rights shall exclude (a) SpinCo Background Patent Rights, (b) Joint Collaboration Patent Rights, and (c) after exercise by the Company of an Option, any Patent Rights that constitute Compound-Specific Technology that are assigned to Company pursuant to Section 3.2.

 

SpinCo FTE Number ” is defined in Section 4.2(a)(i).

 

SpinCo Improvement ” means, any Information that is Invented by either Party, or jointly by the Parties, in connection with the conduct of the Research Activities that is a modification of, or an improvement to, the SpinCo Platform; provided that in no event shall a SpinCo Improvement include any compositions of matter with respect to any Company Compounds, Collaboration Compounds (including any Selected Compounds or Acquired Compounds), or methods of use or manufacture or other Exploitation of any Company Compounds or Collaboration Compounds.

 

SpinCo Indemnified Party ” is defined in Section 9.1.

 

SpinCo In-License ” means any agreement between SpinCo or any of its Affiliates, on the one hand, and a Third Party, on the other hand, pursuant to which SpinCo or such Affiliate has obtained or, with respect to any agreement entered into after the Effective Date, obtains any rights or interest in or to any Patent Rights or Information included within the SpinCo Technology.

 

SpinCo Platform ” means SpinCo’s proprietary methods of screening and profiling molecules, [***], that enables the identification and characterization of pharmacological modulators of N-methyl-D-aspartate (NMDA) receptors. [***].

 

SpinCo Platform Know-How ” means any Information owned or Controlled by SpinCo as of the Effective Date or during the Term or at any time during the Extended IP Access Period that is not generally known, to the extent pertaining specifically to the SpinCo Platform.

 

SpinCo Platform Patent Rights ” means any Patent Rights owned or Controlled by SpinCo as of the Effective Date or during the Term or at any time during the Extended IP Access Period that solely cover or claim the SpinCo Platform Know-How or any SpinCo Improvements.

 

SpinCo Selected Compounds ” means the Eligible Compounds selected by SpinCo in accordance with Section 2.2(c)(iii).

 

SpinCo Technology ” means, collectively, the SpinCo Background Know-How, SpinCo Background Patent Rights, SpinCo Collaboration Know-How, and SpinCo Collaboration Patent Rights, including the SpinCo Platform, SpinCo Platform Know-How, SpinCo Platform Patent Rights and SpinCo Improvements.

 

Target Compound Profile ” means a target compound profile consisting of a set of targeted chemical and biological properties for small molecules to be evaluated and identified pursuant to the Research Plan for the purpose of identifying, generating, discovering and developing those small molecules that show the greatest promise for use in the Field, which profile has been approved by the JSC in accordance with Section 5.2(c)(ii).

 

Term ” is defined in Section 10.1.

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Terminated Compound ” is defined in Section 2.2(e).

 

Territory ” means all countries in the world.

 

Third Party ” means any Person other than the Company, SpinCo and their respective Affiliates.

 

Third Party Claims ” is defined in Section 9.1.

 

Section 1.2.                                  Descriptive Headings; Certain Interpretations .

 

(a)                      The table of contents and headings contained in this Agreement are for reference purposes only and shall not control or affect the meaning or construction of this Agreement.

 

(b)                      Except where expressly stated otherwise in this Agreement, the following rules of interpretation apply to this Agreement:

 

(i)                                      “or” has the inclusive meaning represented by the phrase “and/or”;

 

(ii)                                   “include”, “includes” and “including” are not limiting;

 

(iii)                                “hereof”, “hereto”, “hereby”, “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(iv)                               “date hereof” refers to the date of this Agreement set forth in the preamble;

 

(v)                                  “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”;

 

(vi)                               definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

(vii)                            references to “small molecule” are not intended and shall not be construed to include any peptide, small peptide, polypeptide or any modification of any of the foregoing that results in a compound containing two (2) or more amino acids and/or modified amino acids linked by a peptide bond;

 

(viii)                         references to an “Article”, “Section”, “Subsection”, “Exhibit” or “Schedule” refer to an Article of, a Section or Subsection of, or an Exhibit or Schedule to, this Agreement;

 

(ix)                               words importing the masculine gender include the feminine or neuter and, in each case, vice versa ;

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(x)                                  “day” or “days” refers to calendar days;

 

(xi)                               references to a Law include any amendment or modification to such Law and any rules or regulations issued thereunder, whether such amendment or modification is made, or issuance of such rules or regulations occurs, before or, only with respect to events or developments occurring or actions taken or conditions existing after the date of such amendment, modification or issuance, after the date of this Agreement, but only to the extent such amendment or modification, to the extent it occurs after the date hereof, does not have a retroactive effect;

 

(xii)                            references to dollars are to U.S. dollars; and

 

(xiii)                         the language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto.

 

Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof.  In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption will apply against the Party which drafted such terms and provision.

 

ARTICLE 2
RESEARCH PROGRAM

 

Section 2.1.                                  General .  The Parties have entered into this Agreement with the principal objectives of (a) identifying, generating, discovering and developing small molecules that modulate the NMDA receptors, including the Existing Compounds and other Collaboration Compounds, in each case in accordance with the Research Plan and this Agreement, (b) identifying Collaboration Compounds for inclusion in the Eligible Compound Pool, (c) enabling the Company to select Collaboration Compounds that are included in the Eligible Compound Pool in accordance with Section 2.2(c), (d) enabling SpinCo to select Collaboration Compounds that are included in the Eligible Compound Pool in accordance with Section 2.2(c), (e) enabling the Company to identify Collaboration Compounds that show suitability and promise in the Field and (f) enabling SpinCo to identify Collaboration Compounds that show suitability and promise outside the Field (the “ Research Program ”).  The Parties shall conduct the Research Program in accordance with this Article 2 and the other terms and conditions of this Agreement.

 

Section 2.2.                                  Research Plan and Research Activities .

 

(a)                      Research Plan .  The activities to be undertaken in the course of the Research Program shall be set forth in a written research plan, which may be updated and amended in writing from time to time by the JSC (the “ Research Plan ”).  The initial Research Plan setting forth a high-level summary of the anticipated Research Activities is attached hereto as Exhibit A and shall serve as the Research Plan hereunder until such time as the Parties adopt a further updated plan in accordance with this Section 2.2(a). The JSC shall prepare and recommend for adoption by the Parties a further updated (and complete) Research Plan within fifteen (15) days

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

after the Effective Date.  In addition, the JSC shall review and finalize Schedule 1 and Schedule 5 within fifteen (15) days after the Effective Date. Thereafter, for each subsequent Calendar Year, the JSC will prepare an updated Research Plan, which will be completed and approved by November 1 of the preceding Calendar Year.  Except as otherwise provided in this Section 2.2(a) with respect to the initial Research Plan, the Research Plan (and each annual update thereto) will specify the following components, as applicable: [***].  Without limitation to the foregoing, each of SpinCo and the Company acknowledges that it is the intention of the Parties that Research Plan direct the Research Activities to the identification, generation, discovery and development of Collaboration Compounds that modulate the NMDA receptor [***] so as to permit the Company to select three (3) Collaboration Compounds based on their suitability and promise for application in the Field.

 

(b)                      Research Activities; Target Compound Profiles .

 

(i)                                      Under the direction and supervision of the Joint Steering Committee, SpinCo shall use Commercially Reasonable Efforts to perform, or cause to be performed, the Research Activities in accordance with this Agreement and the Research Plan.  Subject to the reimbursement by the Company of certain FTE Costs (and FTE-based funding) and the Out-of-Pocket Expenses for Funded SpinCo Activities as provided in Section 4.2, each Party shall bear the costs and expenses incurred by such Party in connection with the conduct of the Research Program.

 

(ii)                                   By and through their respective representatives on the JSC, SpinCo shall, and the Company may, from time to time propose target compound profiles for use in identifying, generating, discovering and developing those Collaboration Compounds most suitable and promising for application in the Field.  Once approved by the JSC, (A) such proposed target compound profiles shall become Target Compound Profiles hereunder and (B) a Target Compound Profile may be modified or amended by the JSC from time to time.

 

(c)                       Identification and Selection of Collaboration Compounds .

 

(i)                                      Promptly after the Effective Date with respect to the Existing Compounds, and, with respect to Collaboration Compounds identified during the Research Term, promptly after synthesis of such Collaboration Compounds, SpinCo shall provide to the JSC any Information Controlled by SpinCo with respect thereto in accordance with criteria to be established by the JSC.  The JSC shall from time to time discuss such Information, and select and prioritize those Collaboration Compounds that will be further researched and evaluated under the Initial Screening Process as set forth in the Research Plan based on criteria to be established by the JSC from time to time.  SpinCo shall continue to update the JSC and the Company promptly with any Information Controlled by SpinCo pursuant to the Initial Screening Process with respect to such Collaboration Compounds and provide to the JSC and the Company Initial Screening Results as they become available.  For clarity, as used in this Section 2.2(c), Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(ii)                                   Upon completion of all Initial Screening Process activities with respect to a Collaboration Compound, SpinCo shall present promptly to the JSC and the Company all Initial Screening Results for such Collaboration Compound, together with SpinCo’s good-faith opinion to the Company and the JSC with respect to whether SpinCo reasonably believes that such Collaboration Compound satisfies the applicable Target Compound Profile.  As promptly as practicable after receipt of the Initial Screening Results for each Collaboration Compound (or earlier on its own initiative), the JSC shall meet and evaluate such Initial Screening Results (or any interim results) in accordance with the criteria set forth in the Research Plan or otherwise established by the JSC to determine whether or not to designate such Collaboration Compound for inclusion in the Eligible Compound Pool (any Collaboration Compound so designated by the JSC, an “ Eligible Compound ”).  Eligible Compounds shall be added to the Eligible Compound Pool throughout the Research Term as such determinations are made by the JSC and in the order such determinations are made by the JSC, in each case as of the date of the applicable determination.  The JSC shall provide prompt written notice to each of SpinCo and the Company (A) upon the determination by the JSC that a Collaboration Compound is a Eligible Compound and shall be included in the Eligible Compound Pool (each, an “ Eligible Compound Notice ”) and (B) when Eligible Compound Pool Satisfaction is achieved (the “ Eligible Compound Pool Satisfaction Notice ”).

 

(iii)                                Upon the receipt by the Parties of any Eligible Compound Notice, the Parties shall have the right to designate Collaboration Compounds as Company Selected Compounds or SpinCo Selected Compounds, as applicable, according to the following procedures.

 

(A)                                The Company shall have the right at any time during the period commencing on the date of receipt by the Parties from the JSC of the initial Eligible Compound Notice and ending [***] days after the date of receipt by the Parties from the JSC of the initial Eligible Compound Pool Satisfaction Notice (the “ Initial Eligible Compound Selection Period ”), to select one (1) Eligible Compound (the right of either Party to select one (1) Eligible Compound in accordance with this Section 2.2(c), a “ Pick ”) as a Company Selected Compound by delivering written notice thereof to the JSC and SpinCo identifying the selected Eligible Compound (the “ Pick Notice ”), in which case each such Eligible Compound shall be deemed to be a Company Selected Compound as of the date of such written notice. If the Company declines to exercise a Pick during the Eligible Compound Selection Period, the JSC shall deliver a written notice of such failure to the Company and SpinCo (a “Non-Pick Notice” ).

 

(B)                                (i) Following the Company’s Pick pursuant to subsection (A), SpinCo shall have the right at any time during the applicable Eligible Compound Selection Period ending [***] days after the date of receipt by the Parties from the JSC of an Eligible Compound Pool Satisfaction Notice or (ii) following the Company’s failure to Pick pursuant to subsection (A) at any time during the applicable Eligible Compound Selection Period ending [***] days after the date of receipt by the Parties from the JSC of a Non-Pick Notice, in either case ((i) or (ii))  to  exercise a Pick with respect to one (1) Eligible Compound as a SpinCo Selected Compound by delivering a Pick Notice to the JSC and the Company identifying the selected Eligible Compound, in which case each such Eligible Compound shall be deemed to be

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

a SpinCo Selected Compound as of the date of such Pick Notice.

 

(C)                                Subject to subsections (A) and (B), the right to exercise a Pick shall alternate thereafter between the Company and SpinCo according to the foregoing procedures, on a mutatis mutandis basis, with the Company having the next opportunity, during its next applicable Eligible Compound Selection Period, to exercise a Pick (or to decline a Pick) following the Pick (or declination to Pick) by SpinCo pursuant to Section 2.2(c)(iii)(B), and then SpinCo having the next opportunity, during its next applicable Eligible Compound Selection Period, to Pick (or decline to Pick) after the Company’s last Pick (or declination to Pick), and so on.

 

(D)                                Each Party may exercise its right to select an Eligible Compound from the Eligible Compound Pool during the applicable Eligible Compound Selection Period, even if Eligible Compound Pool Satisfaction has not been achieved. If during the Eligible Compound Selection Period of a Party, additional Eligible Compounds are added to the Eligible Compound Pool, such Eligible Compound Selection Period shall be extended at the election of such Party by the number of days necessary for such Party to have at least [***] Business Days to consider such additional Eligible Compounds prior to exercising its Pick by delivering written notice thereof to the JSC and the other Party.

 

(E)                                 Unless otherwise agreed by the Parties, each Party’s exercise of a Pick shall be effective only if such Party delivers a Pick Notice as required herein no later than the last day of the applicable Eligible Compound Selection Period (taking account of any extensions thereof pursuant to Section 2.2(c)(iii)(D)).  If a Party fails to deliver such notice within the applicable period, such Party shall be deemed to have declined the right to exercise a Pick with respect to the applicable Eligible Compound Selection Period.

 

(F)                                  The JSC shall provide prompt notice to a Party upon the earliest of the other Party’s exercise of a Pick, or declination to exercise a Pick,  and the expiration of an Eligible Compound Selection Period of the other Party.

 

(iv)                               At any time during the Research Term, SpinCo and the Company may trade, vary or modify selection rights or the Picking procedures by written agreement.

 

(v)                                  Each of SpinCo and the Company acknowledges that it is the intention of the Parties that the Research Program will be conducted in a manner that facilitates the sharing of Information as contemplated under this Agreement and consensus-based decision making with respect to the order and timing of the Research Activities carried out under the Research Plan, with a shared goal of progressing expeditiously the consideration and selection by the JSC of Eligible Compounds for the Eligible Compound Pool and the selection by each Party of Selected Compounds.  Each Party shall in good faith perform its obligations hereunder in furtherance of these objectives, without regard to the effect that the order or timing of the Research Activities or the sharing of such Information would have in relation to one Party or the other’s Picking rights with regard to Eligible Compounds as set forth in Section 2.2(c).

 

(d)                      Selected Compounds .  With respect to any Company Selected Compounds,

 

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the Company shall have the right, but not the obligation, at any time during the Research Term, (i) to (A) have conducted by SpinCo such Preclinical Functional Efficacy Studies as may be set forth in the then current Research Plan (B) have conducted by SpinCo such additional Preclinical Functional Efficacy Studies as the Company may reasonably request in writing from time to time consistent with the Resource Allocation Principle; and (ii) to (A) have conducted by SpinCo such Post-Selection Enabling Activities as may be set forth in the Research Plan, and (B) have conducted by SpinCo such other tests, assays, studies and activities (including Post-Selection Enabling Activities) as the Company may reasonably request in writing from time to time for the purpose of generating Information necessary or reasonably useful for the Company to determine whether it desires to exercise an Option with respect to such Company Selected Compound, and in the case of this clause (B), to which SpinCo agrees, such agreement not to be unreasonably conditioned, withheld or delayed.  In the case of tests, assays, studies and activities requested under clause (ii)(B), it is understood that SpinCo shall not be required to agree to perform such other tests, assays, studies and activities to the extent it would require a resource commitment in excess of the Research Program Resource Commitment.  With respect to any such tests, assays, studies and other activities that are not covered by the then current Research Plan to which SpinCo agrees, the Parties shall cooperate, by and through their respective members on the JSC, to adopt an amendment to the Research Plan to reflect such tests, assays, studies and other activities, including to include Budgeted Amounts for (x) the Out-of-Pocket Expenses to be reimbursed by the Company with respect to such activities pursuant to Section 4.2(a) or 4.2(b), as applicable, and (y) in the case of any such tests, assays, studies and activities under clause (ii)(B) (including Post-Selection Enabling Activities), the number of FTEs and the associated FTE Costs for the conduct and completion of such activities, in each case for the applicable period, to be reimbursed by the Company pursuant to Section 4.2(b).  Except as expressly set forth in the Research Plan or as requested by Company hereunder, SpinCo shall not conduct research or development on any Company Selected Compound during the Research Term.  For clarity, (x) subject to Section 3.6, SpinCo shall have the right (but not the obligation) to perform any tests, assays, studies and other activities with respect to SpinCo Selected Compounds as it may determine in its sole discretion, (y) the Company shall have the right (but not the obligation) to perform, or to engage Affiliates or Third Parties to perform, any tests, assays, studies and other activities with respect to any and all Company Selected Compounds during the Option Period, including additional Preclinical Functional Efficacy Studies and Post-Selection Enabling Activities; and (z) neither Party shall have any obligation during the Research Term to conduct or have conducted research or development activities with respect to such Party’s Selected Compounds.  If the Company conducts or  engages any Affiliate or Third Party to conduct any Preclinical Functional Efficacy Studies or substantially equivalent tests, assays, studies and other activities pursuant to clause (y) of the preceding sentence during the Research Term, the Company shall provide the results thereof that the Company Controls to SpinCo; provided that such right shall not extend to results of tests, assays, studies or other activities with respect to any Company Selected Compound conducted after the exercise by the Company of an Option with respect to such Company Selected Compound.

 

(e)                       Terminated Compounds .  At any time during the Research Term, the Company shall have the right to elect to permanently discontinue Research Activities with respect to any Company Selected Compound by providing not less than thirty (30) days’ written

 

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notice to SpinCo and SpinCo shall have the right to elect to permanently discontinue Research Activities with respect to any SpinCo Selected Compound by providing written notice to the Company. In the event that the Company or SpinCo provides such written notice that it has made such election to terminate Research Activities with respect to a Selected Compound, the applicable Selected Compound shall become a “ Terminated Compound ” and shall be deemed to be returned to the Eligible Compound Pool as of the date of expiration of the thirty (30) day notice period (with respect to the Company) and as of the date of such notice (with respect to SpinCo) for potential selection by the other Party in accordance with the procedures set forth in Section 2.2(c).

 

(f)                        Exception Compounds .  Notwithstanding anything to the contrary in this Agreement, the Parties hereby agree that Section 2.2(c) shall not apply to Exception Compounds, which shall be governed instead by this Section 2.2(f).  SpinCo shall conduct such additional tests, assays, studies and other activities, including Preclinical Functional Efficacy Studies, with respect to the Exception Compounds as the Company may request in writing during the Research Term, consistent with the Resource Allocation Principle, to enable the Company to determine whether it wishes to select the Exception Compounds as Company Selected Compounds or exercise an Option with respect to the Exception Compounds. [***]. The Company’s selection of the Exception Compounds as Company Selected Compounds pursuant to this Section 2.2(f) shall not constitute a Pick for purposes of this Agreement.  [***].

 

(g)                       Limitation on Compounds Outside Research Activities .  It is the intention of the Parties that, except for the Excluded Compounds, or as provided in Section 2.2(f) in relation to Exception Compounds, SpinCo will make available for screening through the Research Activities during the Research Term, and the exercise by the Parties of related selection rights (though the Picking procedures), any and all small molecule compounds owned or Controlled as of the Effective Date or Controlled at any time during the Term or otherwise being subjected to synthesis, screening or testing by SpinCo during the Research Term that are reasonably believed by SpinCo to have the potential to modulate the NMDA receptors.  Accordingly, except as provided in this Agreement with respect to the conduct of the Research Program, SpinCo shall not, directly or indirectly, whether alone or together with a Third Party, engage during the Research Term in any activities to identify, generate, discover, or develop small molecule compounds that modulate the NMDA receptors, including any Collaboration Compounds, except as provided in this Agreement with respect to the Exploitation by SpinCo of the Excluded Compounds, any SpinCo Selected Compound or any Declined Compound.

 

Section 2.3.                                  Conduct of the Research Program; Diligence .  SpinCo shall use Commercially Reasonable Efforts during the Research Term to conduct the Research Activities set forth in the Research Plan in order to identify, generate, discover and develop in connection with the Research Program small molecules that modulate the NMDA receptor and that may be useful in the Field, including small molecules that meet one or more Target Compound Profiles.   SpinCo shall conduct the Research Activities in good scientific manner, including good laboratory practices, and in compliance with applicable Laws.

 

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Section 2.4.                                  Research Term .  The term for the conduct of the Research Program will begin on the Effective Date and, subject to the earlier termination of this Agreement in accordance with Article 10 hereof, will end upon the earlier of (a) the fifth (5th) anniversary of the Effective Date and (b) the date on which the Company has exercised its third (3rd) Option (the “ Research Term ”).  For clarity, the expiration of the Research Term does not affect the Company’s right to exercise an Option at any time during the applicable Option Period.

 

Section 2.5.                                  Research Program Personnel; Subcontracting

 

(a)                      Research Program Resources and Personnel . The Research Program will be conducted by the Research Team. Unless otherwise agreed in writing by the Parties, SpinCo shall make available a minimum of fifty percent (50%) of the services of the Research Team, and in no event shall SpinCo make available research and technical resources  representing less than [***] of the total research and technical resources of SpinCo measured as of the Effective Date, to perform the Funded SpinCo Activities during the Research Term for the benefit of the Company (the “ Research Program Resource Commitment ”).  For clarity, for such purpose, the research and technical resources of SpinCo dedicated to clinical research programs and activities shall not be factored into the foregoing allocation.  For purposes of determining research and technical resources of SpinCo made available for the benefit of the Company in a given period, such resources shall take account of (i) the research and technical resources dedicated by SpinCo to the Initial Screening Process and the Preclinical Functional Efficacy Studies for such period, as required in accordance with Section 4.2(a)(i) and 4.2(a)(ii), with the benefit to the Company in relation to such activities determined based on (x) [***] of the portion of the effort of the Research Team that SpinCo applies to the Initial Screening Process and (y) that portion of the overall Dedicated FTE Resource that SpinCo applies to the performance of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds consistent with the Reimbursed FTE Number, and (ii) any Post-Selection Enabling Activities and such other tests, assays, studies and activities (in addition to the Initial Screening Process and Preclinical Functional Efficacy Studies) that the Parties agree that SpinCo will perform with respect to any Company Selected Compound (as contemplated in Section 2.2(d)), with the Company deemed to receive one hundred percent (100%) of the benefit of the activities described in this clause (ii).  During the Research Term, SpinCo shall use Commercially Reasonable Efforts to maintain and use hereunder a Research Team with appropriately qualified research and technical personnel with qualifications reasonably comparable to the research and technical personnel employed by the Company during the [***] month period prior to the completion of the Reorganization (as such term is defined in the Merger Agreement). Without limiting the generality of the foregoing or Section 2.6, in the event that any such research or technical personnel of SpinCo that are engaged in the Research Program are no longer employed by SpinCo or otherwise become unavailable during the Research Term, SpinCo shall select replacement personnel at least as appropriately qualified as such unavailable personnel and shall not engage any personnel to conduct Research Activities over the Company’s reasonable objection.

 

(b)                      Subcontracting . SpinCo may engage one or more subcontractors to perform its obligations under the Research Plan, to the extent permitted under the Research Plan or otherwise with the prior written consent of the Company, such consent not to be unreasonably

 

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conditioned, withheld or delayed.  Notwithstanding the foregoing sentence, SpinCo shall remain at all times fully responsible and liable for its responsibilities under the Research Program and this Agreement.

 

Section 2.6.                                  Project Personnel .  The scientific and technical personnel of SpinCo considered by the Company to be critical for the conduct of the Research Program (the “ Key Personnel ”) are set forth on Schedule 7 . To the extent consistent with applicable Law, SpinCo shall use Commercially Reasonable Efforts to keep available the services of the Key Personnel during the Research Term consistent with SpinCo’s obligations under Section 2.5(a).  Without limiting the generality of the foregoing, SpinCo shall not materially reduce the time commitment of any Key Personnel to the Research Program without the prior written approval of the Company such approval not to be unreasonably conditioned, withheld or delayed.  In the event that any Key Personnel are no longer employed by SpinCo or are otherwise incapable of performing their obligations under this Agreement due to a disability for a period of not less than [***] consecutive days, the Parties shall meet and discuss in good faith how best to proceed.  Notwithstanding the foregoing, SpinCo shall continue to be responsible for performing the SpinCo Activities, and any consent or agreement by the Company pursuant to this Section 2.6 shall not be deemed to be a waiver of any failure of SpinCo to conduct the SpinCo Activities under this Agreement.

 

Section 2.7.                                  Facilities and Materials .

 

(a)                      Unless otherwise specified in the Research Plan, SpinCo shall be responsible for providing all facilities and equipment that are reasonably necessary or useful to carry out the SpinCo Activities undertaken by SpinCo under the Research Plan.

 

(b)                      SpinCo shall procure or cause to be procured any and all materials required in connection with the conduct of the Research Activities, including the supply of compounds required for the performance of the Research Plan.  The Company may from time to time request, and SpinCo shall use Commercially Reasonable Efforts to provide to the Company, such quantities of materials as may be necessary or useful for the Company’s use in tests, assays, studies and other activities with respect to Company Selected Compounds, for which the Company shall reimburse SpinCo for Out-of-Pocket Expenses pursuant to Section 4.2(b).

 

Section 2.8.                                  Records and Disclosure/Reports .

 

(a)                      Records .  SpinCo shall, and shall cause its Affiliates and Third Party subcontractors to, maintain books and records in sufficient detail and in a good scientific manner appropriate for patent and regulatory purposes, and in compliance with applicable Law, which shall be complete and accurate and shall properly reflect all work done and results achieved in the conduct of the Research Program.  Such books and records shall be retained by SpinCo or its Affiliates or Third Party subcontractors, as applicable, for at least [***] years after the expiration or termination of this Agreement or for such longer period as may be required by applicable Law.  The Company shall have the right, during normal business hours and upon not less than [***] Business Days’ prior written notice, to inspect, audit and copy all records of SpinCo or its Affiliates or Third Party subcontractors maintained pursuant to this Section 2.8(a), including

 

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records with respect to all Collaboration Compounds, the Initial Screening Process for all Collaboration Compounds, the Preclinical Functional Efficacy Studies with respect to both Parties’ Selected Compounds and all other SpinCo Funded Activities; provided that such right shall not extend to records of activities with respect to SpinCo Selected Compounds and Declined Compounds other than the Initial Screening Results and Preclinical Functional Efficacy Studies.  Such audit rights may not be exercised more than once in any Calendar Year and the Company shall maintain such records and the information disclosed therein in confidence to the extent required pursuant to Article 7.

 

(b)                      Disclosure/Reports .  No later than thirty (30) days after the Effective Date, SpinCo shall disclose and make available to the Company, in a form to be reasonably agreed by the Parties, any Information Controlled by SpinCo consisting of the results of tests, assays, studies and other activities performed prior to the Effective Date with respect to any Existing Compounds, other than the Excluded Compounds.  Without limitation to the foregoing, or to Section 2.2(b)(ii), SpinCo, throughout the Research Term, shall promptly provide the Company with written reports of all Information generated and any Inventions Invented in the conduct of the SpinCo Activities, including Information with respect to any and all Collaboration Compounds, provided that such right shall not extend to Information generated and any Inventions Invented with respect to SpinCo Selected Compounds and Declined Compounds other than Information and Inventions with respect to the Initial Screening Results and Preclinical Functional Efficacy Studies; provided, further that SpinCo shall have no obligation to disclose to the Company any Extended IP Access Period Patent Rights that first meet the definition thereof after the expiration of the Option Period.  Without limitation to the foregoing, SpinCo shall promptly provide to the Company with each report required pursuant to the Research Plan.

 

Section 2.9.                                  Additional Activities . If the Company requests SpinCo to perform any research or development activities in addition to the types of activities contemplated by the Research Plan ( i.e ., in addition to the Initial Screening Process, Preclinical Functional Efficacy Studies and Post-Selection Enabling Activities), the Parties shall negotiate in good faith to determine and mutually agree on the scope, duration, and the responsibility of the respective Parties for the costs, of such additional activities, if any, and upon such mutual agreement, the Parties shall supplement in writing this Agreement or the Research Plan to include such additional activities.

 

ARTICLE 3
EXCLUSIVE OPTION OF THE COMPANY

 

Section 3.1.                                  Exclusive Option . SpinCo hereby grants to the Company, and the Company hereby accepts, an exclusive option exercisable with respect to a total of three (3) Company Selected Compounds (each, an “ Option ”), the exercise of which with respect to any Company Selected Compound shall result in (a) the Company Selected Compound becoming an Acquired Compound for purposes of this Agreement and (b) SpinCo (i) assigning to the Company all Compound-Specific Know-How owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the Term, (ii) upon the request of the Company,

 

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assigning to the Company the Compound-Specific Patent Rights owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the Term, and (iii) the Company having the license rights afforded to it under the Exploitation License, in each case with respect to the applicable Acquired Compound, as set forth below.

 

(a)                      Data Package . For each Company Selected Compound, as promptly as possible (and in no event later than any date for the for the delivery thereof specified in the Research Plan or as otherwise agreed by the Parties in writing), SpinCo will assemble and deliver to the Company a Data Package for such Company Selected Compound.

 

(b)                      Evaluation .  Following receipt of a Data Package with respect to each Company Selected Compound (the “ Data Package Delivery Date ”), the Company shall have the right to continue to evaluate such Company Selected Compound throughout the Option Period. If the Data Package Delivery Date for a particular Company Selected Compound occurs after the end of the Research Term, then the Option Period for such compound shall automatically be deemed to be extended until (and include) the date that is [***] after the Data Package Delivery Date.  If, during the Option Period the Company reasonably determines that additional Information (including Materials ( e.g. , quantities of compound for testing)) in the Control of SpinCo or reasonably obtainable by SpinCo is required to make an election with respect to any Company Selected Compound, SpinCo shall use Commercially Reasonable Efforts to provide to the Company such additional Information, and in the case of Materials, to procure and provide to the Company the requested quantities (for which the Company shall reimburse SpinCo for Out-of-Pocket Expenses pursuant to Section 4.2(b)), it being understood that the level of effort that SpinCo is required to dedicate during the Research Term in order to provide such Information shall be consistent with the Resource Allocation Principle and, if necessary, the Parties will confer and prioritize the Research Activities in a manner that enables SpinCo to provide such Information consistent with those principles.  If Information is provided after, or within [***] days prior to the end of the Option Period, the Option Period for such Company Selected Compound shall be continued until [***] days after such Information is provided to the Company.  For clarity, as used in this Section 3.1(b), Information Controlled by SpinCo includes Information in the public domain that is in the possession of SpinCo and not subject to any restriction preventing the disclosure of such Information to the Company.

 

(c)                       Option Exercise . Any time during the period commencing on the Effective Date and ending on the last day of the Option Period, the Company shall have the right to exercise an Option with respect to any Company Selected Compound by providing written notice to SpinCo (“ Option Exercise Notice ”), in which case such Company Selected Compound shall become an Acquired Compound and the Company shall be required to pay the Option Exercise Fee pursuant to Section 4.4.

 

Section 3.2.                                  Assignment and License of Compound-Specific Technology .

 

(a)                      As soon as practicable following the Option Exercise Date with respect to an Acquired Compound, SpinCo shall identify existing Compound-Specific Technology owned or Controlled by SpinCo as of the Effective Date or Controlled by SpinCo at any time during the

 

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Term applicable to such Acquired Compound, including any such Compound-Specific Technology that is subject to a SpinCo In-License.

 

(b)                      Effective on the Option Exercise Date with respect to the applicable Acquired Compound, SpinCo shall, and hereby does, irrevocably assign and transfer solely and exclusively to the Company all Compound-Specific Know-How with respect to such Acquired Compound that it Controls as of the Option Exercise Date and all of SpinCo’s and its Affiliates’ worldwide rights, title, and interests (including intellectual property rights) in and to such owned or Controlled Compound-Specific Know-How, free and clear of any Liens and without reservations of any kind or the payment to SpinCo of additional consideration (other than the applicable Option Exercise Fee).

 

(c)                       At any time during the Term or at any time thereafter, the Company shall have the right, upon written notice to SpinCo (an “ Assignment Notice ”), to require SpinCo to assign to the Company or any of its Affiliates (or designees) all Compound-Specific Patent Rights owned or Controlled by SpinCo or any of its Affiliates (or its or their successors).  Effective on the receipt by SpinCo of an Assignment Notice with respect to an Acquired Compound (the “ Assignment Notice Date ”), SpinCo shall, and hereby does, irrevocably assign and transfer solely and exclusively to the Company all Compound-Specific Patent Rights with respect to such Acquired Compound that it Controls (whether prior to, on or after the Option Exercise Date) and all of SpinCo’s and its Affiliates’ worldwide rights, title, and interests (including intellectual property rights) in and to such owned or Controlled Compound-Specific Patent Rights, free and clear of any Liens and without reservations of any kind or the payment to SpinCo of additional consideration (other than the applicable Option Exercise Fee).  For clarity, until such time as the Company provides an Assignment Notice with respect to an Acquired Compound, any Compound-Specific Patent Rights that are included in the SpinCo Background Patent Rights or SpinCo Collaboration Patent Rights or with respect to which SpinCo has a joint interest as part of any Joint Collaboration Patent Rights, shall continue to remain a part of such category of Patent Rights, shall continue to be licensed to the Company pursuant to the license grants in Section 6.3 and shall be subject to the terms and conditions of Article 6, including in relation to the prosecution and enforcement of such Compound-Specific Patent Rights.

 

(d)                      Following the Option Exercise Date with respect to any Acquired Compound and upon the written request of Company, SpinCo shall promptly take such actions as are necessary or as the Company may reasonably request with respect to any SpinCo Collaboration Patent Rights, SpinCo Background Patent Rights and Joint Collaboration Patent Rights that include claims that cover such Acquired Compound, including by filing divisionals, continuations, continuations-in-part or otherwise, so as, to the extent feasible, to separate into discrete patent application(s) claims that solely and exclusively cover the composition or formulation of such Acquired Compound and the Exploitation thereof (including any method of use thereof), including, to the extent possible, to separate claims into Patent Rights that will constitute Compound-Specific Patent Rights.

 

(e)                       In the case of any Compound-Specific Technology Controlled by SpinCo or its Affiliates pursuant to a SpinCo In-License, SpinCo shall promptly identify such SpinCo In-

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

License and provide a copy thereof to Company.  To the extent that any SpinCo In-License relates solely to the SpinCo Technology being assigned to the Company, at the request of the Company, SpinCo shall use reasonable efforts to assign to the Company such SpinCo In-License, and if the consent of the applicable Third Party is required for such assignment, use reasonable efforts to obtain such consent and thereafter use reasonable efforts to promptly assign to the Company, such SpinCo In-License.  With respect to any such SpinCo In-License that is not assigned to the Company, the Patent Rights and other intellectual property rights licensed to SpinCo or any of its Affiliates and Controlled by SpinCo pursuant to the terms of the SpinCo In-License shall constitute SpinCo Technology hereunder and the license granted to the Company in Section 6.3(b) shall include a sublicense under such SpinCo In-License and shall be subject to Section 6.3(d).

 

(f)                        Each Party hereby agrees to do all such acts and execute all documents reasonably necessary to effectuate the provisions of this Section 3.2, including any steps to memorialize the Company’s ownership (such as, e.g. , by recording assignments or affirmations of assignment, as applicable), in all relevant jurisdictions.

 

Section 3.3.                                  Transfer of Information .  As soon as reasonably practicable after the Option Exercise Date with respect to an Acquired Compound, SpinCo shall disclose to the Company in English (and deliver in writing or in an electronic format) all Information in SpinCo’s or its Affiliates’ Control and not previously disclosed in writing to the Company related to such Acquired Compound, including all Compound-Specific Know-How related to such Acquired Compound and copies of files and other records pertaining to any Compound-Specific Patent Rights, including file histories (the “ Initial Transfer ”).  Thereafter, SpinCo shall cooperate with the Company and promptly disclose to the Company in English (and deliver in writing or in an electronic format) any and all other Information Controlled by SpinCo (or its Affiliates) and not previously disclosed in writing to the Company with respect to the Acquired Compound, including all such additional Information that constitutes Compound-Specific Technology.  Upon the request of the Company, SpinCo also shall transfer to the Company such quantities of all relevant Materials (including all existing quantities of the Acquired Compound), if any, in SpinCo’s or its Affiliates’ Control that are necessary or reasonably useful for the Exploitation of the Acquired Compounds and Acquired Products.

 

Section 3.4.                                  Non-Exercise of the Option Exercise . If the Company declines or otherwise fails to exercise an Option for a Company Selected Compound during the Option Period then such Company Selected Compound shall become a Declined Compound and, subject to Sections 3.6 and 6.3, SpinCo shall have the right in its sole discretion without any further obligation to the Company under this Agreement to develop, commercialize and otherwise Exploit such Declined Compound.

 

Section 3.5.                                  Preservation of Option and License Rights .   SpinCo shall not, and shall ensure that its Affiliates shall not, (a) encumber the rights in the SpinCo Platform or the other SpinCo Technology or any of SpinCo’s right, title or interest in or to any Joint Collaboration Technology, or transfer or assign to a Third Party any of the SpinCo Technology or any Joint Collaboration Technology, unless such encumbrance, transfer or assignment is

 

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subject to the rights of and obligations to the Company under this Agreement, including the rights of the Company under the Exploitation License and to receive an assignment of any Compound-Specific Technology with respect to Acquired Compounds, or (b) grant any rights or licenses under the SpinCo Technology or any Joint Collaboration Technology that are inconsistent with the rights granted to the Company under this Agreement, including the Options.

 

Section 3.6.                                  Exclusivity .   During the Exclusivity Period, SpinCo shall not, and shall cause its Affiliates not to, either alone or in conjunction with others, directly or indirectly engage in (a) the research or preclinical development of any compound or any product for the purpose of the treatment, prevention or diagnosis of any disorders or conditions in the Field, (b) the clinical development of anys compound or any product for the treatment, prevention or diagnosis of any disorders and conditions in the Field, or the manufacture of such compound or product for such purpose, or (c) the commercialization of any compound or any product labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions in the Field, or the manufacture of such compound or product for purposes of such commercialization (a “ Competing Business ”), or grant to any Third Party the right to do the same, except with respect to any activities conducted with regard to the Research Program in this Agreement.  SpinCo acknowledges and agrees that the restrictions imposed in this Section 3.6 are reasonable and necessary for the protection of the business of the Company and the investments made by the Company under this Agreement and that the Company would not have entered into this Agreement without the protection afforded under this Section 3.6.  For clarity, without limitation to any other term or condition of this Agreement or any other Transaction Document, nothing under this Section 3.6 shall restrict SpinCo’s right, either alone or in collaboration with others, to directly or indirectly engage in the research, development, manufacture or commercialization of any compounds or products for use outside the Field, or grant to any Third Party the right to do the same.

 

Section 3.7.                                  Change of Control .  The restrictions in Section 3.6 shall be subject to the following: (x) the restrictive covenants in Section 3.6 shall in no way prevent SpinCo or any of its Affiliates from being subject to a Change of Control or acquiring not more than five percent (5%) of the outstanding equity securities of any Person engaged in a Competing Business so long as neither SpinCo nor any of its Affiliates manage, operate or control such Person or conduct such Competing Business and (y) in the event of a Change of Control of SpinCo, (i) nothing in this Agreement shall restrict the acquiring party or its Affiliates other than SpinCo from pursuing or engaging in any research, development or commercialization activities with respect to any therapeutic or prophylactic product or products for the treatment or prevention of any of the disorders and conditions set forth on Schedule 4 , and (ii) any references to “SpinCo or its Affiliates” or “SpinCo and its Affiliates” shall not include the acquiring party or its Affiliates other than SpinCo; provided that:

 

(a)                      the acquiring party or its Affiliates other than SpinCo do not utilize any Acquired Compound or Acquired Product or any Company Compound or Collaboration

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Compound in any manner in connection with such research, development or commercialization activities;

 

(b)                      SpinCo shall provide the Company with written notice of any such Change of Control two (2) Business Days following the earlier of the first public announcement of the execution of any agreement with respect to such Change of Control and the closing date of such Change of Control;

 

(c)                       all such acquiring party’s or its Affiliates’ research, development, manufacture and commercialization activities related to the Competing Business shall be kept separate from the activities of SpinCo related to any Acquired Compound or Acquired Product  and any Collaboration Compound;

 

(d)                      such acquiring party and its affiliates shall not have the right to use or Exploit, and shall not use or Exploit, the SpinCo Technology (including the SpinCo Platform) or any Company Compound or Collaboration Compound in any manner that would constitute a violation of Section 3.6 had such use or Exploitation been engaged in by SpinCo (assuming that no Change of Control had occurred);

 

(e)                       during the Research Term, no employee or agent of SpinCo that participates or has participated in any Research Activities shall participate in any Competing Business of the acquiring party or any of its Affiliates; and

 

(f)                        such acquiring party or its Affiliates shall implement procedures customary in the industry to ensure that employees of SpinCo or any of its Affiliates who had, or continue to have, access to the Information related to any Acquired Compound or Acquired Product and any Collaboration Compound, including any Confidential Information of the Company, are not utilized by such acquiring party or its Affiliates in the research, development, manufacture or commercialization activities with respect to any diagnostic, therapeutic or prophylactic product or products for the diagnosis, treatment or prevention of any of the disorders and conditions set forth on Schedule 4 .

 

Section 3.8.                                  Restriction on the Company .  During the Exclusivity Period, the Company shall not, and shall cause its Affiliates not to, either alone or in conjunction with others, directly or indirectly engage in (a) the research or preclinical development of the Acquired Compounds or the Acquired Products for the purpose of the treatment, prevention or diagnosis of any disorders or conditions outside the Field, (b) the clinical development of the Acquired Compounds or the Acquired Products for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for such purpose, or (c) the commercialization of the Acquired Compounds or the Acquired Products labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for purposes of such commercialization, or grant to any Third Party the right to do the same.  The Company acknowledges and agrees that the restrictions imposed in this Section 3.8 are reasonable and necessary for the protection of the business of SpinCo and the investments

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

made by SpinCo and that SpinCo would not have entered into this Agreement without the protection afforded under this Section 3.8.

 

ARTICLE 4
PAYMENTS

 

Section 4.1.                                  Prepaid Research Expenses.   The Company shall pay to SpinCo an amount equal to [***] as a prepayment in connection with the Funded SpinCo Activities (“ Prepaid Research Expenses ”), which Prepaid Research Expenses shall be credited against amounts invoiced pursuant to Section 4.2 for Funded SpinCo Activities until exhausted.  The Prepaid Research Expenses shall be payable within fifteen (15) days of the Effective Date.

 

Section 4.2.                                  Funded SpinCo Activities .  The Company shall reimburse SpinCo for Funded SpinCo Activities based on the type of Research Activities being performed as provided in this Section 4.2.

 

(a)                      Initial Screening Process; Preclinical Functional Efficacy Studies .

 

(i)                                                  Research Team .  The Parties hereby acknowledge and agree that the Research Program shall be conducted by a number of research employees of SpinCo (the “ Research Team ”) who will be engaged in the conduct of the Funded SpinCo Activities, including the Initial Screening Process and the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds.  For clarity, in addition to the Research Team, SpinCo may have other research employees engaged in other activities on behalf of SpinCo, and any individual employee may be both part of the Research Team and also engaged in such other activities; provided that the Dedicated FTE Resource is utilized in the Research program. With respect to the period from the Closing Date through December 31, 2015 and each Calendar Year thereafter, the Parties shall agree in advance on the FTE-based funding contributions of each Party with respect to the Initial Screening Process, which contributions shall be allocated between the Parties on a [***] basis, and the Preclinical Functional Efficacy Studies,  to be performed by the Research Team during the applicable period by establishing the total required number of Research Team members (measured in FTEs) for the performance of such Research Activities (the “ Dedicated FTE Resource ”), the number of Research Team members (measured in FTEs) to be funded by the Company for the applicable period for the conduct of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds (together with [***] of the FTE-based funding for the Initial Screening Process the “ Reimbursed FTE Number ”) and the minimum number of Research Team members to be funded by SpinCo for the conduct of Preclinical Functional Efficacy Studies with respect to Company Selected Compounds (together with [***] of the FTE-based funding for the Initial Screening Process, the “ SpinCo FTE Number ”).  The number of planned Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds may or may not be equal, and the number of FTEs and Out-of-Pocket Expenses required for any particular Preclinical Functional Efficacy Study may vary for a given period.  It is the intention of the Parties that the Reimbursed FTE Number and the SpinCo FTE Number shall represent that portion of the Dedicated FTE Resource that the Company and SpinCo,

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

respectively, shall receive and have access to during the applicable period with respect to the Initial Screening Process and the Preclinical Functional Efficacy Studies (such principle, the “ Resource Allocation Principle ”). By way of example and without limitation, if the Dedicated FTE Resource for a given twelve (12)-month period is [***] Research Team members (measured in FTEs) and the Reimbursed FTE Number is [***], the Company shall receive the benefit of, and have access to, at least [***] of the overall Dedicated FTE Resource for such period, and if the Dedicated FTE Resource for a given [***]-month period is [***] Research Team members (measured in FTEs) and the Reimbursed FTE Number is [***] as a result of additional FTEs for Preclinical Functional Efficacy Studies anticipated to be conducted with respect to Company Selected Compounds compared to the Preclinical Functional Efficacy Studies anticipated to be conducted with respect to SpinCo Selected Compounds, the Company shall receive the benefit of, and have access to, at least [***] of the overall Dedicated FTE Resource for such period.

 

(ii)                                               SpinCo has represented to the Company that it expects to have a Research Team through December 31, 2016 of at least [***] research employees (measured in FTEs) available to perform the Initial Screening Process.  The Parties agree that, for such period, SpinCo shall use diligent efforts to cause the Dedicated FTE Resource to be [***] Research Team members (measured in FTEs), in which event the Reimbursed FTE Number applicable to the Company for such period shall be [***] and the SpinCo FTE Number shall be [***].  In subsequent periods, at least [***] days prior to commencement of the next Calendar Year, the Parties shall confer in good faith and agree in writing upon the Dedicated FTE Resource, the Reimbursed FTE Number and the SpinCo FTE Number for such period.  SpinCo shall not act to reduce, and shall use commercially reasonable efforts to cause not to be reduced, the Dedicated FTE Resource for any period below the level agreed for such period without the Company’s consent.  For clarity, with respect to a given period of the Research Term, the Company shall have no obligation to reimburse SpinCo for amounts pursuant to this Section 4.2(a) and SpinCo shall have no obligation to conduct the Research Program unless and until the Dedicated FTE Resource and the Reimbursed FTE Number have been agreed for such period.  Without limitation to the foregoing, in the event that Research Team (measured in FTEs) decreases in size during the applicable calendar month, the amount reimbursable by the Company pursuant to this Section 4.2(a) for such month shall be reduced pro rata with respect to that portion of the applicable month during which the number of Research Team member (measured in FTEs) is fewer than the applicable Dedicated FTE Resource for such period.  For clarity, SpinCo may elect to increase the number of Research Team members (measured in FTEs) engaged in such Research Activities in excess of the Dedicated FTE Resource agreed by the Parties for such period, but unless otherwise agreed by the Company in writing, the Company shall have no obligation to fund any Research Team members in excess of the Reimbursed FTE Number.

 

(iii)                                            Consistent with the foregoing, and subject to Section 4.2(c), for the period from the Closing date to December 31, 2015 and each Calendar Year thereafter during the Research Term, with respect to the conduct of the Initial Screening Process for Collaboration Compounds and Preclinical Functional Efficacy Studies for both Party’s Selected Compounds, the Company shall reimburse SpinCo for (A) [***] and (B) [***] of the Out-of-Pocket Expenses related and reasonably allocable to the Initial Screening Process for Collaboration Compounds and [***] of the Out-of-Pocket Expenses related and reasonably allocable to Preclinical

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Functional Efficacy Studies with respect to Company Selected Compounds.  SpinCo shall be responsible for funding the remaining Research Team member FTEs and other Out-of-Pocket Expenses with respect to the Initial Screening Process and Preclinical Functional Efficacy Studies for such period.

 

(b)                      Post-Selection Enabling Activities and Other SpinCo Funded Activities .  Subject to Sections 4.2(a) and 4.2(c), with respect to the conduct of all other Funded SpinCo Activities, including the conduct of any Post-Selection Enabling Activities conducted on behalf of Company, the Company shall reimburse SpinCo for (i) [***] of the Budgeted Amounts for FTE Costs for such Research Activities and (ii) Out-of-Pocket Expenses related and reasonably allocable to such Research Activities.

 

(c)                       Invoicing; Payment .

 

(i)                                                  Within [***] days following the last day of each calendar month during the Research Term, SpinCo shall provide to the Company (x) an invoice for (1) the applicable Reimbursed FTE Number times [***] of the then current annual FTE Rate for the conduct of the Initial Screening Process and the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds and SpinCo Selected Compounds (adjusted as provided in this Section 4.2(c) for any calendar month during which the total number of Research Team members dedicated to such Research Activities (measured in FTEs) is fewer than the applicable Reimbursed FTE Number), (2) [***] of Out-of-Pocket Expenses incurred by SpinCo during such calendar month that are reasonably allocable to the conduct of the Initial Screening Process with respect to Company Selected Compounds and SpinCo Selected Compounds and one hundred percent (100%) of the Out-of-Pocket Expenses reasonably allocable to the Preclinical Functional Efficacy Studies with respect to Company Selected Compounds, together with reasonable supporting documentation with respect thereto, (3) the Budgeted Amounts for FTE Costs for the conduct of all other Funded SpinCo Activities for the applicable calendar month, including the conduct of any Post-Selection Enabling Activities, (4) one hundred percent (100%) of the Out-of-Pocket Expenses incurred by SpinCo during such calendar month that are reasonably allocable to such Post-Selection Enabling Activities and any other Funded SpinCo Activities conducted on behalf of Company, together with reasonable supporting documentation with respect thereto, and (y) the balance of the Prepaid Research Expenses that remains after the application of same to the invoice for such calendar month; provided , however, that in the case of Out-of-Pocket Expenses, SpinCo shall limit the invoiced amounts to the Budgeted Amount therefor and any Out of Budget Amounts that are subject to the reimbursement by the Company pursuant to Section 4.2(d).  For clarity, the reconciliation and invoicing process set forth in this Section 4.2(c) shall apply, without limitation, with respect to each calendar month with respect to which Prepaid Research Expenses will be creditable against invoiced amounts.

 

(ii)                                               Within [***] days following receipt by the Company of such invoice from SpinCo, the Company shall pay to SpinCo the amount due (after taking account of the Prepaid Research Expenses) as reimbursement for the Funded SpinCo Activities in accordance with Section 4.5.  If the Company disputes in good faith any charge contained in an

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

invoice, it will pay any undisputed amounts in accordance with the preceding sentence and provide written notice of the nature of the dispute to SpinCo, and the disputed amount will be addressed under the dispute resolution provisions of Section 11.10.

 

(d)                      Overspend .  SpinCo shall promptly inform the Company in writing upon SpinCo determining that it is reasonably likely to overspend by more than [***] of the Budgeted Amounts for Out-of-Pocket Expenses for a calendar month with respect to the Funded SpinCo Activities, including Out-of-Pocket Expenses with respect to the conduct of any Post-Selection Enabling Activities (“ Out of Budget Amounts ”). Any Out of Budget Amounts shall be reimbursed by the Company pursuant to Section 4.2(c) to the extent such Out of Budget Amounts (i) are less than or equal to [***] of the Budgeted Amounts, and (ii) were not attributable to a failure by SpinCo to use Commercially Reasonable Efforts or the failure of SpinCo to adequately supervise a Third Party performing such activities or the negligence on the part of SpinCo with respect to such activity.

 

(e)                       No Additional Reimbursement .  Without limitation to the foregoing, SpinCo acknowledges and agrees that SpinCo shall not be entitled to reimbursement hereunder for, and shall not invoice the Company for, any amounts attributable to activities other than as set forth in Section 4.2(a) or Section 4.2(b) above.

 

Section 4.3.                                  FTE Records and Audit Rights .

 

(a)                      SpinCo shall keep for at least [***] years from the end of the Calendar Year to which they pertain complete and accurate records of the Out-of-Pocket Expenses for Funded SpinCo Activities in sufficient detail to allow the accuracy of the amounts charged to the Company to be confirmed.

 

(b)                      At the request and, subject to this Section 4.3(b), expense, of the Company, SpinCo shall, and shall cause its Affiliates to, permit an Independent Accountant, at reasonable times and upon not less than thirty (30) days’ notice, to audit the books and records maintained by SpinCo pursuant to Section 4.3(a) to ensure the accuracy of all reports and payments made under this Agreement.  Each such examination shall be limited to pertinent records for any Calendar Year ending not more than [***] years prior to the date of the audit.  This audit right shall not be exercised by the Company more than once in any Calendar Year and a twelve (12) month period may not be audited more than once.  Before permitting such Independent Accountant to have access to such records, SpinCo may require such Independent Accountant and its personnel involved in such audit to sign a customary confidentiality agreement in form and substance reasonably acceptable to SpinCo as to any Confidential Information which is to be provided to such accountant or to which such accounting firm will have access while conducting the examination under this Section 4.3.  The Independent Accountant will prepare and provide to the Company and SpinCo a written report stating whether the reports submitted and amounts paid hereunder were correct or incorrect, and the amounts of any discrepancies. The Parties shall use reasonable efforts, through the participation of finance representatives of both Parties, to resolve any dispute arising in relation to the audit by good faith discussion.  The results of any such audit, reflecting the Independent Accountant’s determination of any disputed

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

matters, shall be binding on both Parties absent manifest error.  In the event that there was an underpayment or overpayment by the Company hereunder with respect to FTE Costs (or, in the case of FTE-based reimbursement pursuant to Section 4.2(a)(iii), with respect to amounts due based on the Reimbursed FTE Number, as adjusted) or Out-of-Pocket Expenses, the Company or SpinCo, as the case may be, shall promptly (but in no event later than thirty (30) days after its receipt of the Independent Accountant’s report so concluding) make payment to the other of the amount of such underpayment or overpayment plus, in the case of any overpayment by the Company, interest at the rate set forth in Section 4.7 from the date such overpayment was originally made.  If such examination establishes an overpayment to SpinCo for any Calendar Year covered by such examination in excess of [***], SpinCo shall reimburse the Company for the expense of such Independent Accountant.

 

Section 4.4.                                  Option Exercise Fee .   The Company shall pay to SpinCo an option exercise fee of One Million Dollars ($1,000,000) (“ Option Exercise Fee ”) for each Option exercised by the Company hereunder.  Each Option Exercise Fee shall be payable within [***] days of the date on which the Company delivers to SpinCo an Option Exercise Notice for the applicable Option pursuant to Section 3.1(c).

 

Section 4.5.                                  Payment Method; Foreign Exchange . All payments due under this Agreement shall be made by bank wire transfer in immediately available funds to a bank account designated by the Party owed such payment.  Payments hereunder shall be made in U.S. dollars.  For the purpose of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement, a Party shall convert any amount expressed in a foreign currency into U.S. dollar equivalents using its standard conversion methodology consistent with GAAP.

 

Section 4.6.                                  Taxes .  Payments shall be free and clear of any taxes (other than withholding and other taxes imposed on the receiving Party), fees or charges, to the extent applicable.  If applicable Law requires withholding of income or other taxes imposed upon any payments made by a Party under this Agreement, the paying Party shall make such withholding payments as may be required and shall subtract such withholding payments from such payments.   Any amounts so withheld and paid over to the appropriate taxing authority shall be deemed to have been paid hereunder. At the receiving Party’s request, the paying Party shall provide the receiving Party a certificate evidencing payment of any withholding taxes hereunder and shall reasonably assist the receiving Party, at the receiving Party’s expense, to obtain the benefit of any applicable tax treaty.

 

Section 4.7.                                  Interest on Overdue Payments .  If any payment due to either Party under this Agreement is not paid when due, then such paying Party shall pay interest thereon (before and after any judgment) at a rate per annum equal to the one-month LIBOR rate (as reported in the Wall Street Journal) as in effect from time to time, plus [***], provided that interest shall not accrue at a rate that exceeds the maximum rate permitted by applicable Law, such interest to run from the date on which payment of such sum became due until payment thereof in full together with such interest (or, in the case of an overpayment governed by Section 4.3, from the date specified in Section 4.3).

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

ARTICLE 5
GOVERNANCE

 

Section 5.1.                                  Research Project Coordinators .  Promptly after the Effective Date, each Party shall appoint a senior representative having a general understanding of pharmaceutical discovery and research matters with respect to the Research Program to act as its project coordinator under this Agreement (each, a “ Project Coordinator ”).  The Project Coordinators shall serve as the contact point between the Parties with respect to this Agreement, and shall be primarily responsible for: (a) facilitating the flow of information and otherwise promoting communication, coordination and collaboration between the Parties, (b) providing a single point of communication for seeking consensus both internally within the respective Party’s organization and together, including facilitating review of external corporate communications, (c) raising cross-Party or cross-functional disputes in a timely manner, and (d) undertaking such other responsibilities as the Parties may mutually agree in writing.  Each Party may replace its Project Coordinator at any time by written notice to the other Party.

 

Section 5.2.                                  Joint Steering Committee .  As soon as practicable (but not later than thirty (30) days) following the Effective Date, the Parties shall establish a joint steering committee (the “ Joint Steering Committee ” or “ JSC ”), which shall serve as a forum for coordination and communication between the Parties with respect to the Research Program.

 

(a)                      Composition of the JSC .  The JSC shall be comprised of two (2) representatives of the Company and two (2) representatives of SpinCo, each with the requisite expertise and seniority to enable such person to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JSC.  Each Party may change any one or both of its JSC representatives at any time upon written notice to the other Party.

 

(b)                      Chair of Committee; Meetings of the JSC; Procedures .

 

(i)                                      Regular Meetings .  The chair of the JSC shall alternate between a representative of the Company on the JSC and a representative of SpinCo on the JSC, as designated by the Company or SpinCo, as applicable, for each twelve (12) month period during the Option Period, with SpinCo having the right to designate the chair for the first such period.  The JSC shall meet [***] times per Calendar Year, at least one of such meetings to be face-to-face,  or on such other schedule agreed upon by the Parties.  Either Party may request additional ad hoc meetings at a mutually agreeable times.  As agreed upon by the Parties, JSC meetings may be face-to-face or may be conducted through teleconferences or videoconferences, provided that at least one (1) JSC meeting during any Calendar Year shall be conducted face-to-face, unless otherwise agreed to by the Parties.  In addition to its JSC representatives, each Party shall be entitled to have other employees attend such meetings to present and participate, though not in a decision-making capacity; provided that any such other employees agree in writing to be bound by obligations of confidentiality at least as stringent as provided for under this Agreement.  Each Party shall bear its own costs and expenses, including travel and lodging expense, that may be incurred by JSC representatives or other attendees at JSC meetings, as a result of such meetings hereunder.  The chair of the JSC (or his or her designee) shall have the responsibility for

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

preparing and circulating to the members of the JSC an agenda for each JSC meeting not later than [***] Business Days prior to such meeting and for transcribing and issuing to the members of the JSC minutes of each JSC meeting within [***] days after each meeting, and such minutes shall be reviewed and modified as mutually required to obtain approval of such minutes promptly thereafter.

 

(ii)                                   Ad Hoc Research Review Meetings .  In addition to the meetings set forth in Section 5.2(b)(i), the JSC shall meet upon the request of either Party on three (3) days’ notice to ensure that the Parties can avoid delay in the conduct and progression of the Research Activities, including to consider any Initial Screening Results, to facilitate the selection of Collaboration Compounds as Eligible Compounds and to facilitate discussion of Eligible Compounds for selection as Selected Compounds by each Party.  The chair of the JSC (or his or her designee) shall provide to the members of the JSC an agenda and any relevant information for each such meeting not later than [***] prior to such meeting.

 

(iii)                                Procedures .  The JSC shall have the right to adopt such standing rules as shall be necessary or useful in carrying out its work in accordance with the terms of this Agreement, and allocate to each Party’s representatives responsibility for performing ministerial tasks required in connection with such work, provided that such rules are not inconsistent with this Agreement or unduly burdensome on either Party.  Without limitation to the foregoing, the JSC shall adopt rules to ensure a timely and orderly process for the JSC to provide notices to the Parties as required hereunder, including the issuance of notices with respect to the selection of Eligible Compounds for the Eligible Compound Pool, the exercise of Picks by each Party and the achievement of Eligible Compound Pool Satisfaction from time to time hereunder.

 

(c)           Function and Powers of the JSC . The Joint Steering Committee shall be responsible for overseeing and managing the Research Program and the conduct of activities under the Research Plan.  SpinCo shall, through the JSC, update the Company on its progress under the Research Plan on at least a monthly basis during the Research Term.  Without limiting the generality of the foregoing, the JSC shall be responsible for the following:

 

(i)                                      reviewing and serving as a forum for discussing the Research Plan and the Budgeted Amounts, reviewing, revising (as applicable), and recommending for adoption by the Parties the complete Research Plan, and preparing, reviewing and recommending for adoption by the Parties updates and amendments to the Research Plan and the Budgeted Amounts;

 

(ii)                                   reviewing, revising (as applicable), and recommending for adoption by the Parties the final version of Schedule 1 and Schedule 5 ;

 

(iii)                                reviewing, revising (as applicable), and approving [***];

 

(iv)                               monitoring compliance with the Research Plan, including the accomplishment of key objectives and reviewing actual monthly spending versus the Budgeted Amounts;

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(v)                                  providing a forum for SpinCo to present to and discuss with the Company the Collaboration Compounds, including Collaboration Compounds that show promise for the Field, and for the Parties to coordinate the Company’s access to Collaboration Compounds and related Information;

 

(vi)                               selecting and prioritizing Collaboration Compounds for further research and evaluation under the Research Plan, including adopting and amending from time to time the criteria to be used by the JSC for selecting and prioritizing Collaboration Compounds that will be evaluated under the Initial Screening Process;

 

(vii)                            discussing and determining which Collaboration Compounds constitute Eligible Compounds in accordance with Section 2.2(c), including adopting and amending from time to time the criteria to be used by the JSC in determining whether to select particular Collaboration Compounds as Eligible Compounds;

 

(viii)                         reviewing and discussing (but not selecting) each Company Selected Compound under consideration by the Company for selection as an Acquired Compound in accordance with Section 3.1;

 

(ix)                               reviewing and coordinating with respect to members of the Research Team, including reviewing such members’ qualifications;

 

(x)                                  issuing promptly such notices as the JSC is required to provide to one or both Parties pursuant to this Agreement, including notices with respect to the selection of Eligible Compounds for the Eligible Compound Pool, the other Party’s exercise of Picks  by each Party and the achievement of Eligible Compound Pool Satisfaction from time to time hereunder; and

 

(xi)                               taking such other actions or making such other decisions as may be delegated to the JSC pursuant to this Agreement or by mutual written agreement of the Parties after the Effective Date.

 

For clarity, with respect to the adoption of the complete Research Plan, or updates or amendments to the Research Plan, or final Schedule 1 or Schedule 5 , such Research Plan (or update or amendment) and schedules shall not be effective unless and until executed by an authorized representative of each Party.

 

(d)          Decision-Making . The Company’s members of the JSC shall collectively have one (1) vote, and SpinCo’s members of the JSC shall collectively have one (1) vote.  No decision shall be made without a quorum of at least one (1) representative member from each Party present.  [***].

 

(e)           Limitations on Authority .  The JSC shall have only those powers expressly delegated to it in this Agreement or agreed by the Parties in writing, and will not have the power to amend or waive compliance with this Agreement, or to make any decision that is not consistent with this Agreement.  For clarity, the decision-making rights reserved for the JSC are

 

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not intended to apply to SpinCo’s management of its day-to-day operations in performing the Research Activities, provided that SpinCo is conducting such operations in a manner consistent with the JSC’s direction on strategic and other matters within the JSC’s jurisdiction (as provided in Section 5.2(c)) and that such day-to-day operations do not contradict, supersede or conflict with this Agreement.

 

Section 5.3.                                  Expenses .  Each Party shall bear its own costs and expenses, including travel costs and expenses, for personnel serving as Project Coordinators or participating in the JSC.

 

ARTICLE 6
INTELLECTUAL PROPERTY

 

Section 6.1.                                  Collaboration Inventions . Subject to the licenses and other rights granted herein, including SpinCo’s assignment obligation in Section 3.2 with respect to Compound-Specific Technology:

 

(a)          As between the Parties, the Company shall own all rights, title, and interests in and to the (i) Company Collaboration Know-How, (ii) the Company Collaboration Patent Rights, and (iii) the Compound-Specific Know-How and the Compound-Specific Patent Rights that are assigned to the Company or any of its Affiliates (or designees) pursuant to Section 3.2;

 

(b)          As between the Parties, SpinCo shall own all rights, title, and interests in and to the SpinCo Collaboration Know-How, the SpinCo Collaboration Patent Rights, the SpinCo Platform Know-How, the SpinCo Platform Patent Rights and the SpinCo Improvements; and

 

(c)           The Parties shall each own an equal, undivided interest in and to any and all Joint Collaboration Know-How and Joint Collaboration Patent Rights.  Subject in the case of SpinCo to its exclusivity obligations under Section 3.6, each Party shall have the right to Exploit and license Third Parties to Exploit the Joint Collaboration Technology without a duty of seeking consent or accounting to the other Party.

 

Section 6.2.                                  Inventorship . The determination of whether Information and inventions are Invented by a Party for the purpose of allocating proprietary rights therein shall, for purposes of this Agreement, be made in accordance with applicable Law in the United States as such law exists as of the Effective Date irrespective of where Inventorship actually occurs.

 

Section 6.3.                                  Licenses to the Company .

 

(a)          R&D License .  SpinCo, on behalf of itself and its Affiliates, hereby grants to the Company and its Affiliates a fully paid-up, royalty-free, irrevocable, co-exclusive (together with SpinCo) right and license, with the right to grant or authorize sublicenses to Third Party (sub)contractors (in the case of SpinCo, in accordance with Section 2.5(b)), under all SpinCo Technology and SpinCo’s and its Affiliates’ interest in the Joint Collaboration Technology (collectively, the “ Licensed Technology ”) during the Research Term and the Option Period for

 

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the sole purpose of conducting research and development with respect to Collaboration Compounds (other than Declined Compounds and SpinCo Selected Compounds after the date on which the applicable Collaboration Compound becomes a Declined Compound or SpinCo Selected Compound, as applicable) and evaluating whether or not to exercise its Options hereunder, including for purposes of evaluating the Information disclosed in any Initial Screening Results and the Data Packages or otherwise provided by SpinCo hereunder; provided that, upon the Company’s selection of a Company Selected Compound, the license granted in this Section 6.3(a) shall automatically be deemed to be exclusive (including with regard to SpinCo and its Affiliates), with the right to grant and authorize sublicenses through multiple tiers with respect to such Company Selected Compound, subject to the retained rights of SpinCo and its Affiliates under the Licensed Technology as necessary to conduct SpinCo Activities.

 

(b)          Exploitation License .  Without limitation to Section 6.3(a), SpinCo, on behalf of itself and its Affiliates, hereby grants to the Company and its Affiliates a royalty-free, fully paid-up (subject to Section 6.3(d)), perpetual, irrevocable exclusive (including with regard to SpinCo and its Affiliates) right and license, with the right to grant and authorize sublicenses through multiple tiers, under the Licensed Technology to Exploit (i) any Acquired Compound or Acquired Product for all purposes, including to Exploit Acquired Compounds and Acquired Products for all purposes in and outside the Field and (ii) without limitation to the foregoing clause (i), any and all compounds and products in the Field (the “ Exploitation License ”).  The Company covenants to SpinCo that the Company and its Affiliates shall not exercise rights, or grant any other Person the right to exercise rights, under the license granted in this Section 6.3(b) with respect to (x) (i) the research or preclinical development of the Acquired Compounds or the Acquired Products for the purpose of the treatment, prevention or diagnosis of any disorders or conditions outside the Field, (ii) the clinical development of the Acquired Compounds or the Acquired Products for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for such purpose, or (c) the commercialization of the Acquired Compounds or the Acquired Products labelled, or approved or licensed by any Regulatory Authority (as defined in the Merger Agreement), for the treatment, prevention or diagnosis of any disorders or conditions outside the Field, or the manufacture of the Acquired Compounds or Acquired Products for purposes of such commercialization, or (y) any compound or product other than an Acquired Compound or Acquired Product in the Field, unless and until the Company has proposed to SpinCo in writing a development plan with respect to such use outside the Field (in the case of clause (x)) or such compound and product in the Field (in the case of clause (y)) and (in each case) such plan has been approved by SpinCo in writing, in its sole discretion.  For clarity, no rights are granted to the Company or its Affiliates outside the Field with respect to compounds and products other than Acquired Compounds and Acquired Products.

 

(c)           Retained Right .  The right and license granted to the Company and its Affiliates in Section 6.3(b) shall not include the right under the SpinCo Platform Know-How, SpinCo Platform Patent Rights and SpinCo Improvements to identify, discover or conduct preclinical development with respect to any compound or product for the purpose of use outside the Field or to conduct clinical development of any compound or product outside the Field, other than any Acquired Compound or any Acquired Product (subject in the case of Acquired

 

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Compounds and Acquired Products to the restrictions set forth in Sections 6.3(a) and 6.3(b)), and shall be subject to the retained rights of SpinCo and its Affiliates under the Licensed Technology as necessary to perform the Research Plan and to otherwise conduct any and all research and development with respect to any compound or product, other than Acquired Compounds and Acquired Products, that is not directed to the Field and to Exploit any compounds and products, other than Acquired Compounds and Acquired Products, outside the Field.

 

(d)          SpinCo In-Licenses .  The right and license granted to the Company and its Affiliates in Section 6.3(b) shall be royalty-free and fully paid-up, except to the extent that it includes any sublicense or other rights under any Licensed Technology which are subject to a license agreement by and between SpinCo and any Third Party entered into after the Closing (as defined in the Merger Agreement) (each, a “ Selected SpinCo In-License Agreement ”) with respect to which the exercise by the Company or any of its Affiliates or sublicensees of a sublicense thereunder would give rise to any payment obligations to such Third Party, including in respect of milestones, royalties or other amounts, in which case (i) SpinCo shall provide the Company with written notice with regard to such obligations and a copy of such Selected SpinCo In-License Agreement and shall include a description of the amounts payable and the reporting requirements under such Selected SpinCo In-License Agreement (the “ SpinCo Third Party Obligations ” and any such notice, a “ Selected In-License Notice ”) and (ii) the Company shall be responsible for the payment of any and all such amounts (and for complying with related reporting requirements) to the extent identified by SpinCo as SpinCo Third Party Obligations pursuant to subsection (i) and shall pay and report such amounts to SpinCo in sufficient time for SpinCo to comply with the applicable terms and conditions of the applicable Third Party agreement to the extent identified by SpinCo as SpinCo Third Party Obligations pursuant to subsection (i); provided that the Company shall not have such obligations in respect of any Selected SpinCo In-License Agreement in the event that Company notifies SpinCo within sixty (60) days of the receipt of the applicable Selected In-License Notice that the Company desires not to receive the benefit of a sublicense under such Selected SpinCo In-License Agreement, in which event the license granted to the Company in Section 6.3(b) shall be deemed to exclude ab initio any sublicense under such Selected SpinCo In-License Agreement and the Company shall not be responsible pursuant to this Section 6.3(d) for any payments due to such Third Party pursuant to such agreement.  Any sublicense granted to the Company with respect to such Licensed Technology under a Selected SpinCo In-License Agreement (other than any such Agreement with respect to which the Company declines the sublicense rights as provided in the preceding sentence), shall be subject to the terms and conditions of the applicable Selected SpinCo In-License Agreement.

 

(e)           Limitation on In-License Agreements .  SpinCo covenants to the Company that SpinCo and its Affiliates shall not, without the Company’s prior written consent, enter into any option, license, assignment or similar agreement with a Third Party with respect to any Collaboration Compound (other than any Excluded Compound or SpinCo Selected Compound) or the Exploitation thereof, including any SpinCo In-License, that would require SpinCo or any of its Affiliates or sublicensees to pay to the Third Party any milestones, royalties or other amounts in connection with the Exploitation of any such Collaboration Compound; provided that after the conclusion of the Option Period this covenant shall apply to any Acquired Compound

 

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but no other Collaboration Compound.

 

Section 6.4.                                  Licenses to SpinCo .

 

(a)          The Company, on behalf of itself and its Affiliates, hereby grants to SpinCo, during the Research Term, a fully paid-up, royalty-free, non-exclusive license, with the right to grant sublicenses to Third Party subcontractors in accordance with Section 2.5(b), under the Company Collaboration Know-How and Company Collaboration Patent Rights solely for the purpose of performing SpinCo Activities.

 

(b)          The Company on behalf of itself and its Affiliates, hereby grants to SpinCo and its Affiliates a perpetual, irrevocable, non-exclusive right and license, with the right to grant and authorize sublicenses through multiple tiers, under the Grantback Patent Rights to the extent reasonably necessary to make or have made, or import for the purpose of making or having made, subject to Section 3.6, (i) any intermediate of any SpinCo Selected Compounds and Declined Compounds and (ii) any intermediate of any other compounds and products that, after expiration of the Option Period, constitute Non-Acquired Compounds and Non-Acquired Products, in each case solely for use outside the Field in any product (other than an Acquired Product or Company Product) that contains or incorporates such SpinCo Selected Compound or Declined Compound (the “ Grantback License ”); provided that SpinCo shall only have the right to sublicense to a Person to the extent SpinCo grants to such Person a license to any other Patent Rights of SpinCo that also claim the applicable compound or product.  The Grantback License shall be royalty-free and fully paid up, except to the extent that it includes any sublicense or other rights under any Grantback Patent Rights which are subject to a license agreement by and between the Company or any of its Affiliates and any Third Party (each, a “ Company In-License Agreement ”) with respect to which the exercise by SpinCo or any of its Affiliates or sublicensees of a sublicense thereunder would give rise to any payment obligations to such Third Party, including in respect of milestones, royalties or other amounts, in which case (i) the Company shall provide SpinCo with a written notice with regard to such obligations and copy of such Company In-License Agreement and shall include a description of the amounts payable and the reporting requirements under such Company In-License Agreement (the “ Grantback Third Party Obligations ” and any such notice, a “ Grantback In-License Notice ”) and (ii) SpinCo shall be responsible for the payment of any and all such amounts (and for complying with related reporting requirements) to the extent identified by the Company as Grantback Third Party Obligations pursuant to subsection (i) and shall pay and report such amounts to the Company in sufficient time for the Company to comply with the applicable terms and conditions of the applicable Third Party agreement to the extent identified by the Company as Grantback Third Party Obligations pursuant to subsection (i); provided that SpinCo shall not have such obligations in respect of any Company In-License Agreement in the event that SpinCo notifies the Company within sixty (60) days of the receipt of the applicable Selected In-License Notice that SpinCo desires not to receive the benefit of a sublicense under such Company In-License Agreement, in which event the license granted to SpinCo in Section 6.4(a) shall be deemed to exclude ab initio any sublicense under such Company In-License Agreement and SpinCo shall not be responsible pursuant to this Section 6.4(b) for any payments due to such Third Party pursuant to such agreement).  Any sublicense granted to SpinCo with respect to such Grantback

 

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Patent Rights under a Company In-License Agreement (other than any such Agreement with respect to which SpinCo declines the sublicense rights as provided in the preceding sentence), shall be subject to the terms and conditions of the applicable Company In-License Agreement .

 

Section 6.5.                                  Prosecution and Maintenance of Patent Rights .

 

(a)          SpinCo Patent Rights .  Subject to Section 6.5(d), except as set forth below, SpinCo shall have the sole right, but not the obligation, to prepare, file, prosecute and maintain any and all SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights and SpinCo Platform Patent Rights (excluding any Compound-Specific Patent Rights).  Any such filing shall be at SpinCo’s sole cost and expense.  Subject to applicable Law, SpinCo shall keep the Company reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of any such Patent Rights being prosecuted by SpinCo that may reasonably be expected to impact the any Company Selected Compound or the Company’s Exploitation License, including by providing the Company with (i) copies of any material communications to or from SpinCo or its Representatives, on the one hand, and any patent authority, on the other hand, with respect thereto and (ii) drafts of any material filings or responses to be made by SpinCo to any such patent authority with respect thereto sufficiently in advance of submitting such filings or responses so as to allow for a reasonable opportunity for the Company to review and comment thereon.  SpinCo shall [***] the requests and suggestions of the Company with respect to such drafts and with respect to strategies for preparing, filing, prosecuting and maintaining such Patent Rights; [***].  If SpinCo elects not to file, or desires to discontinue prosecution or maintenance of any such Patent Rights, SpinCo shall provide reasonable prior written notice thereof to the Company and, in any event, so as to provide the Company a reasonable amount of time to meet any applicable deadline to establish or preserve such Patent Rights in such country or region, and the Company shall have the right, in its sole discretion (subject to Section 6.9) and upon notice to SpinCo, to file, prosecute and maintain such Patent Rights that cover or claim any Company Selected Compound, Acquired Compound or Acquired Product or the Exploitation thereof (including any method of use or making of any Company Selected Compound, Acquired Compound or Acquired Product), which filing, prosecution and maintenance shall be at the Company’s sole cost and expense.  Each Party shall provide the other Party with all assistance reasonably necessary to facilitate prosecution and maintenance of such Patent Rights under this Section 6.5(a).  Notwithstanding the foregoing, SpinCo’s foregoing obligations under this Section 6.5(a) shall not apply to any SpinCo Platform Patent Rights or Extended IP Access Period Patent Rights, and SpinCo shall have the sole right, but not the obligation, at its sole cost and expense, to obtain, prosecute and maintain the SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights throughout the world, without any obligation to coordinate with the Company.

 

(b)          Company Patent Rights .

 

(i)                                      The Company shall have the sole right, but not the obligation, at its sole cost and expense, to obtain, prosecute and maintain the Company Collaboration Patent Rights.

 

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(ii)                                   The Company shall have the sole right, but not the obligation, to obtain, prosecute and maintain throughout the world any and all Compound-Specific Patent Rights, the cost and expense of which shall be borne by the Company.  Subject to applicable Law, in the case of any Compound-Specific Patent Rights, the Company shall keep SpinCo reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of such Compound-Specific Patent Rights.  The Company shall use reasonable efforts to confer with SpinCo with respect to the Company’s choice of any outside counsel to be retained by or on behalf of the Company to carry out the filing, prosecution and maintenance of any Compound-Specific Patent Rights.  SpinCo shall provide the Company with all assistance reasonably necessary to facilitate prosecution and maintenance of such Compound-Specific Patent Rights.

 

(c)           Joint Collaboration Patent Rights . As between the Parties, [***] shall have the first right (but not the obligation), using counsel reasonably acceptable to the Company, to obtain, prosecute and maintain throughout the world any Joint Collaboration Patent Rights (excluding any Compound-Specific Patent Rights), in each case, with SpinCo’s reasonable out-of-pocket expenses of preparation, filing, prosecution and maintenance to be [***] by the Parties. Subject to applicable Law, [***] shall keep [***] reasonably informed in respect of any material change, effect, event, occurrence, state of facts or development relating to the preparation, filing, prosecution or maintenance of any such Joint Collaboration Patent Rights, including by providing [***] with (i) copies of any material communications to or from [***] or its Representatives, on the one hand, and any patent authority, on the other hand, with respect thereto and (ii) drafts of any material filings or responses to be made by [***] to any such patent authority sufficiently in advance of submitting such filings or responses so as to allow for a reasonable opportunity for [***] to review and comment thereon.  [***] shall consider in good faith the requests and suggestions of [***] with respect to such drafts and with respect to strategies for preparing, filing, prosecuting and maintaining such Joint Collaboration Patent Rights.  If [***] elects not to file, or desires to discontinue prosecution or maintenance of any such Joint Collaboration Patent Rights, SpinCo shall provide reasonable prior written notice thereof to [***] shall thereupon have the option, in its sole discretion to assume the control and direction of the preparation, filing, prosecution and maintenance of such Joint Collaboration Patent Rights, with [***] reasonable out-of-pocket expenses to be [***] by the Parties.  In the event that the non-prosecuting Party under this Section 6.5(c) at any time desires to cease co-funding the preparation, filing or maintenance of any such Joint Collaboration Patent Rights with respect to any country or region, it may do so upon written notice to the prosecuting Party (and shall have no further funding obligations commencing with respect to the period commencing thirty (30) days after the date of such notice), provided that upon providing such notice the non-Prosecuting Party shall automatically be deemed to assign (and hereby assigns effective as of the date of such notice) to the prosecuting Party all right, title and interest in and to such Joint Collaboration Patent Rights with respect to such country or region and such Joint Collaboration Patent Rights shall thereafter be deemed to be Company Collaboration Patent Rights or SpinCo Collaboration Patent Rights, as applicable).

 

(d)          CREATE Act .  Notwithstanding anything to the contrary in this Article 6, neither Party shall have the right to pursue a filing under 35 U.S.C. 102(c) when exercising its

 

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rights under this Article 6, without the prior written consent of the other Party. With respect to any such permitted election, the Parties shall coordinate their activities with respect to any submissions, filings or other activities in support thereof. The Parties acknowledge and agree that this Agreement is a “joint research agreement” as defined in 35 U.S.C. 100(h).

 

Section 6.6.                                  Enforcement and Defense of Patent Rights .

 

(a)          Rights and Procedures .  If either Party believes that any SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights, Company Collaboration Patent Rights or Joint Collaboration Patent Rights (including any Compound-Specific Patent Rights) (i) is being infringed by a Third Party’s activities or (ii) is being challenged as invalid or unenforceable (“ Infringement/Challenge ”), it shall notify the other Party in writing and provide it with any evidence of such Infringement/Challenge that is reasonably available to such Party.

 

(i)                                      The Company shall have the sole right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge with respect to any Compound-Specific Patent Rights.

 

(ii)                                   SpinCo shall have the sole right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge with respect to any SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights.

 

(iii)                                With respect to any Infringement/Challenge in relation to any SpinCo Background Patent Rights, SpinCo Collaboration Patent Rights, and Joint Collaboration Patent Rights (excluding (x) any Compound-Specific Patent Rights, which are governed by Section 6.6(a)(i) and (y) any SpinCo Platform Patent Rights and any Extended IP Access Period Patent Rights, which are governed by Section 6.6(a)(ii)), (A) the Company shall have the sole right, but not the obligation, to remove or defend against any Infringement/Challenge with respect to any such Patent Rights that [***], including any Acquired Compound or Acquired Product (or the Exploitation thereof) in the Field, (B) SpinCo shall have the sole right, but not the obligation, to remove or defend against any Infringement/Challenge with respect to any such Patent Rights that [***] and (C) the Company shall have the first right, but not the obligation, at its sole cost and expense, to remove or defend against any Infringement/Challenge that is not described by clause (A) or (B) that may reasonably impact any Acquired Compound or Acquired Product in the Field; provided that if the Company determines not to remove or defend against any such Infringement/Challenge within ninety (90) days of receiving notice of any such Infringement/Challenge (or such other period as may be required to preserve SpinCo’s right to remove or defend against such Infringement/Challenge), SpinCo shall, at its sole cost and expense, have the right, but not the obligation, to defend against such remove or defend against any such Infringement/Challenge, subject to the Company’s prior written consent, not to be unreasonably withheld, conditioned or delayed (the Party with the right to remove or defend such Infringement/Challenge being referred to as the “ Lead Litigation Party ”).  The Parties shall cooperate to ensure that there is proper communication and coordination of activities between the Parties with respect to the activities carried on pursuant to the terms of this Section 6.6(a)(iii).  For the avoidance of doubt, [***].

 

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(b)          Cooperation .  The Party not enforcing or defending the applicable Patent Rights under Section 6.6(a) shall, at the requesting Party’s expense, provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action.

 

(c)           Costs and Expenses .  Any amounts recovered by either Party pursuant to Section 6.6(a), whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable out-of-pocket costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by or paid to the Party removing or defending against the Infringement/Challenge.

 

Section 6.7.                                  Potential Infringement of Third Party Rights .

 

(a)          Third Party Licenses .  If (i) in the reasonable opinion of the Company, one or more Patent Rights have issued to a Third Party in any country such that the Company or any of its Affiliates or (sub)licensees cannot exercise the Exploitation License or otherwise Exploit any Acquired Compound in such country without infringing such Patent Rights or (ii) as a result of any claim made against the Company or any of its Affiliates or (sub)licensees alleging that the exercise of the Exploitation License or other Exploitation of any Acquired Compound by the Company, its Affiliates or any of its (sub)licensees infringes or misappropriates any Patent Rights or any other intellectual property right of a Third Party in any country, a judgment is entered by a court of competent jurisdiction from which no appeal is taken within the time permitted for appeal, such that the Company or any of its Affiliates or (sub)licensees cannot exercise the Exploitation License or otherwise Exploit any Acquired Compound  in such country without infringing the Patent Rights or other proprietary rights of such Third Party, then, in any case, the Company shall have the first right, but not the obligation, at its sole cost and expense, to negotiate and obtain a license from such Third Party as necessary for the Company and its Affiliates and (sub)licensees to exercise the Exploitation License or otherwise Exploit any Acquired Compound in such country.

 

(b)          Third Party Litigation .  In the event that a Third Party institutes a Patent Rights, trade secret or other infringement suit against either Party or its Affiliates or (sub)licensees alleging that the exercise of the Exploitation License or other Exploitation of any Acquired Compound  infringes one or more Patent Rights, trademark, trade secret or other intellectual property rights held by such Third Party, then subject to Article 9, the Company shall have the first right, but not the obligation, at its sole cost and expense, to assume direction and control of the defense of claims arising therefrom (including the right to settle such claims at its sole discretion).  If the Company determines not to assume such direction and control, subject to Article 9, SpinCo shall, at its sole cost and expense, have the right, but not the obligation, to defend against such claims asserted against SpinCo or any of its Affiliates; provided , however , that SpinCo shall obtain the written consent of the Company prior to settling or otherwise disposing of such claims to the extent such event would limit or restrict the ability of the Company to exercise the Exploitation License or Exploit any Acquired Compound.

 

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(c)                       Cooperation .  In the event that a Third Party institutes a Patent Rights, trade secret or other infringement suit against either Party or its Affiliates or (sub)licensees, the Party that is not controlling the defense shall, and shall cause its Affiliates, to use all reasonable efforts to assist and cooperate with the defending Party (at the defending Party’s expense) in connection with the defense of such suit.

 

Section 6.8.                                  Section 365(n) of the Bankruptcy Code . All rights and licenses granted under or pursuant to this Agreement by the Company or SpinCo are and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction.  The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code or any analogous provisions in any other country or jurisdiction, the Party hereto that is not a Party to such proceeding shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non-subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

 

Section 6.9.                                  Patent Term Extension and Orange Book Listing . For the avoidance of doubt, as between the Parties:

 

(a)                      [***] shall have the sole right to make decisions regarding and shall have the sole right to apply for, patent term extensions, worldwide, including in the United States with respect to extensions pursuant to 35 U.S.C. §156 et. seq. and in other jurisdictions pursuant to supplementary protection certificates, and in all jurisdictions with respect to any other extensions that are now or become available in the future, wherever applicable, with respect to the Compound-Specific Patent Rights covering or claiming the Acquired Compounds and the Acquired Products, and the Exploitation of each of the foregoing, including patent term extensions decisions with respect to Compound-Specific Patent Rights and [***] Collaboration Patent Rights, in each case including whether or not to do so. [***] shall ensure that any and all Compound-Specific Patent Rights Controlled by [***] remain available for such patent term extensions with respect to the Acquired Compounds and the Acquired Products, and the Exploitation of each of the foregoing unless the Parties otherwise agree in writing.  The Parties shall cooperate with respect to any decisions regarding patent term extensions, worldwide, with respect to any Compound-Specific Patent Rights and shall cooperate in good faith to consider each Party’s respective interests in patent term extensions as relates to its respective products.  For the avoidance of doubt, [***] shall not have the right to seek any patent term extension, supplemental protection certificate or other extension of any Grantback Patent Rights at any

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

time.

 

(b)          [***] shall have the sole right to make all filings with regulatory authorities, worldwide, with respect to any Acquired Compounds or Acquired Products, including as required or allowed (i) in the United States, in the Orange Book, and (ii) outside of the United States, under the national implementations of Article 10.1(a)(iii) of Directive 2001/EC/83 in the European Union or other international equivalents of any of the foregoing.

 

Section 6.10.                           No Implied Licenses .  Except as expressly provided herein, neither Party grants any license or similar right to or under any intellectual property not otherwise expressly granted herein.

 

ARTICLE 7
CONFIDENTIALITY

 

Section 7.1.                                  Confidentiality .

 

(a)                      Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, each Party shall, and shall cause its officers, directors, employees and agents to, (i) all times during the Term and for a period of [***] years following termination or expiration hereof (the “ Confidentiality Term ”), keep confidential and shall not publish or otherwise disclose to any Third Party any Confidential Information of the other Party and (ii) not use for any purpose other than a Permitted Use any Confidential Information of the other Party.  Subject to Section 7.1(b), as used in this Agreement (i) “ Confidential Information ” means all information and know-how and any tangible embodiments thereof provided or disclosed by one Party to the other Party in the course of performing this Agreement, including data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business and (ii) a “ Permitted Use ” means (x) the exercise of any (sub)license or other rights hereunder or the conduct of activities related to the subject matter of this Agreement or (y) the performance by a Party of any of its obligations under this Agreement.  Without limiting the generality of the foregoing, all SpinCo Platform Know-How and tangible embodiments thereof shall be Confidential Information of SpinCo.

 

(b)                      Research Program Information.

 

(i)                                      In light of the Parties’ shared interests in the Research Activities, both Parties recognize each other’s interest in Information generated under or in connection with this Agreement or the Research Program consisting of the Research Plan and any amendments thereto, Target Compound Profiles, Initial Screening Results and other results of tests, assays, studies and other activities (including Preclinical Functional Efficacy Studies) conducted in the Research Program and other Information with respect to any Collaboration Compound that is the subject of any Research Activities hereunder (collectively, the “ Research Program Information ”).  Notwithstanding the Party that disclosed any Research Program Information,

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

such Information shall be the Confidential Information of each Party (and both Parties shall be deemed to be the receiving Party and the disclosing Party with respect thereto); provided that with respect to Research Program Information, a Permitted Use means (in addition to the uses set forth in Section 7.1(a)), the right to use Research Program Information, in the case of each Party,  for its internal research purposes and, in the case of SpinCo, except in the case of the Research Plan and any amendments thereto, the Target Compound Profiles and Confidential Acquired Compound Information, for the conduct of any and all activities that are not targeted to the Field.  Any disclosures of such Research Program Information to Third Parties shall be subject to the other terms of this Article 7.

 

(ii)                                   Notwithstanding Section 7.1(a) and 7.1(b), (A) upon the Company’s exercise of a Pick with respect to an Eligible Compound, any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of the Company (and not of SpinCo) and (B) upon SpinCo’s exercise of a Pick with respect to an Eligible Compound or any Collaboration Compound becoming a Declined Compound, any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of SpinCo (and not of the Company); provided that with respect to any Selected Compound that becomes a Terminated Compound pursuant to Section 2.2(e), any and all Research Program Information pertaining primarily to such Eligible Compound shall be deemed to be the Confidential Information of each Party (and both Parties shall be deemed to be the receiving Party and the disclosing Party with respect thereto) unless and until such Terminated Compound again becomes a Selected Compound of a Party.

 

(iii)                                Notwithstanding Sections 7.1(a) and 7.1(b)(ii), (A) upon the Company’s exercise of an Option with respect to any Acquired Compound, any and all Research Program Information pertaining primarily to the Acquired Compounds and Acquired Products and all Compound-Specific Technology (collectively, as of the applicable Option Exercise Date, the “ Confidential Acquired Compound Information ”) shall be deemed to be the Confidential Information of the Company (and not of SpinCo), (B) after the conclusion of the Option Period with respect to all Company Selected Compounds, any and all Research Program Information pertaining primarily to any Declined Compound or SpinCo Selected Compound shall be deemed the Confidential Information of SpinCo (and not of the Company) and (C) after the conclusion of the Option Period with respect to all Company Selected Compounds, any and all other Research Program Information that is not covered by clause (A) or clause (B) above shall be the Confidential Information of the disclosing Party with respect thereto.

 

Section 7.2.                                  Exceptions . Notwithstanding the foregoing, the confidentiality and non-use obligation under Section 7.1 with respect to any Confidential Information shall not apply to information that:

 

(a)                      can be demonstrated by documentation or other competent evidence to have been in the knowledge or possession of the receiving Party prior to the time it was disclosed to, or learned by, the receiving Party;

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(b)                      was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

 

(c)                       became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

 

(d)                      was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or

 

(e)                       can be demonstrated by documentation or other competent evidence to have been independently developed by or for the receiving Party without use of the disclosing Party’s Confidential Information;

 

provided , however , (i) that the exceptions set forth in clauses (a), (d) and (e) shall not operate to relieve SpinCo of any obligations with respect to any Confidential Acquired Compound Information, and (ii) that the exceptions set forth in clauses (a), (d) and (e) shall not operate to relieve the Company of any obligations with respect to any Research Program Information pertaining primarily to SpinCo Selected Compounds or Declined Compounds.

 

For clarity, in the case of clauses (a), (b) and (c) above, specific disclosures made under this Agreement shall not be deemed to be within the above exceptions merely because they are embraced by general disclosures in the public knowledge or literature or in the possession of the receiving Party, and any combination of features disclosed hereunder shall not be deemed within the above exceptions merely because individual features are in the public knowledge or literature or in the possession of the receiving Party.

 

Section 7.3.                                  Authorized Disclosure .  Notwithstanding anything in Section 7.1 to the contrary, the receiving Party may disclose the Confidential Information of the disclosing Party to the extent that such disclosure is:

 

(a)                      made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial and local Governmental Entity of competent jurisdiction or, if in the reasonable opinion of the receiving Party’s legal counsel, such disclosure is otherwise required by applicable Law, including by reason of filing with securities regulators; provided , however , that the receiving Party shall first have given notice to the disclosing Party and given the disclosing Party a reasonable opportunity to quash such order or to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided , further , that the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;

 

(b)                      made by or on behalf of the receiving Party to a Governmental Entity as

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

required in connection with any filing, application or request for regulatory approval; provided, however , that reasonable measures shall be taken to assure confidential treatment of such information to the extent practicable and consistent with applicable Law;

 

(c)                       subject to the disclosing Party’s prior written consent, not to be unreasonably withheld, conditioned or delayed, made by or on behalf of the receiving Party to a patent authority as may be reasonably necessary or useful for purposes of obtaining or enforcing any Patent Right provided, however , that reasonable measures shall be taken to assure confidential treatment of such information, to the extent such protection is available;

 

(d)                      made by or on behalf of the receiving Party to its Representatives and contractors in connection with the performance of its obligations or exercise of its rights as contemplated by this Agreement, or to existing or prospective investors,  lenders or acquirers as may be necessary or useful in connection with their evaluation of such existing or prospective investment, loan or acquisition; provided, however , that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made);

 

(e)                       made by or on behalf of the Company or its Affiliates or (sub)licensees to  Representatives, contractors, existing or prospective collaboration partners, (sub)licensees, or acquirers or other Third Parties as may be necessary or useful in connection with the Exploitation of any Acquired Compound or Acquired Product;  provided, however , that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made);

 

(f)                        in the case of Research Program Information, made by or on behalf of SpinCo or its Affiliates to  Representatives, contractors, existing or prospective collaboration partners, (sub)licensees, or acquirers or  other Third Parties as may be necessary or useful in connection with the Exploitation of a SpinCo Selected Compound or Declined Compound or the other conduct of its business outside the Field; provided, however , that such rights of disclosure shall not apply to any Research Program Information with respect to the structure of any Collaboration Compound other than a SpinCo Selected Compound or a Declined Compound or to any Confidential Acquired Compound Information; provided, further, that such persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this Article 7 (which confidentiality and non-use obligations shall apply for a period of no less than [***] years after the effective date of the agreement pursuant to which any such disclosure is made); or

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

(g)                       mutually agreed to by the Parties or as otherwise expressly set forth in this Agreement.

 

Section 7.4.                                  Nondisclosure of Terms .  Each of the Parties hereto acknowledges that the terms of this Agreement constitute the Confidential Information of each Party and agrees not to disclose the terms of this Agreement to any Third Party without the prior written consent of the other Party hereto; provided that a Party may disclose the terms of this Agreement without such consent to such Party’s Representatives on a need-to-know basis, and also as follows: (a) either Party may disclose such terms to existing and prospective Third Party investors, lenders and acquirers and other Third Parties in connection with due diligence or similar investigations by such Third Parties, (b) the Company may disclose such terms to existing and potential (sub)licensees, collaborators and other Third Parties as may be necessary or useful in connection with the Exploitation of any Acquired Compound or Acquired Product, and (c) SpinCo may disclose such terms to existing and potential licensees and sublicensees, and to collaborators of SpinCo as may be necessary or useful in connection with (i) the Exploitation of any SpinCo Selected Compound or Declined Compound as may be necessary or useful in connection with the grant of such sublicense and (ii) after expiration of the Option, the Exploitation of any compound or product that modulates the NMDA receptors other than any Acquired Compound or Acquired Product as may be necessary in connection with such (sub)licensee’s or collaborator’s reasonable and customary diligence activities, provided that any disclosure pursuant to clause (ii) shall be limited to only those terms necessary to demonstrate that the compounds or products with respect to which such disclosure is being made are not within the scope of this Agreement, and provided , further , that  SpinCo shall have obtained the Company’s prior written consent with respect to the terms to be disclosed prior to disclosing any such terms; provided , further , that in each case ((a)-(c)) the permitted disclosures shall be made under confidentiality obligations substantially equivalent to those of this Agreement.  Notwithstanding the foregoing, to the extent a Party determines in good faith that it is required by applicable Law to publicly file or otherwise disclose the terms of this Agreement with a Governmental Entity, including public filings pursuant to securities laws or the rules of a stock exchange on which the securities of the disclosing Party are listed (or to which an application for listing has been submitted), 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 redacted form (which approval shall not 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.

 

Section 7.5.                                  Press Releases and Announcements .  Except as provided in Section 7.4, no public statement or 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 7.5, then either Party may make subsequent and repeated public disclosure of

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

the contents thereof without further approval of the other Party.

 

Section 7.6.                                  Publications and Presentations .  The Parties acknowledge that scientific lead-time is a key element of the value of the Research Activities under the Research Program and further agree that scientific publications must be strictly monitored to prevent any adverse effect from premature publication of results of the Research Activities hereunder.  Accordingly, neither Party shall publish, present or otherwise disclose any material related to the results of the Research Program without the prior review by the other Party.  The publishing Party shall provide the other Party the opportunity to review each of the publishing Party’s proposed abstracts, manuscripts or presentations (including information to be presented verbally) that contain the non-publishing Party’s Confidential Information or disclose any unpatented Information related to the results of the Research Program at least [***] days prior to its intended presentation or submission for publication, and the publishing Party agrees, upon written request from the non-publishing Party given within such thirty (30)-day period, not to submit such abstract or manuscript for publication or to make such presentation until the non-publishing Party is given up to [***] days (or such other period as the Parties may mutually agree) from the date of such written request to seek appropriate patent protection for any unpatented Information disclosed in such publication or presentation that it reasonably believes may be patentable.  Notwithstanding the foregoing, in no event shall a Party have the right, in reliance on this Section 7.6, to publish, present or otherwise disclose any Confidential Information of the other Party without such other Party’s prior written consent; provided that the Company shall have the right to publish, present or otherwise disclose the Research Program Information with respect to any Acquired Compound or Acquired Product without the prior written consent of SpinCo, and SpinCo shall have the right to publish, present or otherwise disclose the Research Program Information with respect to any SpinCo Selected Compound or any Declined Compound without the prior written consent of the Company.

 

Section 7.7.                                  Use of Name .  Neither Party shall mention or otherwise use the name, insignia, symbol, trademark, trade name or logotype of the other Party (or any abbreviation or adaptation thereof) in any publication, press release, promotional material or other form of publicity without the prior written approval of such other Party in each instance.  The restrictions imposed by this Section 7.7 shall not prohibit either Party from making any disclosure identifying the other Party that is required by applicable Law.

 

ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 8.1.                                  Representations, Warranties and Covenants .  Each Party hereby represents and warrants, as of the Execution Date and as of the Effective Date, and covenants to the other Party, as applicable, as follows:  Such Party has the power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal and valid obligation binding upon such Party and enforceable in accordance with its terms.  The execution, delivery and performance of

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

the Agreement by such Party does not and will not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it is bound, or violate any applicable Law, any order of any court, governmental body or administrative or other agency having jurisdiction over it, or its articles of incorporation or bylaws.

 

Section 8.2.                                  Additional Representations, Warranties and Covenants of SpinCo .  SpinCo hereby represents and warrants, as of the Execution Date and as of the Effective Date, and covenants, as applicable, as follows:

 

(a)                      With respect to each Collaboration Compound and each Company Selected Compound, all Information contained in the Initial Screening Results and in the Data Package, as applicable, including any reports delivered in connection therewith, with respect to such compound will be complete and will accurately set forth the results of the relevant activities in all respects, and taken together, such Information will constitute all material information related to such compound Known to SpinCo at the time of delivery of such Initial Screening Results, Data Packages and related reports.

 

(b)                      Neither SpinCo nor its Affiliates has, directly or indirectly, by action or omission, (i) assigned, transferred, granted, conveyed or otherwise encumbered any right, title or interest in or to any Patent Rights or Information owned by, licensed to or otherwise Controlled by SpinCo or its Affiliates with respect to the Exploitation of compounds or products in the Field or with respect to any Collaboration Compound, or (ii) agreed to or is otherwise bound by any covenant not to sue for any infringement, misuse or otherwise with respect to the foregoing Patent Rights or Information.

 

(c)                       To SpinCo’s Knowledge, as of the date hereof the conduct of the Research Program as described in the initial Research Plan does not and will not infringe or misappropriate any Patent Rights or other intellectual property or proprietary right of any Person.

 

(d)                      Except as otherwise disclosed to the Company as part of the Data Package, the Exploitation by the Company of the applicable Company Selected Compound, and if optioned by the Company, the associated Acquired Compound will not, to SpinCo’s Knowledge at the time of delivery of the Data Package, infringe or violate the issued Patent Rights or misappropriate any other intellectual property or proprietary rights of any Person.

 

(e)                       To SpinCo’s Knowledge, all material Information Controlled by SpinCo with respect to any Company Selected Compound at the time of delivery of the Data Package will be disclosed to the Company in writing prior to, or as part of, the delivery of any applicable Data Package, or if later obtained by SpinCo, promptly after obtaining same.

 

(f)                        Schedule 8 sets forth a true and complete list of all SpinCo In-Licenses and shall be updated by SpinCo from time to time to list any SpinCo In-License entered into after the Effective Date.  SpinCo has, prior to the Effective Date, provided the Company with access to true and complete (except for any redactions required by the terms thereof) copies of any SpinCo In-License in effect as of the Effective Date.  To SpinCo’s Knowledge (i) the licenses to SpinCo in the SpinCo In-Licenses are in full force and effect and by their terms and are sublicenseable to

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

the Company as contemplated by this Agreement, (ii) there are no challenges to or violation of the rights granted to SpinCo thereunder by any Third Party, (iii) SpinCo is not in material breach under any of the SpinCo In-Licenses, nor, to SpinCo’s Knowledge, is any counterparty thereto, and (iv) SpinCo has not received any written notice of breach under any of the SpinCo In-Licenses from the counterparty thereto.

 

(g)                       Except with respect to any SpinCo In-Licenses to which the Company has consented pursuant to Section 6.3(e), as of the date of the assignment of any Compound-Specific Technology to the Company pursuant to Section 3.2, such Compound-Specific Technology will be Controlled by SpinCo or an Affiliate free and clear of all Liens.

 

(h)                      Neither SpinCo nor any of its Affiliates has been debarred or is subject to debarment and neither it nor any of its Affiliates will use in any capacity, in connection with the SpinCo Activities, any Person who has been debarred pursuant to Section 306 of the FFDCA or who is the subject of a conviction described in such section.  SpinCo agrees to inform the Company in writing promptly if it or any such Person who is performing services hereunder is debarred or is the subject of a conviction described in Section 306 or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of its or its Affiliates’ Knowledge, is threatened, relating to the debarment or conviction of it or any such Person performing services hereunder.

 

(i)                          In furtherance of the rights granted to the Company hereunder, SpinCo shall enter into agreements to obligate all Persons who perform SpinCo Activities or who conceive, discover, develop or otherwise make any Compound-Specific Technology or Licensed Technology to assign their rights in and to any such Information and Patent Rights to SpinCo such that SpinCo may assign or license such rights to the Company, as applicable, in accordance with this Agreement.

 

(j)                         As of the Effective Date, SpinCo has the infrastructure and appropriately qualified research and technical personnel required to conduct the Initial Screening Process and, during the Research Term, shall at all times have and maintain the infrastructure and shall use Commercially Reasonable Efforts to have and maintain at all times appropriately qualified research and technical personnel required to conduct the Research Activities in accordance with the Research Plan.

 

(k)                      Neither SpinCo nor any of its Affiliates has encumbered, and neither SpinCo nor any of its Affiliates will at any time during Term encumber, any (i) Licensed Technology or (ii) any Know-How or Patent Rights that are owned by SpinCo or any of its Affiliates that would, in the absence of a “control” requirement, constitute Licensed Technology hereunder, in each case that is necessary or useful to the Company under or in connection with the Research Program or the Exploitation of any Company Selected Compounds or Acquired Compounds, in a manner that would have the effect of excluding such Licensed Technology from the licenses, assignments or other rights provided to the Company hereunder.

 

(l)                          SpinCo and its Affiliates and their respective permitted contractors and consultants will conduct all SpinCo Activities in accordance with applicable Law, including

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

good laboratory practices.

 

Section 8.3.                                  No Other Warranties . OTHER THAN THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR GRANTS ANY WARRANTY IN THIS AGREEMENT AND EACH PARTY HEREBY  DISCLAIMS ALL OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY WITH RESPECT TO MATERIALS OR INFORMATION DELIVERED TO THE OTHER PARTY UNDER THIS AGREEMENT, OR WITH RESPECT TO ANY INFORMATION OR PATENT RIGHTS, INCLUDING ALL OTHER WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND VALIDITY OF ANY PATENTS, ISSUED OR PENDING.

 

ARTICLE 9
INDEMNIFICATION

 

Section 9.1.                                  Indemnification by the Company .  The Company shall defend, indemnify and hold harmless SpinCo, its Affiliates, and their respective directors, officers, agents and employees (each a “ SpinCo Indemnified Party ”) from any Loss incurred in connection with any and all Third Party suits, investigations, claims or demands (collectively, “ Third Party Claims ”) to the extent arising out of or resulting from (a) the Company’s breach of this Agreement, (b) the research, development or Exploitation of any Company Selected Compound or Acquired Compound or Acquired Product by the Company or any of its Affiliates, (sub)licensees or agents or (c) any negligence or willful misconduct on the part of the Company or its Affiliates or their respective directors, officers, employees, and agents in performing their obligations under this Agreement; provided , however , that the foregoing indemnity obligation shall not apply to the extent such Loss is subject to indemnification by SpinCo pursuant to Section 9.2, as to which Losses each of the Company and SpinCo shall indemnify the other to the extent of their respective liability.

 

Section 9.2.                                  Indemnification by SpinCo .  SpinCo shall defend, indemnify and hold harmless the Company, its Affiliates and (sub)licensees, and their respective directors, officers, agents and employees (each a “ Company Indemnified Party ”) from any Loss incurred in connection with any and all Third Party Claims to the extent arising out of or resulting from (a) SpinCo’s breach of this Agreement, (b) the research, development or Exploitation of any Excluded Compound or SpinCo Selected Compound, product that contains a Excluded Compound or a SpinCo Selected Compound, Non-Acquired Compound or Non-Acquired Product by SpinCo or any of its Affiliates, (sub)licensees or agents or (c) any negligence or willful misconduct on the part of SpinCo or its Affiliates or their respective directors, officers, employees, and agents in performing their obligations under this Agreement; provided , however , that the foregoing indemnity obligation shall not apply to the extent such Loss is subject to indemnification by the Company pursuant to Section 9.1, as to which Losses each of the Company and SpinCo shall indemnify the other to the extent of their respective liability.

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Section 9.3.                                  Indemnification Procedures .

 

(a)          Notice of Claim . All indemnification claims in respect of a Company Indemnified Party shall be made solely by the Company and all indemnification claims in respect of a SpinCo Indemnified Party shall be made solely by SpinCo.  The Company or SpinCo shall give the Indemnifying Party prompt written notice (an “ Indemnification Claim Notice ”) of any Losses or discovery of fact upon which such the Indemnified Party intends to base a request for indemnification under this Section 9.3, but in no event shall the Indemnifying Party be liable for any Losses that result from any delay in providing such notice.  Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss is known at such time).  The Indemnified Party shall furnish promptly to the Indemnifying Party copies of all papers and official documents received in respect of any Loss and Third Party Claims.

 

(b)          Control of Defense . At its option, the Indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within thirty (30) days after the Indemnifying Party’s receipt of an Indemnification Claim Notice.  The assumption of the defense of a Third Party Claim by the Indemnifying Party shall not be construed as an acknowledgment that the Indemnifying Party is liable to indemnify the Indemnified Party in respect of the Third Party Claim, nor shall it constitute a waiver by the Indemnifying Party of any defenses it may assert against the Indemnified Party’s claim for indemnification.  Upon assuming the defense of a Third Party Claim, the Indemnifying Party may appoint as lead counsel in the defense of the Third Party Claim any legal counsel selected by the Indemnifying Party.  In the event the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the Indemnifying Party all original notices and documents (including court papers) received by the Indemnified Party in connection with the Third Party Claim.  Should the Indemnifying Party assume the defense of a Third Party Claim, except as provided in Section 9.3(c), the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of the Third Party Claim unless specifically requested in writing by the Indemnifying Party.  In the event that it is ultimately determined that the Indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party from and against the Third Party Claim, the Indemnified Party shall reimburse the Indemnifying Party for any and all costs and expenses (including attorneys’ fees and costs of suit) and any Losses incurred by the Indemnifying Party in its defense of the Third Party Claim.

 

(c)           Right to Participate in Defense .  Without limitation of Section 9.3(b) above, any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided , however , that such employment shall be at the Indemnified Party’s own expense unless (i) the employment thereof has been specifically authorized by the Indemnifying Party in writing, (ii) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 9.3(b) (in which case the Indemnified Party shall control the defense), or (iii) the interests of the indemnitee and the Indemnifying Party with respect to such Third Party Claim

 

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CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

are sufficiently adverse to prohibit the representation by the same counsel of both parties under applicable Law, ethical rules or equitable principles.

 

(d)          Settlement .  With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affecting the business of the Indemnified Party in any manner, and as to which the Indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the Indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the Indemnifying Party, in its sole discretion, shall deem appropriate.  With respect to all other Losses in connection with Third Party Claims, where the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 9.3(b), the Indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss; provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).  If the Indemnifying Party does not assume and conduct the defense of a Third Party Claim as provided above, the Indemnified Party may defend against such Third Party Claim; provided that the Indemnified Party shall not settle any Third Party Claim without the prior written consent of the Indemnifying Party, not to be unreasonably withheld or delayed.

 

(e)           Cooperation .  Regardless of whether the Indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.  Such cooperation shall include access during normal business hours afforded to Indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the Indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

 

(f)            Expenses .  Except as provided above, the costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a Calendar Quarter basis by the Indemnifying Party, without prejudice to the Indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the Indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.

 

Section 9.4.                                  Insurance . Each Party shall have and maintain such type and amounts of insurance covering its activities hereunder as is reasonable under the circumstances, including insurance as is: (a) normal and customary in the research-based pharmaceutical industry generally for parties similarly situated; and (b) otherwise required by applicable Law.  Each of the foregoing policies of SpinCo shall be primary to any liability insurance carried by

 

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the Company, which Company insurance shall be excess and non-contributory for claims and losses arising out of the performance of the Agreement.  In the case of the Company (but not SpinCo), all of such insurance coverage may be maintained through a self-insurance plan. Certificates evidencing at least the above-required insurance coverage shall be submitted by each Party within thirty (30) days after the Effective Date and prior to each renewal or replacement period and shall bear a certification that the coverage specified therein will not be canceled or terminated without at least thirty (30) days’ prior written notice to the other Party.  Such policies shall remain in effect throughout the Term and shall not be canceled without the prior authorization of the other Party.  Maintenance of such insurance coverage shall not relieve a Party of any responsibility under this Agreement for damages in excess of insurance limits or otherwise.

 

ARTICLE 10
TERMINATION

 

Section 10.1.                           Term .  This Agreement shall come into force on the Effective Date and shall continue in effect until the expiration of the Option Period with respect to all Collaboration Compounds and the conclusion of any associated assignment and Initial Transfer activities as set forth in Sections 3.2 (other than Section 3.2(c)) and 3.3 (the “ Term ”), unless earlier terminated in accordance with the terms hereof.

 

Section 10.2.                           Termination Upon Notice . The Company may terminate this Agreement for any or no reason at any time upon sixty (60) days’ written notice to SpinCo.

 

Section 10.3.                           Termination for Insolvency .  In the event that either Party files for protection under bankruptcy or insolvency laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within sixty (60) days after such filing, proposes a written agreement of composition or extension of its debts, proposes or is a party to any dissolution or liquidation, files a petition under any bankruptcy or insolvency act or has any such petition filed against it that is not discharged within sixty (60) days of the filing thereof, then the other Party may terminate this Agreement in its entirety effective immediately upon written notice to the first Party.

 

Section 10.4.                           Effect of Termination or Expiration .

 

(a)                      Upon any termination of this Agreement:

 

(i)                                      the Research Program shall terminate;

 

(ii)                                   if the Company has exercised any Option as of the effective date of expiration or termination, SpinCo shall complete as promptly as practicable all assignment and transfer activities set forth in Section 3.2 and 3.3 with respect to any Acquired Compound to the extent not completed as of the date of expiration or termination;

 

(iii)                                if the Company has exercised any Option as of the effective date of

 

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expiration or termination, the license granted to the Company under Section 6.3(b) and the license granted to SpinCo in Section 6.4(b) shall survive and remain in effect on a fully-paid, perpetual and irrevocable basis (and, for clarity, termination of either such license is not an available remedy for breach by a Party of this Agreement or any of its obligations hereunder); and

 

(iv)                               in the event Company terminates this Agreement pursuant to (A) Section 10.2 and SpinCo is in material breach of one or more of its material obligations under this Agreement as of the effective date of such termination, or (B) Section 10.3, then in each case ((A) and (B)), the Exclusivity Period shall remain in effect until the [***] anniversary of the date that would have been the last day of the Research Term had the Research Term run its full course without extension (i.e. , a Research Term of [***] years).

 

(b)                      Upon any termination or expiration of this Agreement, each Party shall promptly return or destroy all Confidential Information of the other Party, provided that each Party may retain, subject to Article 7, (i) any such Confidential Information with respect to which a Party has a continuing right or license under this Agreement, (ii) one (1) copy of such Confidential Information in its archives solely for the purpose of establishing the contents thereof and ensuring compliance with its obligations hereunder, (iii) any computer records or files containing such Confidential Information that have been created solely by its automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with its standard archiving and back-up procedures, but not for any other uses or purposes and (iv) any Confidential Information of the other Party contained in its laboratory notebooks or databases.

 

Section 10.5.                           Accrued Rights .  The expiration or earlier termination of this Agreement, for any reason, shall not affect any rights or obligations that have already accrued as of the date of such expiration or termination, nor preclude either Party from pursuing any rights and remedies it may have under this Agreement or at law or in equity which accrued or are based upon any event occurring before expiration or termination.

 

Section 10.6.                           Survival .  If the Company has not exercised any Option as of the expiration or any termination of this Agreement, Articles 1 (to the extent necessary to give effect to the other articles and sections set forth in this Section 10.6), 9 (other than Section 9.4) and 11 and Sections, 2.8, 3.4 (with respect to SpinCo’s exclusivity obligations with respect to Declined Compounds), 3.6 (for the Exclusivity Period), 3.7, 3.8 (for the Exclusivity Period), 4.2(a)(iii) (to the extent applicable to any final accounting hereunder), 4.2(b)-(e) (to the extent applicable to any final accounting hereunder), 4.3 (for the relevant period), 4.5-4.7, 6.1-6.2, 6.5(b)(i), 6.5(c)-(d), 6.6 (only with respect to Joint Collaboration Patent Rights), 6.8, 6.10, 7.1-7.3 (for the period contemplated therein), 7.4-7.7, 10.4(a)(i), 10.4(a)(iv), 10.4(b), 10.5, 10.7 and this Section 10.6 shall survive the expiration and any termination of this Agreement.  If the Company has exercised any Option as of the expiration or any termination of this Agreement, then in addition to the Articles and Sections set forth in the preceding sentence, Sections 2.7(b) (second sentence, for a period of one (1) year after expiration or termination), 2.9, 3.2, 3.3, 3.5 (with respect to Acquired Compounds or Acquired Products), 4.4 (solely with respect to any Option exercised during the Term), 6.3(b)-(d), 6.3(e) (subject to the proviso in the last sentence), 6.4(b), 6.5(a), 6.5(b)(ii), 6.6 (in its entirety), 6.7, 6.9, 8.2(f) (first sentence), 10.4(a)(ii), 10.4(a)(iii), shall survive the expiration and any termination of this Agreement.

 

Section 10.7.                           Termination Not Sole Remedy .  Termination is not the sole

 

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remedy under this Agreement and, whether or not termination is effected, all other remedies will remain available except as agreed to otherwise herein.

 

ARTICLE 11. 
MISCELLANEOUS

 

Section 11.1.                           Notices .  All notices, requests, claims, demands, waivers and other communications under this Agreement shall be in writing and shall be sent by facsimile, courier or express delivery service or personal delivery to the following addresses or facsimile numbers, or to such other addresses or facsimile numbers as shall be designated from time to time by a Party in accordance with this Section 11.1:

 

(a) if to the Company:

 

Naurex Inc.

c/o Actavis W.C. Holding Inc.

Morris Corporate Center III

400 Interpace Parkway

Parsippany, NJ 07054

Attention:  General Counsel

Facsimile:  (862) 261-7923

 

with a copy (which shall not constitute notice) to:

 

Actavis W.C. Holding Inc.

Morris Corporate Center III

400 Interpace Parkway

Parsippany, NJ 07054

Attention:  General Counsel

Facsimile:  (862) 261-7923

 

and

 

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY  10018-1405

Attention:  Andrew Ment

Facsimile: (212) 841-1010

 

(b) if to SpinCo:

 

[***]

 

with a copy to:

 

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[***]

 

All notices, requests, claims, demands, waivers and other communications under this Agreement shall be deemed to have been duly given (i) when delivered by hand, if personally delivered, (ii) upon receipt when delivered by a courier or express delivery service (such date of receipt being evidenced by the courier’s or express delivery service’s records) or (iii) when sent, if sent by facsimile.

 

Section 11.2.                           Assignment .

 

(a)                                  Without the prior written consent of the other Party hereto, neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided , however , that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder to an Affiliate, to the purchaser of all or substantially all of its assets or the business of the Party to which this Agreement relates, or to its successor entity or acquirer in the event of a merger, consolidation or change in control of the Party.  Any attempted assignment or delegation in violation of the preceding sentence shall be void and of no effect.  All validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of the Company or SpinCo, as the case may be.  In the event either Party seeks and obtains the other Party’s consent to assign or delegate its rights or obligations to a Third Party, the assignee shall assume all obligations of its assignor or transferor under this Agreement.

 

(b)                                  The rights to Information, materials and intellectual property (i) controlled by a Third Party permitted assignee of a Party, which Information, materials and intellectual property were controlled by such assignee immediately prior to such assignment; or (ii) controlled by an Affiliate of a Party who becomes an Affiliate through any Change of Control of such Party after the Effective Date, which Information, materials and intellectual property were controlled by such Affiliate immediately prior to such Change in Control, in each case ((i) and (ii)), shall be automatically excluded from the rights licensed or granted to the other Party under this Agreement; provided , that in each case ((i) and (ii)), SpinCo shall not reference, use or otherwise incorporate any such information, materials or intellectual property in connection with the Research Activities without the prior written consent of the Company.  Without limiting the generality of the foregoing, such Information, materials and intellectual property will not be subject to the licenses granted in Sections 6.3(a) and 6.3(b).

 

Section 11.3.                           Relationship of the Parties .  It is expressly agreed that SpinCo, on the one hand, and the Company, on the other hand, shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency.  Neither SpinCo, on the one hand, nor the Company, on the other hand, shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written consent of the other Party to do so.  All persons employed by a Party shall be employees of such Party and not of the other Party and all

 

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costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

Section 11.4.                           Equitable Relief .  The Parties acknowledge and agrees that in the event of a violation or threatened violation of any provision of Articles 3 or 7, the non-breaching Party shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving irreparable injury or actual damages and without the necessity of having to post a bond, as well as to an equitable accounting of all earnings, profits and other benefits arising from any such violation.  The rights provided in the immediately preceding sentence shall be cumulative and in addition to any other rights or remedies that may be available to the non-breaching Party.  Nothing in this Section 11.4 is intended, or should be construed, to limit the non-breaching Party’s right to preliminary and permanent injunctive relief or any other remedy for a breach of any other provision of this Agreement.

 

Section 11.5.                           Amendment and Waiver .

 

(a)                                  No failure or delay on the part of any Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Party at Law, in equity or otherwise.

 

(b)                                  Except as otherwise specifically set forth in this Agreement, any amendment, supplement or modification of or to any provision of this Agreement and any waiver of any provision of this Agreement shall be effective (i) only if it is made or given in writing and signed by SpinCo and the Company or, in the case of a waiver, by the Party granting the waiver and (ii) only in the specific instance and for the specific purpose for which made or given.

 

Section 11.6.                           Entire Agreement .  This Agreement, together with their schedules and exhibits and all ancillary agreements, documents or instruments to be delivered in connection herewith and therewith, contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and thereof and supersede all prior discussions, negotiations, commitments, agreements and understandings, both written and oral, relating to such subject matter.

 

Section 11.7.                           No Third-Party Beneficiaries .  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party other than the SpinCo Indemnified Parties or the Company Indemnified Parties under Article 9. 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.

 

Section 11.8.                           Export Control .  This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries that may be imposed on the Parties from time to time.  Each Party agrees that it will not export, directly or indirectly, any technical information acquired from the other Party

 

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under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other Governmental Entity in accordance with applicable Law.

 

Section 11.9.                           Counterparts .  This Agreement may be executed in any number of counterparts and by the Parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  This Agreement may be executed by facsimile, .pdf or other electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were the original signatures.

 

Section 11.10.                    Dispute Resolution .  Except as provided in Section 5.2(d), if a dispute arises between the Parties in connection with or relating to this Agreement or any document or instrument delivered in connection herewith, then either Party shall have the right to refer such dispute to the Designated Officers who shall confer on the resolution of the issue.  Any final decision mutually agreed to by the Designated Officers shall be in writing and shall be conclusive and binding on the Parties.  Except as set forth in the provisos in Section 5.2(d), if such officers are not able to agree on the resolution of an issue within twenty (20) days after such issue was first referred to them, the Parties shall have the right to litigate such dispute in accordance with Section 11.12 or to pursue such other dispute resolution mechanism as the Parties may agree. Notwithstanding anything herein to the contrary, nothing in this Section 11.10 shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction or other interim equitable relief concerning a dispute, if necessary to protect the interests of such Party.

 

Section 11.11.                    Performance Warranty .  Each Party hereby warrants and guarantees the performance of any and all rights and obligations by its Affiliates. Each Party will prohibit all of its Affiliates from taking, any action that such Party is prohibited from taking under this Agreement as if such Affiliates were parties to this Agreement.

 

Section 11.12.                    Governing Law; Venue . This Agreement shall be governed by, and construed in accordance with, the substantive Law of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof.  Any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby shall be brought exclusively in a court of competent jurisdiction, federal or state, located in New York, New York, and in no other jurisdiction.  Each Party hereby consents to personal jurisdiction and venue in, and agrees to service of process issued or authorized by, such court.

 

Section 11.13.                    Severability .  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

Section 11.14.                    Force Majeure .    Neither Party shall be liable to the other Party for failure or delay in performing any obligation set forth in this Agreement, and neither shall be

 

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deemed in breach of its obligations, if such failure or delay is due to a Force Majeure.  In the event of such Force Majeure, the suspension of performance shall be of no greater scope and no longer duration than is necessary and the Party affected shall use commercially reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.  Notice of a Party’s failure or delay in performance due to force majeure must be given to the other Party within ten (10) days after its occurrence.  All delivery dates under this Agreement that have been affected by Force Majeure shall be tolled for the duration of such Force Majeure; provided that, in the case that SpinCo is the affected Party, if the suspension of performance continues for ninety (90) days after the date of the occurrence, the Company shall be permitted to terminate this Agreement on account of such Force Majeure.

 

Section 11.15.                    Consequential Damages . EXCEPT  IN THE EVENT OF (A) THE INTENTIONAL OR WILLFUL BREACH OR MISCONDUCT OR FRAUD OF A PARTY, (B) A PARTY’S BREACH OF ITS OBLIGATIONS UNDER SECTION 3.6, SECTION 3.7 OR SECTION 3.8 (AS APPLICABLE) OR ARTICLE 7, (C) AS PROVIDED UNDER SECTION 11.4, AND (D) TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER ARTICLE 9, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES UNDER THIS AGREEMENT FOR ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS OR LOST REVENUES, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

 

[ Signature page follows ]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their duly authorized representatives as of the date first written above.

 

 

NAUREX INC.

 

 

 

 

 

By:

   /s/ Norbert G. Riedel

 

 

Name: Norbert G. Riedel, Ph.D.

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

 

APTINYX INC.

 

 

 

 

 

By:

   /s/ Norbert G. Riedel

 

 

Name: Norbert G. Riedel, Ph.D.

 

 

Title: President and Chief Executive Officer

 

[SIGNATURE PAGE TO RESEARCH COLLABORATION AGREEMENT]

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 1

 

PRELIMINARY DATA PACKAGE INFORMATION

 

(TO BE REVIEWED AND FINALIZED BY THE JSC)

 

In addition to the initial screening results for Eligible Compound:

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 2

 

EXCEPTION COMPOUNDS

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 3

 

EXCLUDED COMPOUNDS

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 4

 

PSYCHIATRY AND NEUROLOGY INDICATIONS

 

Psychiatry

 

·                   [***]

·                   [***]

·                   [***]

·                   [***];

·                   [***];

·                   [***];

·                   [***];

·                   [***];

·                   [***];

·                   [***];

·                   [***]; and

·                   [***].

 

Neurology

 

·                   Delirium; and

·                   Major or mild neurocognitive disorder  due to Alzheimer’s disease including prodromal stages.

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 5

 

INITIAL SCREENING RESULTS

 

(TO BE REVIEWED AND FINALIZED BY THE JSC)

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 6

 

KNOWLEDGE PERSONS

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 7

 

KEY PERSONNEL

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

SCHEDULE 8

 

SPINCO IN-LICENSES

 

None, as of the Execution Date or the Effective Date.

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

Exhibit A

 

[***]

 

SCHEDULES TO RESEARCH AND COLLABORATION AGREEMENT

 


 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

AMENDMENT NO. 1

 

TO

RESEARCH COLLABORATION AGREEMENT

 

AMENDMENT NO. 1, dated as of July 15, 2016 (this “Amendment”), to the Research Collaboration Agreement, dated as of July 25, 2015 (the “Agreement”), by and between Naurex, Inc., a Delaware corporation (the “Company”) and Aptinyx Inc., a Delaware corporation (“SpinCo”).

 

WHEREAS, the Parties desire to amend the Agreement pursuant to Section 2.2(c)(iv) and Section 11.5(b) of the Agreement to modify certain matters relating to the Picking procedures under the Agreement as set forth below.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Amendment and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:

 

1.                                    Definitions . Capitalized terms not otherwise defined herein have the respective meanings set forth in the Agreement.

 

2.                                     Amendment . The definition of “ Eligible Compound Pool Satisfaction ” is hereby deleted it its entirety and replaced with the following:

 

“Eligible Compound Pool Satisfaction” means, with respect to a Party’s Eligible Compound Selection Period, that the Eligible Compound Pool contains at least [***] Eligible Compounds that are not Terminated Compounds, and that at least [***] of such Eligible Compounds has been added to the Eligible Compound Pool after the last Pick of the other Party.

 

3.                                     Miscellaneous .

 

(a)                               From and after the date hereof, all references in the Agreement to “this Agreement” and similar phrases shall be deemed to mean the Agreement  as amended by this Amendment. All of the terms and provisions of the Agreement, as amended hereby, shall continue in full force and effect in accordance with their respective terms.

 

(b)                                This Amendment shall be governed by, and construed in accordance with, the substantive Law of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws thereof. Any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby shall be brought exclusively in a court of competent jurisdiction, federal or state, located in New York, New York, and in no other jurisdiction. Each Party hereby consents to personal jurisdiction and venue in, and agrees to service of process issued or authorized by, such court.

 

(c)                                 This Amendment may be executed in any number of counterparts and by the Parties in separate counterparts, each of which when so executed shall be deemed to be an original  and all of which taken together  shall constitute one and the same agreement.   This Amendment may be executed by facsimile, .pdf or other electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were the original signatures.

 

[Signature Page Follows]

 



 

CONFIDENTIAL TREATMENT REQUESTED. INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND MARKED WITH “[***]”. AN UNREDACTED VERSION OF THE DOCUMENT HAS ALSO BEEN FURNISHED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION AS REQUIRED BY RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

IN WITNESS WHEREOF,  the Parties have caused this Amendment to be signed by their duly authorized representative as of the date first above written.

 

 

NAUREX INC.

 

 

 

 

 

By:

/s/ David C. Nicholson

 

Name: David C. Nicholson

 

Title: Vice President

 

 

 

 

 

APTINYX INC.

 

 

 

 

 

By:

/s/ Ashish Khanna

 

Name: Ashish Khanna

 

Title: Chief Business Officer

 

[Signature Page to Amendment No. 1 to Research Collaboration Agreement]

 




Exhibit 10.9

 

OFFICE LEASE AGREEMENT

 

Between

 

FSP 909 DAVIS STREET LLC,

a Delaware limited liability company

as

Landlord

 

and

 

APTINYX INC.,

a Delaware corporation

as

Tenant

 

Premises:

 

Suite 600

909 Davis Street

Evanston, Illinois 60201

 



 

BASIC LEASE INFORMATION

 

Effective Date:

 

October 13, 2016

 

 

 

Tenant:

 

APTINYX INC., a Delaware corporation

 

 

 

Tenant’s Address:

 

909 Davis Street
Evanston, Illinois 60201
Attn: Patricia Adams, Vice President of Human Resources and Administration

 

 

 

Guarantor:

 

None.

 

 

 

Landlord:

 

FSP 909 DAVIS STREET LLC, a Delaware limited liability company

 

 

 

Landlord’s Address:

 

Franklin Street Properties
401 Edgewater Place
Suite 200
Wakefield, Massachusetts 01880-6210

With a copy to:

NAI Hiffman Asset Management, LLC
909 Davis Street
Evanston, Illinois 60201
Attn: Building Manager

 

 

 

Premises:

 

Suite 600, composed of 16,519 square feet of Rentable Area on the sixth (6 th ) floor of the office building (the “ Building ”) located at 909 Davis Street, City of Evanston, Cook County, Illinois (“ Land ”). The Premises are outlined on the plan attached to the Lease as Exhibit “B” .

 

 

 

Term:

 

Sixty-five (65) months, commencing on April 1, 2017 (the “ Commencement Date ”), and ending at 5:00 p.m. on August 31, 2022, subject to adjustment, extension and earlier termination as provided in the Lease.

 

 

 

Renewal Option(s):

 

One five (5) year renewal in accordance with Exhibit “G” attached hereto.

 

 

 

Base Rental:

 

 

 

Period of Term

 

Annual Base
Rental Rate
Per RSF

 

Annual
Base Rental

 

Monthly
Installment

 

 

 

 

 

 

 

 

 

4/1/17 – 3/31/18

 

$

18.00

 

$

297,342.00

*

$

24,778.50

*

4/1/18 – 3/31/19

 

$

18.50

 

$

305,601.48

 

$

25,466.79

 

4/1/19 – 3/31/20

 

$

19.00

 

$

313,860.96

 

$

26,155.08

 

4/1/20 – 3/31/21

 

$

19.50

 

$

322,120.56

 

$

26,843.38

 

4/1/21 – 3/31/22

 

$

20.00

 

$

330,380.04

 

$

27,531.67

 

4/1/22 – 8/31/22

 

$

20.50

 

$

141,099.80

 

$

28,219.96

 

 

 

 

 

(5 months)

 

 

 

 


* See Section 5(b) below regarding rent abatement.

 



 

Security Deposit:

 

$350,000.00 in the form of a Letter of Credit in accordance with the terms of Exhibit “M” , and subject to reduction as provided in Section 9 of Exhibit “M” .

 

 

 

Rent:

 

Base Rental, Tenant’s Share of Operating Costs and all other sums that Tenant may owe to Landlord under the Lease.

 

 

 

Improvement Allowance:

 

$25.00 per square foot of Rentable Area.

 

 

 

Permitted Use:

 

General office purposes consistent with comparable first class office buildings in Evanston, Illinois, provided Tenant may also use the Premises for a laboratory for research and development of medicine and drugs, and all ancillary uses related thereto, subject to and in accordance with the terms and conditions described in Section 4 below and Exhibit “N” to this Lease.

 

 

 

Tenant’s Share of Operating Costs:

 

8.464%

 

 

 

Initial Liability Insurance Amount:

 

$3,000,000.00

 

 

 

Brokers:

 

CBRE, Inc., for Tenant
and Jones Lang LaSalle, for Landlord

 

 

 

Right of First Refusal

 

On all contiguous space on the fifth (5 th ) floor of the Building, in accordance with Exhibit “H” attached hereto.

 

The foregoing Basic Lease Information is incorporated into and made a part of the Lease identified above.  If any conflict exists between any Basic Lease Information and the Lease, then the Lease shall control.

 



 

TABLE OF CONTENTS

 

 

 

Page No.

 

 

 

1.

Definitions

1

 

 

 

2.

Lease Grant

5

 

 

 

3.

Lease Term; Acceptance of Premises

5

 

 

 

4.

Use

5

 

 

 

5.

Payment of Rent

5

 

 

 

6.

Operating Costs

6

 

 

 

7.

Late Payments; Dishonored Checks

10

 

 

 

8.

Security Deposit

11

 

 

 

9.

Services to be Furnished by Landlord

11

 

 

 

10.

Graphics; Signage

12

 

 

 

11.

Telecommunications

13

 

 

 

12.

Repair and Maintenance by Landlord

14

 

 

 

13.

Maintenance by Tenant

14

 

 

 

14.

Repairs by Tenant

15

 

 

 

15.

Alterations, Additions, Improvements

15

 

 

 

16.

Laws and Regulations; Green/LEED Programs; Disability Laws; Building Rules and Regulations

16

 

 

 

17.

Entry by Landlord

18

 

 

 

18.

Assignment and Subletting

19

 

 

 

19.

Mechanic’s Liens

20

 

 

 

20.

Property Insurance

21

 

 

 

21.

Liability Insurance

21

 

 

 

22.

INDEMNITY

22

 

 

 

23.

WAIVER OF SUBROGATION RIGHTS

22

 

 

 

24.

Casualty Damage

23

 

 

 

25.

Condemnation

23

 

 

 

26.

DAMAGES FROM CERTAIN CAUSES

24

 



 

 

 

 

27.

Default by Tenant

24

 

 

 

28.

Default by Landlord

26

 

 

 

29.

Quiet Enjoyment

27

 

 

 

30.

Right to Relocate

27

 

 

 

31.

Holding Over

27

 

 

 

32.

Rights Reserved to Landlord

27

 

 

 

33.

Subordination to Mortgage; Estoppel Agreement

28

 

 

 

34.

Intentionally Omitted

28

 

 

 

35.

Attorney’s Fees

28

 

 

 

36.

No Implied Waiver

29

 

 

 

37.

Independent Obligations

29

 

 

 

38.

Recourse Limitation

29

 

 

 

39.

Notices

29

 

 

 

40.

Severability

29

 

 

 

41.

Recordation

29

 

 

 

42.

Governing Law

29

 

 

 

43.

Force Majeure

30

 

 

 

44.

Time of Performance

30

 

 

 

45.

Transfers by Landlord

30

 

 

 

46.

Commissions

30

 

 

 

47.

Financial Statements

30

 

 

 

48.

Tenant’s Standing and Authority

30

 

 

 

49.

Effect of Delivery of This Lease

30

 

 

 

50.

WAIVER OF WARRANTIES AND ACCEPTANCE OF CONDITION

30

 

 

 

51.

Merger of Estates

31

 

 

 

52.

Survival of Indemnities and Covenants

31

 

 

 

53.

Headings

31

 

 

 

54.

Entire Agreement; Amendments

31

 



 

55.

Exhibits

31

 

 

 

56.

Joint and Several Liability

32

 

 

 

57.

Multiple Counterparts

32

 

 

 

58.

Mail

32

 

 

 

59.

Roof Rights

32

 

 

 

60.

OFAC and Anti-Money Laundering Compliance Certifications

32

 

 

 

61.

Landlord Cancellation Option

32

 

 

 

62.

Landlord’s Representations

32

 

ADDENDUM

 

DEFINITIONS

 

 

 

EXHIBIT “A-1”

 

LEGAL DESCRIPTION OF THE PROPERTY

EXHIBIT “A-2”

 

LEGAL DESCRIPTION OF THE RETAIL PARCEL

EXHIBIT “A-3”

 

EXCLUDED RETAIL PROPERTY

EXHIBIT “B”

 

FLOOR PLAN

EXHIBIT “C”

 

RULES AND REGULATIONS

EXHIBIT “D”

 

TENANT IMPROVEMENTS AGREEMENT

EXHIBIT “E”

 

PARKING

EXHIBIT “F”

 

CONFIDENTIALITY AGREEMENT

EXHIBIT “G”

 

RENEWAL OPTION

EXHIBIT “H”

 

RIGHT OF FIRST OFFER

EXHIBIT “I”

 

INTENTIONALLY OMITTED

EXHIBIT “J”

 

INTENTIONALLY OMITTED

EXHIBIT “K”

 

EXISTING EXPANSION RIGHTS AND ROFRS ENCUMBERING THE PREMISES

EXHIBIT “L”

 

INTENTIONALLY OMITTED

EXHIBIT “M”

 

LETTER OF CREDIT TERMS AND CONDITIONS

EXHIBIT “N”

 

LABORATORY USE RIDER

 



 

OFFICE LEASE AGREEMENT

 

THIS OFFICE LEASE AGREEMENT (“ Lease ”) is executed effective as of September    , 2016 (the “ Effective Date ”), between FSP 909 DAVIS STREET LLC, a Delaware limited liability company (“ Landlord ”), and APTINYX INC., a Delaware corporation (“ Tenant ”).

 

W I T N E S S E T H :

 

1.             Definitions .  Capitalized terms used in this Lease and not defined elsewhere have the meanings given them below:

 

After Hours HVAC Rate ” means $125.00 per hour per floor for cooling and $75.00 per hour per floor for heating, subject to adjustment from time to time as provided in Section 9(a)(8)  below.

 

Alterations ” shall have the meaning given such term in Section 15(a)  hereto

 

Base Rental ” means the “Base Rental” set forth in the Basic Lease Terms.

 

Broker ” shall mean the broker(s) identified in the Basic Lease Terms.

 

Building ” means that certain office building known as 909 Davis Street, Evanston, Illinois 60201.

 

Building Standard ”  means the level of service or type of equipment standard in the Building or the type, brand and/or quality of materials Landlord reasonably designates from time to time to be the minimum type, brand or quality to be used in the Building or the exclusive type, grade or quality of material to be used in the Building, consistent with similar first class buildings in the Market Area.

 

Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of the State, or are in fact closed in, the State.

 

Claims ” means any and all liabilities, obligations, damages, claims, suits, losses, causes of action, lien, judgments and expenses (including court costs, reasonable attorneys fees and costs of investigation) of any kind, nature or description.

 

Commencement Date ”  means April 1, 2017.

 

Common Areas ”  means all areas, spaces, facilities and equipment (whether or not located within the Building) made available by Landlord for the common and joint use of Landlord, Tenant and others designated by Landlord using or occupying space in the Building, including, but not limited to, tunnels, loading docks, walkways, sidewalks and driveways necessary for access to the Building, Parking Areas, Building lobbies (including those on floors with one tenant), atriums, landscaped areas, public corridors, public rest rooms, Building stairs, elevators open to the public, service elevators (provided that such service elevators shall be available only for tenants of the Building and others designated by Landlord), drinking fountains, equipment rooms, risers and any such other areas and facilities, if any, as are designated by Landlord from time to time as Common Areas, including, but not limited to, any such areas so designated by Landlord on a single-tenant floor of the Building.

 

Complex ”  means the Property, the Building and the Parking Areas.

 

Default Rate ”  means the lesser of (1) the rate of twelve percent (12%) per annum, and (2) the maximum rate of interest then permissible for a commercial loan to Tenant in the State.

 

Disability Laws ” shall have the meaning given such term in Section 15(a)  hereto.

 

Dispute ” shall have the meaning given such term in Section 6(e)  hereto.

 

1



 

Event of Default ” shall have the meaning given such term in Section 27(a)  hereto.

 

Force Majeure ” means acts of God; strikes; lockouts; labor troubles; inability to procure materials; acts of war; terrorist actions; inclement weather; governmental laws or regulations; casualty; orders or directives of any legislative, administrative, or judicial body or any governmental department; inability to obtain any licenses, permissions or authorities (despite commercially reasonable pursuit of such licenses, permissions or authorities); and other similar or dissimilar causes beyond Landlord’s reasonable control.

 

Hazardous Materials ” means any of the following, in any amount: (a) any petroleum or petroleum product, asbestos in any form, urea formaldehyde and polychlorinated biphenyls; (b) any radioactive substance; (c) any toxic, infectious, reactive, corrosive, ignitable or flammable chemical or chemical compound; and (d) any chemicals, materials or substances, whether solid, liquid or gas, defined as or included in the definitions of hazardous substances, hazardous wastes, hazardous materials, extremely hazardous wastes, restricted hazardous wastes, toxic substances, toxic pollutants, solid waste, or words of similar import in any federal, state or local Law now existing or existing on or after the Effective Date as the same may be interpreted by government offices and agencies.

 

Hazardous Materials Laws ” means any federal, state or local statutes, laws, ordinances or regulations now existing or existing after the Effective Date that control, classify, regulate, list or define Hazardous Materials.

 

Landlord Related Party ”  means any officer, director, partner, employee, member, agent or contractor of Landlord.

 

Landlord’s Mortgagee ” shall have the meaning given such term in Section 33(a ) hereto.

 

Landlord’s Notice Address ” shall mean the address of Landlord set forth on the signature page of this Lease.

 

Landlord’s Relocation Notice ” shall have the meaning given such term in Section 30 hereto.

 

Laws ” means any law, regulation, rule, order, statute or ordinance of any governmental or private entity in effect on or after the Effective Date and applicable to the Complex or the use or occupancy of the Complex, including, without limitation, Hazardous Materials Laws, Rules and Regulations and Permitted Encumbrances.

 

Lease Term ”  means the period commencing on the Commencement Date and terminating on August 31, 2022.

 

Lease Year ”  means a period of twelve (12) consecutive calendar months with respect to each subsequent Lease Year.  The first Lease Year shall begin on the 1 st  day of the month following the Commencement Date unless the Commencement Date occurs on the 1 st  day of a month, in which event the first Lease Year shall begin on the Commencement Date.

 

Market Area ”  means the Evanston, Illinois submarket area.

 

Miscellaneous Power ” shall have the meaning given such term in Section 9(a)(6)  hereto.

 

Mortgage ” shall have the meaning given such term in Section 33(a)  hereto.

 

New Premises ” shall have the meaning given such term in Section 30 hereto.

 

Non-Structural Alterations ” shall have the meaning given such term in Section 15(a)  hereto.

 

Normal Business Holidays ”  means New Year’s Day, Memorial Day, July 4 th  (Independence Day), Labor Day, Thanksgiving and Christmas Day and any other day which shall be recognized by office tenants generally (excluding federal or state banking institutions) as a national holiday on which employees are not required to work.

 

2



 

Normal Business Hours ”  for the Building means 8:00 a.m. to 6:00 p.m. on Monday through Friday, and 8:00 a.m. to 1:00 p.m. on Saturday, exclusive of Normal Business Holidays.

 

OFAC ” shall have the meaning given such term in Section 60 hereto.

 

Offsite Parking Garage ” means the off-site multi-level parking garage known as the Sherman Parking Garage located at 821 Davis Street, Evanston, Illinois.

 

Operating Costs ” shall have the meaning given to such term in Section 6(c)  hereto.

 

Parking Areas ”  means those areas located upon the Property designated by Landlord, from time to time, to be parking areas.

 

Permitted Encumbrances ” means all easements, declarations, encumbrances, covenants, conditions, reservations, restrictions and other matters now or after the Effective Date affecting title to the Complex, provided Landlord shall not enter into any new easements, declarations, encumbrances, covenants, conditions, reservations, restrictions or other matters after the Effective Date which materially adversely affect Tenant’s rights or materially increase Tenant’s obligations hereunder.

 

Permitted Transfer ” shall have the meaning given such term in Section 18(a)  of this Lease.

 

Premises ”  means the suite of offices, known as Suite No. 600, located upon the sixth (6 th ) floor of the Building and outlined on the floor plan attached to this Lease as Exhibit “B” and incorporated herein by reference, and consists of 16,519 square feet of Rentable Area.

 

Primary Lease ” shall have the meaning given such term in Section 33(a)  of this Lease.

 

Property ” shall mean, collectively, the real property described on Exhibit “A-1” , the Building, and any other building or improvements now or hereafter constructed upon the real property described on Exhibit “A-1” , but excluding the parcel of real estate and air space having an address of 900-950 Church Street and more particularly described on Exhibit “A-2” attached hereto (the “ Retail Parcel ”) and excluding any business and trade fixtures, machinery and equipment owned, or leased from a third party, by the owner of the Retail Parcel, which are generally described on Exhibit “A-3” attached hereto, or a tenant of the Retail Parcel.

 

Provider ” shall have the meaning given to such term in Section 11(a)  of this Lease.

 

Relocation Effective Date ” shall have the meaning given such term in Section 30 of this Lease.

 

Rent ”  means, collectively, the Base Rental, the Tenant’s Share of Operating Costs (as provided in Section 6 ), the amounts to be paid by Tenant pursuant to the Tenant Improvements Agreement (if any), and all other sums of money becoming due and payable to Landlord under this Lease.

 

Rentable Area ”  means (i) the “ Usable Area ” within any Premises (i.e., the gross area enclosed by the surface of the exterior glass walls, the mid-point of any walls separating portions of the Premises from those of adjacent tenants, the slab penetration line of all walls separating such Premises from Service Areas and the corridor side of walls separating such Premises from Common Areas), plus (ii) a pro-rata part of the Common Areas and Service Areas within the Building.  The areas in clauses (i) and (ii)  above include the area encompassed by any columns or other structural elements which provide support to the Premises or the Building, but exclude permanent vertical penetrations, such as fire stairs, elevator shafts, flues, pipe shafts and vertical ducts.  All references to “RSF” mean the square feet of Rentable Area.

 

Rentable Area of the Building ”  means (and is hereby deemed to be) 195,175 square feet of Rentable Area.

 

3



 

Rentable Area of the Premises ”  means (and is hereby deemed to be) 16,519 square feet of Rentable Area, irrespective of whether the same should be more or less as a result of variations resulting from later re-measurement or actual construction and completion of the Premises for occupancy.

 

Review Fee ” shall have the meaning given such term in Section 18(a)  of this Lease.

 

Rules and Regulations ”  means the rules and regulations for the Complex set forth on Exhibit “C” attached of this Lease and incorporated herein by reference, and the rules and regulations for the Parking Areas, and any rules and regulations that may be adopted or altered by Landlord in accordance with Section 26 of Exhibit “C” .

 

Security Deposit ” means a Letter of Credit in the amount of Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00) in accordance with the terms of Exhibit “M” and subject to reduction as provided in Section 9 of Exhibit “M” , to be delivered by Tenant to Landlord contemporaneously with the Tenant’s delivery to Landlord of an executed copy of this Lease, such funds to be used by Landlord as described in Section 8 below.

 

Service Areas ”  means those areas, spaces, facilities and equipment serving the Building (whether or not located within the Building), but to which Tenant and other occupants of the Building will not have access, including, but not limited to, service elevators, mechanical, telephone, electrical, janitorial and similar rooms and air and water refrigeration equipment.

 

State ” means the State of Illinois.

 

Substitute Tenant ” shall have the meaning given such term in Section 27(f)  of this Lease.

 

Taxes ”  means any general real property tax, improvement tax, gross receipt tax, margin tax, assessment, special assessment, reassessment, commercial rental tax, in lieu tax, levy, charge, penalty or similar imposition imposed by any Taxing Authority.  The term “Taxes” includes all charges or burdens of every kind and nature Landlord incurs in connection with using, occupying, owning, operating, leasing or possessing the Complex, without particularizing by any known name and whether any of the foregoing are general, special, ordinary, extraordinary, foreseen or unforeseen; any tax or charge for fire protection, street lighting, streets, sidewalks, road maintenance, refuse, sewer, water or other services provided to the Complex.  The term “Taxes” does not include Landlord’s state or federal income, franchise, estate or inheritance taxes, or other taxes measured or determined based upon Landlord’s income other than rents at the Complex.  If Landlord is entitled to pay, and elects to pay, any of the above listed assessments or charges in installments over a period of two or more calendar years, then only such installments of the assessments or charges (including interest thereon) as are actually paid in a calendar year will be included within the term “Taxes” for such calendar year. The “Taxes” for any given calendar year shall be those which accrue for such calendar year regardless of the year due and payable or paid (i.e. accounted on an accrual basis, not cash basis).

 

Taxing Authority ” means any authority having the direct or indirect power to tax, including but not limited to, (a) any city, county, state or federal entity, (b) any school, agricultural, lighting, drainage or other improvement or special assessment district, (c) any governmental agency, or (d) any private entity having the authority to assess the Property under any of the Permitted Encumbrances.

 

Tenant Improvements ”  means those improvements to the Premises which Tenant elects to construct or have constructed in the Premises in accordance with the Tenant Improvements Agreement, if any.

 

Tenant Improvements Agreement ”  means an agreement between Tenant and Landlord for construction of improvements within the Premises attached as Exhibit “D of the Lease.

 

Tenant’s Notice Address ” shall mean the address of Tenant set forth on the signature page of this Lease.

 

Tenant Related Party ”  means any officer, director, partner, employee, agent or contractor of Tenant.

 

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Tenant’s Share ”  means the proportion which the Rentable Area of the Premises bears to the Rentable Area of the Building.  The initial Tenant’s Share shall be 8.464%.

 

Transfer ” shall have the meaning given such term in Section 18(a)  hereto.

 

2.             Lease Grant .  Upon the terms of this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the Premises and the non-exclusive right to use the Common Areas, subject to all of the terms and conditions of this Lease (including the Rules and Regulations).

 

3.             Lease Term; Acceptance of Premises .

 

(a)           This Lease shall continue in force during a period beginning on the Effective Date of this Lease (though the Lease Term shall not commence and no Rent shall accrue until the Commencement Date) and ending on the expiration of the Lease Term, unless this Lease is terminated early (pursuant to a right to so terminate specifically set forth in this Lease) or extended to a later date pursuant to any other term or provision hereof.  Tenant currently occupies the Premises under a sublease from the current tenant of the Premises that expires on March 31, 2017 (the “ Existing Sublease ”) and Tenant has agreed to retain possession of the Premises on the Commencement Date in their “AS IS” condition (as described in Section 50 below).  If the current tenant (i.e., Tenant’s sublessor) or any other occupant of the Premises holds over and Landlord cannot acquire possession of the Premises prior to the Commencement Date, this Lease shall not be void or voidable and Landlord shall not be deemed to be in default under this Lease or otherwise liable to Tenant for any claims, damages or liabilities in connection therewith; and in such event Tenant agrees to accept possession of the Premises at such time as Landlord is able to tender the same.

 

(b)           Tenant acknowledges that it has had the opportunity to measure and confirm the square footage of Rentable Area contained in the Premises and the Building and by its execution of this Lease, waives any right to contest the amount of Rentable Square Feet contained in either of the foregoing.

 

4.             Use .  The Premises shall be used solely for general office purposes and for no other purpose.  Notwithstanding the foregoing sentence to the contrary, provided Tenant complies with the additional terms and conditions set forth in Exhibit “N attached hereto, Tenant may also use the Premises for a laboratory for research and development of medicine and drugs, and all ancillary uses related thereto, consistent in all cases with the standards of comparable first class office buildings in Evanston, Illinois, and for no other use.  Tenant shall (i) lock the doors to the Premises and take other reasonable steps to secure the Premises and the personal property of all Tenant Related Parties and any of Tenant’s transferees, contractors or licensees in the Common Areas and the Complex, from unlawful intrusion, theft, fire and other hazards; (ii) keep and maintain in good working order all security and safety devices installed in the Premises by or for the benefit of Tenant (such as locks, smoke detectors and burglar alarms), but the fire alarm panel, sprinkler system and strobes serving the Premises shall be maintained by Landlord (subject to reimbursement pursuant to Section 6 below); and (iii) cooperate with Landlord and other tenants in the Building on Building safety matters.  Tenant acknowledges that Landlord is not a guarantor of the security or safety of Tenant, its employees and invitees or their property; and that such security and safety matters are the responsibility of Tenant and the local law enforcement authorities.

 

5.             Payment of Rent .

 

(a)           Except as otherwise expressly provided in this Lease, the Rent shall be due and payable to Landlord in advance in monthly installments on the first (1 st ) day of each calendar month during the Lease Term, at Landlord’s address as provided on the signature page of this Lease or to such other person or at such other address as Landlord may from time to time designate in writing.  Landlord may, at its option, bill Tenant for Rent, but no delay or failure by Landlord in providing such a bill shall relieve Tenant from the obligation to pay the Base Rental on the first (1 st ) day of each month as provided herein.  All payments shall be in the form of a check unless otherwise agreed by Landlord, provided that payment by check shall not be deemed made if the check is not duly honored with good funds.  The Rent shall be paid without notice, demand, abatement, deduction or offset, except as otherwise expressly provided in this Lease.  If the Lease Term commences on other than the first (1 st ) day of a calendar month, then the Base Rental for such partial month shall be prorated and paid at the rental rate applicable during the first full month of the Lease Term for which a payment of rent is due.  The Base Rental for the first full month of the Lease Term for which a payment of rent is due (i.e., the sixth [6 th ] full month of the Lease Term) plus

 

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an estimated monthly amount of Tenant’s Share of Operating Costs described in Section 6(a)  herein, is being deposited with Landlord by Tenant contemporaneously with the delivery by Tenant to Landlord of an executed copy of this Lease and shall be applied to the payment of Base Rental and Tenant’s Share of Operating Costs, as the case may be, by Landlord for the appropriate periods without any further notice by Tenant.  If the Lease Term commences or ends at any time other than the first day of a calendar year, the Tenant’s Share of Operating Costs shall be prorated for such year according to the number of days of the Lease Term in such year.

 

(b)           Notwithstanding anything herein to the contrary, no Base Rental or Tenant’s Share of Operating Costs shall be due for the first five (5) months of the Lease Term.

 

6.             Operating Costs .

 

(a)           Tenant shall pay to Landlord Tenant’s Share of Operating Costs.  Prior to the commencement of each calendar year during the Lease Term, Landlord may, at its option, provide Tenant with a then current estimate of Operating Costs for the upcoming calendar year, and thereafter Tenant shall pay, as additional rental, in monthly installments, the estimated Tenant’s Share of Operating Costs for the calendar year in question.  In addition, if Landlord determines that any component of Operating Costs of the Complex has changed or is going to change prior to the end of a calendar year, Landlord shall have the right to revise its estimate of Operating Costs of the Complex to take into account such change and Tenant shall pay such adjusted amount thereafter; provided, however, Landlord agrees it will not revise the original estimate of Operating Costs of the Complex more than one time in any calendar year.  The failure of Landlord to estimate Operating Costs and bill Tenant on an annual basis shall in no event relieve Tenant of its obligation to pay Tenant’s Share of Operating Costs.  In the event the Building is not at least ninety-five percent (95%) occupied during any year of the Lease Term (including the calendar year in which the Lease Term commences), the Operating Costs shall be “grossed up” by increasing the variable components of Operating Costs (i.e., those that vary based on occupancy) to the amount which Landlord projects would have been incurred had the Building been ninety-five percent (95%) occupied during such year, such amount to be annualized for any partial year.  Landlord agrees that property taxes shall be based on annual assessments and shall not be “grossed up.”

 

(b)           On or before April 1 of each calendar year during Tenant’s occupancy (including the calendar year following the year in which the Lease Term is terminated), or as soon thereafter as possible, Landlord shall furnish to Tenant a statement of Tenant’s Share of Operating Costs (the “ Statement ”) for the prior year.   In the event of an underpayment by Tenant because of any difference between the amount, if any, collected by Landlord from Tenant for the estimated Tenant’s Share of Operating Costs and the actual amount of Tenant’s Share of Operating Costs, such underpayment shall be paid to Landlord within thirty (30) days after receipt by Tenant of an invoice therefore.  In the event of an overpayment by Tenant because of any difference between the amount, if any, collected by Landlord from Tenant for the estimated Tenant’s Share of Operating Costs and the actual amount of Tenant’s Share of actual Operating Costs, and provided no Event of Default has occurred and is continuing and there are no amounts owing and unpaid by Tenant to Landlord, Landlord shall credit such overpayment against the next due installment of the estimated Tenant’s Share of Operating Costs for the upcoming calendar year. Any overpayment by Tenant during the last year of the then existing term shall be refunded by Landlord to Tenant within thirty (30) days following the expiration of such term.  The obligation to refund underpayments and overpayments shall survive the expiration of this Lease.

 

(c)           “Operating Costs” means all direct and, to the extent provided in Section 6(d)(1) , indirect costs and expenses incurred in each calendar year of operating, maintaining, repairing, managing and, to the extent specifically provided below, owning the Complex, including, without limitation, the following:

 

(1)           Wages, salaries, benefits and other compensation of all employees engaged in the direct operation and maintenance of the Complex at or below the level of general manager or functional equivalent manager, employer’s social security taxes, unemployment taxes or insurance and any other taxes which may be levied on such wages, salaries and other compensation, and the cost of medical, disability and life insurance and pension or retirement benefits for such employees; provided, however, with respect to employees engaged in the operation and maintenance of other buildings owned by Landlord (or an affiliate of Landlord), other than the Complex, such items shall be fairly apportioned among all such buildings;

 

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(2)           Cost of leasing or purchasing all supplies, tools, equipment and materials used in the operation, maintenance, repair and management of the Complex;

 

(3)           Except for electricity to tenants’ premises (which shall be excluded from Operating Costs, as Tenant shall pay for electricity to the Premises directly to the service provider, as provided below), the cost of all utilities for the Complex (both interior and exterior), including, without limitation, the cost of water and power, electrical utilities for the Common Areas, sewage, heating, lighting, air conditioning and ventilation for the Complex;

 

(4)           Cost of all maintenance and service agreements for the Complex and surrounding grounds, including, but not limited to, janitorial service, pest control, security service and access control equipment, equipment leasing, energy management system leasing, snow and ice removal, landscape maintenance, alarm service, window cleaning, metal finishing, trash collection and removal and elevator maintenance, re-painting, re-striping, seal-coating, cleaning, sweeping, patching and repairing parking areas and other paved surfaces serving the Building;

 

(5)           Cost of all insurance relating to the Complex, including, but not limited to, fire and extended coverage insurance, earthquake and flood insurance, environmental insurance, rental interruption insurance and liability insurance applicable to the Complex and Landlord’s personal property used in connection therewith, plus the cost of all deductible payments made by Landlord in connection therewith (but only to the extent not already deducted as an Operating Cost);

 

(6)           All Taxes (if the amount of Taxes payable for any calendar year is changed by final determination of legal proceedings, settlement, or otherwise, such changed amount shall be the Taxes for such year);

 

(7)           Cost of repairs and general maintenance for the Complex (excluding such repairs and general maintenance paid by insurance proceeds or by Tenant or other third parties), including any costs to repair, replace or maintain the fire alarm panel, sprinkler system and strobes serving the Premises, other tenants’ premises, and the common areas of the Complex;

 

(8)           Costs of performing responsibilities allocable to the Complex and costs of contributions allocable to the common elements and operation of the Complex, including costs, expenses and charges incurred by Landlord in connection with public sidewalks, walkways, rights of way or other public facilities, or any easements or other appurtenances to the Property;

 

(9)           Legal expenses incurred with respect to the Complex which relate directly to the operation of the Complex and which benefit all of the tenants of the Complex generally, such as legal proceedings to abate offensive activities or uses or reduce property taxes (as set forth in Section 16(e) hereof), but excluding legal expenses related to the collection of Rent or to the sale, leasing or financing of the Complex;

 

(10)         Fees for management services, whether provided by an independent management company, by Landlord or by any affiliate of Landlord, but only to the extent that the costs of such services do not exceed three percent (3%) of the gross revenues of the Complex;

 

(11)         Expenses incurred in order to comply with any federal, state or municipal law, code or ordinance, or regulation which was not promulgated, or which was promulgated but not in effect or  applicable to the Complex, as of the Effective Date of this Lease;

 

(12)         Amortization of the cost of installation of capital investment items which (A) Landlord reasonably believes will either (i) reduce (or avoid increases in) Operating Costs, or (ii) promote safety, (B) may be required in order to comply with any federal, state or municipal law, code or ordinance, or regulation which was not promulgated, or which was promulgated but was not in effect or applicable to the Complex, as of the Effective Date of this Lease, or (C) may be required to cause the Building or the Complex to comply with or be certified under any so-called green/LEED program(s) undertaken or maintained by Landlord.  All

 

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costs of such capital investment items shall be amortized, together with an amount equal to interest at twelve percent (12%) per annum, with the amortization schedule being determined in accordance with generally accepted accounting principles and in no event shall the amortization period be less than three years or extend beyond the remaining useful life of the Building;

 

(13)         Costs of ad valorem tax consultants;

 

(14)         such other costs, expenses and charges as may ordinarily be incurred in connection with managing, maintaining, repairing and operating an office building project similar to the Complex; and

 

(15)         all costs of maintaining the certification of the Building or Complex under any so-called green/LEED program(s) undertaken or maintained by Landlord, including, without limitation all costs related to the management and reporting in connection thereto.

 

(d)           Notwithstanding anything to the contrary in this Lease, Operating Costs shall not include any expenses or costs for the following items:

 

(1)           Except as provided in Section 6(c)(12) , costs that under generally accepted accounting principles are required to be classified as capital expenditures, and related amortization thereof;

 

(2)           Except as provided in Section 6(c)(12) , depreciation or amortization of the Building or its contents or components;

 

(3)           Expenses for the preparation of space (including tenant finish out costs) or other similar type work which Landlord performs for any tenant or prospective tenant of the Building;

 

(4)           Expenses incurred in leasing or obtaining new tenants or retaining existing tenants, including, but not limited to, marketing costs and leasing commissions;

 

(5)           Except as provided in Section 6(c)(9) , legal expenses;

 

(6)           Interest, amortization or other costs associated with any mortgage, loan or refinancing of the Complex;

 

(7)           Any ground rent incurred for the Complex;

 

(8)           Any costs of services performed for any tenant of the Complex, to the extent that such services are not made available to Tenant under this Lease;

 

(9)           The costs of repairs or replacements incurred by reason of fire or other casualty or caused by the exercise of the right of eminent domain, to the extent of insurance proceeds or a condemnation award received for such purposes;

 

(10)         The costs in excess of $10,000 per year of correcting defects in the design or construction of any latent defect in the original construction of all or any portion of the Building or Complex infrastructure or the Building’s mechanical, electrical, plumbing or HVAC systems;

 

(11)         Costs (including, without limitation, attorney’s fees and disbursements) incurred in connection with any judgment, settlement or arbitration award resulting from any tort liability;

 

(12)         Any cost included in Operating Costs representing an amount paid to Landlord or to a person, firm, corporation, or other entity affiliated with or related to Landlord to the extent in excess of the amount which would have been paid to a third party on an arms-length basis in the absence of such affiliation or relationship;

 

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(13)         Salaries of employees engaged in the direct operation and management of the Complex above the level of general manager or functional equivalent manager;

 

(14)         Costs of mortgaging any of Landlord’s interest in all or any part of the Building or Complex;

 

(15)         Any costs arising from any retail space in the Complex; and

 

(16)         Landlord’s general overhead to the extent that same is not fairly allocable to the Complex.

 

(e)           If there exists any dispute as to the calculation of Tenant’s Share of Operating Costs (a “ Dispute ”), the events, errors, acts or omissions giving rise to the Dispute shall not constitute a breach or default by Landlord nor shall Landlord be liable to Tenant, except as specifically provided below.  If there is a Dispute, Tenant shall so notify Landlord in writing within sixty (60) days after receipt of the Statement.  Such notice shall specify the items in Dispute.  Notwithstanding the existence of a Dispute, Tenant shall timely pay the amount in dispute as and when required under this Lease, provided such payment shall be without prejudice to Tenant’s position.  Upon receipt of such payment, Landlord shall thereafter provide Tenant with such supplementary information regarding the items in Dispute as may be reasonably requested by Tenant in an effort to resolve such Dispute; provided, however, that Landlord shall not be required to provide any supplementary information to Tenant unless all sums shown to be due by Tenant on the Statement are paid in full.  If Landlord and Tenant are unable to resolve such Dispute, such Dispute shall be referred to a mutually satisfactory third party certified public accountant for final resolution, subject to the audit rights of Tenant contained in Section 6(f) .  The cost of such certified public accountant shall be paid by the party found to be least accurate (in terms of dollars in dispute).  If a Dispute is resolved in favor of Tenant, Landlord shall, within thirty (30) days thereafter, refund any overpayment to Tenant, together with interest from the time of such overpayment at ten percent (10%) per annum.  The determination of such certified public accountant shall be final and binding, subject to the audit rights of Tenant contained in Section 6(f) , and final settlement shall be made within thirty (30) days after receipt of such accountant’s decision.  If Tenant fails to dispute the calculation of Tenant’s Share of Operating Costs in accordance with the procedures and within the time periods specified in this Section 6(e) , or request an audit of the Operating Costs in accordance with the procedures and within the time periods specified in Section 6(f) , the Statement shall be considered final and binding for the calendar year in question.

 

(f)            Tenant, at Tenant’s expense, shall have the right, no more frequently than once per calendar year, following thirty (30) days’ prior written notice (such written notice to be given within thirty [30] days following Tenant’s receipt of Landlord’s Statement delivered in accordance with Section 6(b) ) to Landlord, to audit Landlord’s books and records relating to Operating Costs for the immediately preceding calendar year only; provided that such audit must be concluded within one hundred twenty (120) days after Tenant’s receipt of Landlord’s Statement for the year to which such audit relates; and provided further that the conduct of such audit must not unreasonably interfere with the conduct of Landlord’s business.  Without limitation upon the foregoing, Tenant’s right to audit Landlord’s books and records shall be subject to the following conditions:

 

(1)           Such audit shall be conducted during Normal Business Hours and at the location where Landlord maintains its books and records;

 

(2)           Tenant shall deliver to Landlord a copy of the results of such audit within five (5) Business Days after written request by Landlord;

 

(3)           No audit shall be permitted if an Event of Default by Tenant has occurred and is continuing under this Lease, including any failure by Tenant to pay an amount in Dispute;

 

(4)           Tenant shall reimburse Landlord within ten (10) days following written demand for the reasonable cost of all copies requested by Tenant’s auditor;

 

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(5)           Such audit must be conducted by an independent, nationally-recognized accounting firm or a local accounting firm reasonably acceptable to Landlord that is not being compensated by Tenant on a contingency fee basis and which has agreed with Landlord in writing to keep the results of such audit confidential by executing and delivering to Landlord a confidentiality agreement in the form of Exhibit “F” attached to this Lease, such confidentiality agreement to also be signed and delivered to Landlord by Tenant;

 

(6)           No subtenant shall have the right to audit;

 

(7)           If, for any calendar year, an assignee of Tenant (as permitted by this Lease) has audited or given notice of an audit, Tenant will be prohibited from auditing such calendar year, unless in the case of an audit having been noticed but not yet performed by such assignee, the assignee withdraws its audit notice, and, similarly, if Tenant has audited such calendar year or given such notice, the foregoing restrictions of this Section 6(f)(8)  will apply to the assignee’s right to audit; and

 

(8)           Any assignee’s (other than an assignee pursuant to a Permitted Transfer, as hereinafter defined) audit right will be limited to the period after the effective date of the assignment.

 

(g)           Unless Landlord in good faith disputes the results of such audit, an appropriate adjustment shall be made between Landlord and Tenant to reflect any overpayment or underpayment of Tenant’s Share of Operating Costs within thirty (30) days after delivery of such audit to Landlord.  In the event of an overpayment by Tenant, within thirty (30) days following the delivery of such audit, Landlord shall, if no Event of Default exists hereunder, make a cash payment to Tenant in the amount of such overpayment, or, if an Event of Default exists hereunder, credit such overpayment against delinquent Rent and make a cash payment to Tenant for the balance.  In the event Landlord in good faith disputes the results of any such audit, the parties shall in good faith attempt to resolve any disputed items.  If Landlord and Tenant are able to resolve such dispute, final settlement shall be made within thirty (30) days after resolution of the dispute.  If the parties are unable to resolve any such dispute, any sum on which there is no longer dispute shall be paid and any remaining disputed items shall be referred to a mutually satisfactory third party certified public accountant for final resolution.  The cost of such certified public accountant shall be paid by the party found to be least accurate (in terms of dollars in dispute).  The determination of such certified public accountant shall be final and binding and final settlement shall be made within thirty (30) days after receipt of such accountant’s decision. Promptly upon the undisputed determination of the results of such audit or the resolution of a disputed audit, the parties shall execute a memorandum indicating acknowledgment of such determination or resolution, as the case may be.

 

7.             Late Payments; Dishonored Checks .

 

(a)           In the event any installment of Rent is not received within five (5) Business Days after the date due (without in any way implying Landlord’s consent to such late payment), Tenant, to the extent permitted by law, agrees to pay, in addition to said installment of Rent, a late payment charge equal to five percent (5%) of the installment of Rent due, it being understood that said late payment charge shall be for the purpose of reimbursing Landlord for the additional costs and expenses which Landlord presently expects to incur in connection with the handling and processing of late payments.  Notwithstanding the foregoing, with respect to the first (1 st ) two (2) delinquencies, the late payment charge shall be waived so long as the delinquent sum is paid within five (5) Business Days after written notice of such delinquency.  In the event of any such late payment(s) by Tenant, the additional costs and expenses so resulting to Landlord will be difficult to ascertain precisely and the foregoing charge constitutes a reasonable and good faith estimate by the parties of the extent of such additional costs and expenses.  Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any other rights or remedies granted hereunder unless such default is otherwise cured within the time period provided in this Lease.

 

(b)           In addition to the late payment charge contained in Section 7(a) , all Rent, if not paid within thirty (30) days of the date due, shall, at the option of Landlord, and to the extent permitted by law, bear interest from the date due until paid at the Default Rate.

 

(c)           If any check is tendered by Tenant and not duly honored with good funds, Tenant shall, in addition to any other remedies available to Landlord under this Lease, pay Landlord a “NSF” fee of $25.00.

 

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8.             Security Deposit .  The Security Deposit shall be deposited with Landlord by Tenant contemporaneously with the delivery by Tenant to Landlord of this Lease.  The Security Deposit shall be held by Landlord, without liability for interest, as security for the performance by Tenant of Tenant’s covenants and obligations under this Lease, it being expressly understood that the Security Deposit shall not be considered an advance payment of Rent or a measure of Tenant’s liability for damages in case of default by Tenant.  Landlord may, from time to time, without prejudice to any other remedy, use the Security Deposit to the extent necessary to make good any arrearages of Rent or to satisfy any other covenant or obligation of Tenant hereunder following the expiration of any applicable cure periods.  Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to the amount required hereunder, from time to time.  If Landlord transfers its interest in the Complex during the term of this Lease, Landlord may assign the Security Deposit to the transferee and upon assumption by such transferee of liability for the Security Deposit, Landlord shall have no further liability for the return of such Security Deposit.  Upon application of all or any part of the Security Deposit, Tenant must upon demand restore the Security Deposit to the amount required hereunder, from time to time.  No application of the Security Deposit by Landlord will be deemed to have cured Tenant’s default.  Tenant waives all provisions of Laws, now or hereinafter in force, which restrict the amount or types of claim that a landlord may make upon a security deposit or imposes upon a landlord (or its successors) any obligation with respect to the handling or return of security deposits.  The Security Deposit will be released to Tenant within thirty (30) days of the surrender of the Premises to Landlord subject to any deductions made by Landlord pursuant to the terms of this Lease.  Notwithstanding anything to the contrary contained herein, Tenant shall provide the Security Deposit in the form of a Letter of Credit in accordance with Exhibit “M” attached hereto.

 

9.             Services to be Furnished by Landlord .

 

(a)           Landlord agrees to furnish Tenant the following services:

 

(1)           Facilities for hot and cold water at those points of supply provided for general use of other tenants in the Building and as necessary to service any kitchen facilities and restrooms within the Premises approved by Landlord and provided solely for the use of Tenant and its employees, and central heat and air conditioning in season (the cost of such service to be paid by Tenant and other tenants of the Complex in accordance with Section 6(c)(3)  during Normal Business Hours, and the cost of such service during other than Normal Business Hours to be paid as set forth in Section 9(a)(8) ).

 

(2)           Routine maintenance for all Common Areas and Service Areas of the Building in the manner and to the extent necessary to maintain the same in first class condition.

 

(3)           Janitorial service, five (5) days per week, exclusive of Normal Business Holidays, at a level comparable to that provided in similar first class office buildings within a three (3) mile radius of the Building.

 

(4)           All Building Standard fluorescent and incandescent bulb and ballast replacement in the Premises, the Common Areas and the Service Areas, provided Tenant shall be charged Landlord’s standard Building charge for all replacements of same in the Premises during the Term (provided the cost of same provided to other tenants’ premises shall be excluded from “Operating Costs”).

 

(5)           Limited access to the Building (or to the floor on which the Premises are located) during other than Normal Business Hours through the use of master entry cards and/or keys.  Landlord shall have no liability to Tenant, its employees, agents, contractors, invitees, or licensees for losses due to theft or burglary (other than theft or burglary committed by employees of Landlord), or for damages done by unauthorized persons in the Premises or on the Complex.  Tenant shall cooperate fully in Landlord’s efforts to control access in the Building and shall follow all regulations promulgated by Landlord with respect thereto which are adopted in accordance with Exhibit “C” .

 

(6)           Proper facilities to furnish (A) Building Standard lighting, and (B) sufficient electrical power for normal office machines (including electric typewriters, desk-top computer facilities and desk-top word processing facilities) and other machines of similar electrical consumption (“ Miscellaneous Power ”).

 

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In the event Landlord determines that Tenant will require, or is consuming, special lighting in excess of Building Standard or Miscellaneous Power in excess of the Building Standard, Tenant shall reimburse Landlord for the cost of any additional equipment, such as transformers, risers and supplemental air conditioning equipment, which Landlord’s engineer reasonably deems necessary to accommodate such above-standard consumption (without implying any obligation on the part of Landlord to accommodate such use). Tenant shall have all charges for the electricity separately metered to the Premises billed directly to Tenant and Landlord shall make a corresponding adjustment to Tenant’s Share of Operating Costs.  The Premises are separately metered for electricity.  Tenant shall obtain electricity directly from the utility company and pay the utility company directly for such electricity

 

(7)           Passenger elevator service in common with other tenants of the Building for ingress to and egress from the floor(s) upon which the Premises are situated, twenty-four (24) hours a day, seven (7) days a week, and non-exclusive freight elevator service to the Premises during Normal Business Hours and at other times upon reasonable prior notice to Landlord and reasonable approval of the Building manager.  Any passenger or freight elevator use shall be subject to the Rules and Regulations for the Building and shall be subject to temporary cessation for ordinary repair and maintenance and during times when life safety systems override normal Building operating systems.

 

(8)           Heating and air conditioning during other than Normal Business Hours shall be furnished only upon the prior request of Tenant made in accordance with such reasonable procedures as are, from time to time, prescribed by the Building manager, and Tenant shall bear the cost of such heating and air conditioning service at the After Hours HVAC Rate; provided, however, there shall be a two (2) hour minimum charge when such service is requested and the After-Hours HVAC Rate may be adjusted, from time to time, to reflect increases in the costs incurred by Landlord in providing such service.  In the event any other tenant within the same HVAC zone as the Premises also requests after-hours heating or air conditioning during the same period as Tenant, Landlord shall equitably allocate the cost thereof among all tenants within the same HVAC zone requesting such service.

 

(b)           In the event Landlord agrees to provide any additional services at the specific request of Tenant, without implying any obligation on the part of Landlord to do so, the provision of such services shall, unless otherwise specifically agreed in writing, be subject to the availability of Building personnel, and, if the provision of any such service requires Landlord to incur any out-of-pocket cost, Tenant shall reimburse Landlord for the cost of providing such service (plus an administrative charge equal to five percent [5%] of such cost, plus applicable sales tax) within ten (10) days following receipt of an invoice from Landlord.  Unless Landlord has agreed with Tenant to the contrary in writing, Landlord may discontinue the provision of such additional service at any time upon thirty (30) days advance written notice (or immediately upon the occurrence of an Event of Default).

 

The unintentional failure by Landlord, to any extent, to furnish services required to be furnished by Landlord hereunder, or any cessation thereof, shall not render Landlord liable in any respect for damages (including, without limitation, business interruption damages) to persons or property, nor be construed as an eviction of Tenant, nor work an abatement of Rent, nor relieve Tenant from fulfillment of any covenant or agreement set forth in this Lease.  Should any of such services be interrupted, Landlord shall use reasonable diligence to restore the same promptly, but Tenant shall have no claim for rebate of Rent, damages or eviction on account thereof.  Notwithstanding the foregoing, subject to Section 24 (Casualty Damage) and Section 25 (Condemnation), if there is an interruption in essential services to be provided by Landlord which is (a) specific to the Building (as opposed to an interruption or curtailment in such services which extends beyond the Building to include other properties), (b) causes the Premises to be untenantable, and (c) is not caused by an event of Force Majeure, then Tenant will be entitled to deliver Landlord a notice stating that if the untenantability caused by the interruption is not cured within five (5) Business Days, Tenant will be entitled to an abatement of Base Rental as provided in this section.  If Tenant properly delivers such an abatement notice to Landlord, and the untenantability caused by the interruption in such services is not remedied within seven Business Days after Landlord receives Tenant’s abatement notice, then Tenant shall thereafter be entitled to an abatement of Base Rental and Tenant’s Share of Operating Costs (in proportion to the portion of the Premises rendered untenantable by the interruption in such services) until such services are restored.

 

10.          Graphics; Signage .  Tenant shall have the right to maintain its building monument signage and signage at the entrance to the Premises that are existing and in place as of the date of this Lease (the “ Existing Signage ”).  Any other signage requested by Tenant in addition to the Existing Signage shall be subject to the prior

 

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approval of Landlord and shall be provided, constructed and installed by Landlord; provided, however, Tenant shall reimburse Landlord for Landlord’s cost of providing such service, plus an administrative charge equal to ten percent (10%) of Landlord’s cost.  All such additional signage shall be in the standard graphics for the Building and no others shall be used or permitted without Landlord’s prior written consent.  Tenant, at its sole cost and expense, shall remove all of Tenant’s signage upon the termination of this Lease and repair any damage caused by such removal.

 

11.          Telecommunications .

 

(a)           In the event that Tenant wishes to utilize the services of a telephone or telecommunications provider whose equipment is not servicing the Building as of the date of Tenant’s execution of this Lease (“ Provider ”), such Provider shall be required to obtain the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed, before installing its lines or equipment within the Complex.  In no event shall the Provider be permitted to provide service to any occupant of the Complex other than Tenant, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

 

(b)           The installation of lines or equipment by the Provider shall be subject to the satisfaction of the following conditions:

 

(1)           Tenant shall be responsible for and shall pay all costs incurred in connection with the installation of telephone cables and related wiring in the Premises, including, without limitation, any hook-up, access and maintenance fees related to the installation of such wires and cables in the Premises and the commencement of service therein, and the maintenance thereafter of such wire and cables; and there shall be included in Tenant’s Share of Operating Costs  all installation, hook-up or maintenance costs incurred by Landlord in connection with telephone cables and related wiring in the Building which are not allocable to any individual users of such service but are allocable to the Building generally;

 

(2)           Prior to commencement of any work in or about the Building by Provider, Provider shall supply Landlord with such written indemnities, insurance verifications, financial statements, and such other items as Landlord reasonably deems to be necessary to protect its financial interests and the interests of the Building relating to the proposed activities of the Provider;

 

(3)           Prior to the commencement of any work in or about the Building by the Provider, (i) the Provider shall consult with Landlord’s Building manager regarding the Building requirements regarding the installation of telecommunications equipment and cabling and shall comply with same, and (ii) the Provider shall agree to abide by the Rules and Regulations applicable to the work and such other requirements as are reasonably determined by Landlord to be necessary to protect the interests of the Building, the tenants in the Building, and the Landlord, including, without limitation, providing security in such form and amount as determined by Landlord;

 

(4)           Landlord reasonably determines that there is sufficient space in the Building for the placement of all of the Provider’s equipment and materials;

 

(5)           The Provider is licensed and reputable; and

 

(6)           The Provider agrees to compensate Landlord for space used in the Building for the storage and maintenance of the Provider’s equipment and for all costs that may be incurred by Landlord in arranging for access by the Provider’s personnel, security for Provider’s equipment, and any other such costs as Landlord may reasonably expect to incur.

 

(c)           If Tenant fails to maintain all telephone cables and related wiring in the Premises and such failure affects or interferes with the operation or maintenance of any other telephone cables or related wiring in the Building, Landlord or any vendor hired by Landlord may enter into and upon the Premises forthwith and perform such repairs, restorations or alterations as Landlord deems necessary in order to eliminate any such interference (and Landlord may recover from Tenant all of Landlord’s reasonable costs in connection therewith).  Upon the expiration or earlier termination of this Lease, Tenant agrees to remove all telephone cables and related

 

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wiring installed by Tenant for and during Tenant’s occupancy, which Landlord shall request Tenant to remove.  Tenant agrees that neither Landlord nor any of its agents or employees shall be liable to Tenant, or any of Tenant’s employees, agents, customers or invitees or anyone claiming through, by or under Tenant, for any damages, injuries, losses, expenses, claims or causes of action because of any interruption, diminution, delay or discontinuance at any time for any reason in the furnishing of any telephone service to the Premises and the Building

 

(d)           Landlord’s consent under this section shall not be deemed any kind of warranty or representation by Landlord, including, without limitation, any warranty or representation as to the suitability, competence, or financial strength of Provider.

 

(e)           Tenant acknowledges and agrees that all telephone and telecommunications services desired by Tenant shall be ordered and utilized at the sole risk and  expense of Tenant.

 

(f)            Tenant agrees that, to the extent service by Provider is interrupted, curtailed, or discontinued, Landlord shall have no obligation or  liability with respect thereto and it shall be the sole obligation of Tenant at its expense to obtain substitute service.

 

(g)           The provisions of this Section 11 may be enforced solely by the Tenant and Landlord, and are not for the benefit of any other party.  No Provider shall be deemed a third party beneficiary of this Lease.

 

12.          Repair and Maintenance by Landlord .  Except as provided in Section 14 , Landlord shall be responsible for the maintenance and repair of exterior and load-bearing walls, floors (but not floor coverings), mechanical, electrical, plumbing and HVAC systems and equipment which are Building Standard, the roof of the Building, the Common Areas, the Service Areas, the Parking Areas and the fire alarm panel, sprinkler system and strobes serving the Premises, in good condition and repair, reasonable wear and tear and damage due to casualty excepted, so as to maintain the condition of the Building consistent with similar first class buildings in the Market Area.  In no event shall Landlord be responsible for the maintenance or repair of improvements made by or at the request of Tenant which are not Building Standard.  Tenant will cooperate with Landlord to facilitate the performance of Landlord’s obligations under this Section 12 , including any entry by Landlord into all or any portion of the Premises and the temporary relocation of items of Tenant’s personal property, all as Landlord may determine is reasonably necessary to properly perform such obligations.  All requests for repairs must be submitted to Landlord in writing, except in the case of an emergency.  If Tenant believes any maintenance or repair Landlord is obligated under this Section 12 to perform is needed at the Property, Tenant will promptly provide written notice to Landlord specifying in detail the nature and extent of any condition requiring maintenance or repair.  Landlord will not be deemed to have failed to perform its obligations under this Section 12 with respect to any maintenance or repair unless Tenant has provided such written notice and Landlord has had a commercially reasonable time within which to respond to such notice and effect the needed maintenance or repair.  Repairs and maintenance by Landlord pursuant to this Section 12 are included in Operating Costs, except to the extent excluded by Section 6(d) .  Landlord shall not be liable to Tenant for any expense, injury, loss or damage resulting from work done in the Building or upon the Property, except to the extent resulting from the gross negligence or willful misconduct of Landlord, or the use of, any adjacent or nearby building, land, street, or alley.

 

13.          Maintenance by Tenant .  Except for Landlord’s obligations described in Section 12 above and any janitorial services provided by Landlord under Section 9 above, Tenant, at Tenant’s sole cost and expense, will keep and maintain the Premises in good, clean, sanitary, neat and fully operative condition and repair, reasonable wear and tear and damage due to casualty excepted, so as to maintain the condition of the Premises consistent with similar premises in first class buildings in the Market Area, which obligations of Tenant will include, without limitation, the maintenance, repair and replacement of all: (a) interior surfaces of exterior walls and demising walls; (b) interior walls, moldings, partitions and ceilings; (c) carpeting; (d) non-structural interior components; (e) interior windows, plate glass and doors; (f) kitchen or break-room fixtures, appliances and equipment; and (g) Tenant’s personal property situated in the Premises. Tenant will also pay or reimburse Landlord for (or, at Landlord’s option, perform) the repair or replacement of any waste or excessive or unreasonable wear and tear to the Premises or the Complex caused or permitted by Tenant.  Any repairs or replacements performed by Tenant pursuant to this Section must be at least equal in quality and workmanship to the original work, be in accordance with all Laws and comply with Landlord’s sustainability practices, including any third-party rating systems concerning environmental compliance of the Building or Complex, as the same may change from time to time.  At the expiration or early termination of

 

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this Lease, Tenant shall deliver up the Premises to Landlord in as good condition as at the Commencement Date, ordinary wear and tear and damage by fire or casualty loss (unless caused by Tenant) excepted.

 

14.          Repairs by Tenant .  Tenant shall, at Tenant’s cost, repair or replace any damage to the Premises (including doors and door frames, interior windows and any kitchen equipment, such as dishwashers, sinks, refrigerators, trash compactors and plumbing and other mechanical systems related thereto) that is not caused by Landlord or that is not within the responsibility of Landlord under the Tenant Improvements Agreement, if any, and any damage to the Complex, or any part thereof, caused by Tenant or any employee, officer, contractor, agent, subtenant, guest, licensee or invitee of Tenant (except that with respect to any such damage outside of the Premises or below floor coverings, above ceilings or behind walls or columns, such damage shall be repaired by Landlord, and Tenant shall reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge equal to five percent (5%) of the cost of such repairs or replacements.  If Tenant fails to make such repairs or replacements within thirty (30) days after receipt of written notice from Landlord, Landlord may, at Landlord’s option, make such repairs or replacements, and Tenant shall reimburse Landlord for the cost of such repairs or replacements, plus an administrative charge equal to five percent (5%) of the cost of such repairs or replacements.  Reimbursement for all repairs performed by Landlord pursuant to this Section 14 shall be payable as additional Rent by Tenant to Landlord within ten (10) days following Tenant’s receipt of an invoice from Landlord.  Notwithstanding anything contained herein to the contrary, if any such damage is covered by Landlord’s insurance, in whole or in part, Tenant’s liability under this Section 14 shall be limited to the deductible payable by Landlord and any portion of the cost of repairing such damage not covered by Landlord’s insurance.  In connection with repairs or replacements made by Tenant, Tenant shall provide Landlord with a copy of the contractor agreement regarding such repairs, copies of certificates of insurance evidencing contractor coverage satisfactory to Landlord, copies of “as-built” plans and specifications and other information or documentation reasonably required by Landlord, including evidence of the lien-free completion of such repairs or replacements.

 

15.          Alterations, Additions, Improvements .

 

(a)           Tenant will make no alteration, change, improvement, replacement or addition to the Premises (collectively, “ Alterations ”), without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed with respect to interior Alterations which will not affect, in any way, the mechanical, electrical, plumbing, HVAC, structural and/or fire and life safety components of the Building (“ Non-Structural Alterations ”).  Landlord may, at its option, require Tenant to submit plans and specifications to Landlord for approval (such approval not to be unreasonably withheld or delayed) prior to commencing any Alterations.  All Alterations (including any Non-Structural Alterations) shall be performed by union contractors approved by Landlord, which approval shall be granted or denied within five (5) Business Days after Landlord’s receipt of (i) Tenant’s written request for approval, (ii) certificates of insurance for each such union contractor evidencing the insurance required by this Section 15(a), and (iii) a project directory.  All Alterations shall be done in a good and workmanlike manner, in compliance with all applicable laws, including, but not limited to, Title III of The Americans With Disabilities Act of 1990 or any applicable local or state Law regarding handicapped access (collectively, the “ Disability Laws ”) and in accordance with Landlord’s sustainability practices (of which Tenant has received prior written notice) under any so-called green/LEED program(s) undertaken or maintained by Landlord.  Landlord may, in the exercise of reasonable judgment, request that Tenant provide Landlord with appropriate evidence of Tenant’s ability to complete and pay for the completion of the Tenant Alterations such as a performance bond or letter of credit.  Upon completion of the Tenant Alterations, Tenant shall deliver to Landlord an as-built mylar and digitized (if available) set of plans and specifications for the Tenant Alterations. Tenant shall require that any contractors used by Tenant carry a comprehensive liability (including builder’s risk) insurance policy in such amounts as Landlord may reasonably require and provide proof of such insurance to Landlord prior to the commencement of any Alterations and Tenant shall require that any contractors used by Tenant comply with such rules and regulations imposed by Landlord from time to time, including such rules and regulations related to so-called green/LEED program(s) undertaken or maintained by Landlord.  TENANT SHALL INDEMNIFY AND HOLD LANDLORD AND LANDLORD RELATED PARTIES HARMLESS FROM, AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES), DEMANDS, CLAIMS, CAUSES OF ACTION AND LIENS ARISING FROM AND IN CONNECTION WITH ANY ALTERATIONS PERFORMED BY TENANT, EXCEPT TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD.  All persons performing work in the Building at the request of Tenant shall register with the Building manager prior

 

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to initiating any work.  Upon completion of any Alterations, Tenant shall provide Landlord with a copy of its building permit, final inspection tag and, if plans and specifications were required by Landlord, final “as built” plans and specifications, together with evidence of the lien-free completion of such Alterations.  Except for the Tenant Improvements (which shall be governed by the Tenant Improvements Agreement [if any]), all Alterations now or hereafter placed or constructed on the Premises at the request of Tenant shall be at Tenant’s cost.  If Tenant performs such Alterations, an amount equal to ten percent (10%) of the estimated cost of such Alterations shall be deposited with Landlord within ten (10) days following Tenant’s receipt of an invoice from Landlord and upon Tenant completing all “punch list” items with respect to such Alterations, such retained amount will be returned to Tenant when all such punch list items are completed lien-free and to Landlord’s satisfaction.  Tenant shall pay to Landlord a construction supervision fee equal to five percent [5%] of the hard costs of the Alterations with respect to any Alterations (other than Permitted Alterations).  Notwithstanding the foregoing, Tenant may make alterations (collectively, the “ Permitted Alterations ”) of a purely non-structural, decorative nature without Landlord’s prior written consent if Tenant provides Landlord with reasonable prior notice of such alterations and with plans and specifications for such alterations (if such plans and specifications were required to be submitted by Landlord for its approval as provided herein) and such alterations (a) do not require the issuance of a building permit, (b) do not exceed $25,000.00 in cost, and (c) do not affect the base building mechanical, electrical, plumbing, HVAC and/or fire and life safety systems or equipment in the Building.

 

(b)           Upon the expiration or early termination of this Lease, Tenant shall remove its personal property, trade fixtures, office supplies, laboratory equipment and installations (if any) and movable office furniture and equipment not attached to the Building and (1) such removal shall be made prior to the termination or expiration of the Lease Term; and (2) Tenant shall promptly repair all damage caused by such removal.  All other property at the Premises, any Alterations to the Premises, and any other articles attached or affixed to the floor, wall, or ceiling of the Premises shall, immediately upon installation, be deemed the property of Landlord and shall be surrendered with the Premises at the termination or expiration of this Lease, without payment or compensation therefor.  If, however, Landlord so requests in writing, Tenant will, at Tenant’s sole cost and expense, prior to the termination or expiration of the Lease Term, remove any and all trade fixtures, office supplies and office furniture and equipment placed or installed by Tenant in the Premises, and any Tenant Improvements and Alterations (including any non-Building Standard Alterations and any specialty improvements) installed by Tenant or installed by Landlord at Tenant’s request in the Premises and which Landlord designated as being subject to removal at the time of Landlord’s approval of plans (with respect to the Tenant Improvements) or upon Tenant’s written request at the time of Landlord’s consent (or if no consent was required, at the time Landlord was notified thereof) (with respect to any Alterations other than the Tenant Improvements), and will repair any damage caused by such removal. In addition, Tenant shall, at Tenant’s expense, remove all of Tenant’s telecommunications equipment and racks, including removal from the Premises or from risers or other Common Areas of all cabling installed by Tenant or for the exclusive use of Tenant, and Tenant shall  promptly repair, at Tenant’s expense, any damage caused by such removal.

 

16.          Laws and Regulations; Green/LEED Programs; Disability Laws; Building Rules and Regulations .

 

(a)           Tenant, at Tenant’s sole cost and expense, shall comply with all current and future federal, state, municipal Laws applicable to the use of the Premises, the employees, agents, visitors and invitees of Tenant, and the business conducted in the Premises by Tenant, including, without limitation, all Hazardous Materials Laws; will not engage in any activity which would cause Landlord’s fire and extended coverage insurance to be canceled or the rate increased (or, at Landlord’s option, Landlord may allow Tenant to engage in such activity provided Tenant pays for any such increase in the insurance rate); and will not commit any act which is a nuisance or annoyance to Landlord or to other tenants in the Building or which might, in the reasonable judgment of Landlord, appreciably damage Landlord’s goodwill or reputation, or tend to injure or depreciate the value of the Building.  Without limiting the foregoing, Tenant shall not place or permit to remain within the Premises any “hazardous materials” or “hazardous substances” as such terms are now or hereafter defined under applicable Hazardous Materials Laws, except cleaning supplies, copier toner or other similar type products commonly found in commercial office space, provided such items are properly labeled, stored and disposed of in accordance with all applicable governmental requirements. Notwithstanding the foregoing, nothing in this Section 16(a)  shall be construed as requiring Tenant to be responsible for any legal requirements applicable to the structural portions of the Premises, any restrooms within the Building (other than restrooms constructed by or at the special request of

 

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Tenant) or the Building Standard mechanical, electrical, plumbing or HVAC systems, unless the failure to comply with any such legal requirements is caused by Tenant or anyone acting for Tenant.

 

(b)           Tenant, at its sole cost, shall be responsible for compliance with Disability Laws with respect to (1) the Premises, (2) the Tenant Improvements, (3) all Alterations made to the Premises or any other acts of Tenant after the Commencement Date, (4) all requirements of Disability Laws that relate to the employer-employee relationship or that are necessitated by the special needs of any employee, agent, visitor or invitee of Tenant and that are not required to be provided generally, including, without limitation, requirements related to auxiliary aids and graphics installed by or on behalf of Tenant (other than Base Building Signage), and (5) all requirements of Disability Laws that relate to private restrooms constructed by or at the special request of Tenant.  Notwithstanding any provision of this Section 16 to the contrary, Landlord, at its sole cost, shall be responsible for compliance with Disability Laws with respect to the Common Areas (including restrooms located upon floors leased by Tenant) and the Service Areas.  Neither party shall be in default under this Section 16(b)  for its failure to comply with Disability Laws so long as the responsible party is either contesting in good faith, and by legal means, the enforcement of Disability Laws, or is undertaking diligent efforts to comply with Disability Laws.  Except as otherwise provided in Section 16(a) above, Tenant shall not be responsible for compliance with any Laws requiring (a) structural repairs or modifications, (b) repairs, replacements or modifications to the utility or building service equipment, or (c) installation of new or modification of existing building service equipment, such as fire detection or suppression equipment, unless such repairs, replacements, modifications or installations shall (i) be due to Tenant’s particular manner of use of the Premises (as opposed to office use generally), (ii) be due to the negligence or willful misconduct of Tenant or any agent, employee, or contractor of Tenant, and/or (iii) be due solely to Alterations made by or for Tenant.

 

(c)           Tenant shall cooperate fully with Landlord, at all times, in abiding by all regulations and requirements which Landlord may prescribe for the proper functioning and protection of all utilities and services necessary for the operation of the Premises or the Complex and such other rules and regulations Landlord may prescribe in connection with any so-called green/LEED program(s) undertaken or maintained by Landlord, including, without limitation, surveys adopted by Landlord from time to time for the Building and maintaining and reporting utility consumption data in a format prescribed by Landlord.  Landlord and its contractors shall have free access to any and all mechanical installations in the Premises at all reasonable times and upon prior written notice to Tenant (provided that no such notice or reasonable time requirement shall be required in the case of emergency or to perform repairs or other services otherwise required by Landlord under this Lease), and Tenant agrees that there shall be no construction of partitions or other obstructions which might interfere with the moving of the servicing equipment of Landlord to or from the enclosures containing said installations.  Tenant further agrees that neither Tenant nor its employees, agents, licensees, invitees or contractors shall at any time tamper with, adjust or otherwise in any manner adversely affect Landlord’s mechanical installations in the Premises or the Complex.  Further, Tenant shall not use or operate the Premises in any manner that will cause the Premises, Building or Complex or any part thereof not to conform with Landlord’s sustainability practices or the certification of the Premises, Building or Complex issued pursuant to any so-called green/LEED program(s) undertaken or maintained by Landlord, provided Tenant has prior written notice thereof.

 

(d)           Tenant shall comply with the Rules and Regulations and shall cause all of its agents, employees, contractors, invitees and visitors to do so.  All changes to such Rules and Regulations shall be sent by Landlord to Tenant in writing.  Landlord shall have no liability to Tenant or any other person for its failure to enforce the Rules and Regulations.

 

(e)           Tenant, at its sole cost and expense, will regularly monitor the Premises for the presence of mold or any conditions that reasonably can be expected to give rise to mold, such as by way of example but not limitation, water damage, mold growth, repeated complaints of respiratory ailments or eye irritation by persons occupying the Premises or any notice from a governmental authority of complaints of indoor air quality at the Premises.  If Tenant discovers the existence of any mold or conditions referred to above, Tenant will notify Landlord and Landlord shall retain an industrial hygienist or other professional mold consultant to conduct an inspection and prepare a report for Tenant and Landlord.  If the inspection report concludes that mold is present in the Premises and such presence is due to actions, omissions or negligence of Tenant, Tenant will be responsible for the cost of such inspection and the cost of remediation.  If the inspection report concludes that mold is present in the Premises and such presence is due to actions, omissions or negligence of Landlord, Landlord will be responsible for

 

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the cost of such inspection and the cost of remediation. If the inspection report concludes that mold is present in the Premises, Landlord will hire a contractor that specializes in mold remediation to prepare a remediation plan for the Premises and upon Landlord’s approval of the plan, the contractor will promptly carry out the work contemplated in the plan in accordance with applicable Laws.  To the extent required by applicable state or local health or safety requirements, occupants and visitors to the Premises will be notified of the conditions and the schedule for the remediation. The contractor performing the remediation will provide a written certification to Landlord and Tenant that the remediation has been completed in accordance with applicable Laws.

 

(f)            Landlord may, but is not obligated to, contest the amount or validity, in whole or in part, of any Taxes.  Tenant has no right to protest any Tax and/or the appraised value of the Building determined by any taxing authority.  Tenant hereby knowingly, voluntarily and intentionally waives and releases any right, whether created by law or otherwise, to (a) file or otherwise protest before any taxing authority any such rate or value determination even though Landlord may elect not to file any such protest; (b) receive, or otherwise require Landlord to deliver, a copy of any reappraisal notice received by Landlord from any taxing authority (except in connection with an audit of Operating Costs); and (c) appeal any order of a taxing authority which determines any such protest.  Tenant acknowledges and agrees that the foregoing waiver and release was bargained for by Landlord and Landlord would not have agreed to enter into this Lease in the absence of this waiver and release.  If, notwithstanding any such waiver and release, Tenant files or otherwise appeals any such protest, then Tenant will be in default under this Lease and, in addition to Landlord’s other rights and remedies, Tenant must pay or otherwise reimburse Landlord for costs incurred in contesting any Taxes.  If, as a result of Tenant’s tax protest or appeal, an increase in the value of the Complex occurs, then Tenant must pay Landlord, in addition to Tenant’s Share of the costs incurred by Landlord in contesting such Taxes, an amount equal to Tenant’s Share of the additional Taxes, such amount to be calculated based upon the increase in value multiplied by the tax rate estimated to be in effect for each year during the balance of the Lease Term (and to the extent applicable, any extension of the Lease Term).  Tenant’s Share of Landlord’s costs incurred in connection with contesting the Taxes must be paid by Tenant within five days following written demand by Landlord.

 

(g)           TENANT SHALL INDEMNIFY AND HOLD LANDLORD AND LANDLORD RELATED PARTIES HARMLESS FROM, AND REIMBURSE LANDLORD FOR AND WITH RESPECT TO, ANY AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS’ FEES), DEMANDS, CLAIMS, CAUSES OF ACTION AND LIENS ARISING FROM AND IN CONNECTION WITH THE FAILURE OF TENANT TO FULLY COMPLY WITH ITS OBLIGATIONS SET FORTH IN THIS SECTION 16 OR FROM THE PRESENCE, TREATMENT, STORAGE, TRANSPORTATION, DISPOSAL, RELEASE OR MANAGEMENT OF HAZARDOUS MATERIALS IN, ON, UNDER, UPON OR FROM THE PROPERTY RESULTING FROM OR RELATING TO TENANT’S USE OF THE PREMISES OR THE COMPLEX.  The obligations of Tenant under this Section shall survive the expiration or earlier termination of this Lease

 

17.          Entry by Landlord .

 

(a)           Tenant shall permit Landlord to erect, use and maintain pipes, ducts, wiring and conduits in and through the Premises, so long as Tenant’s use, layout or design of the Premises is not materially affected or altered.  Landlord or Landlord’s agents shall have the right to enter upon the Premises in the event of an emergency, or to inspect the Premises, to perform janitorial and other services, to conduct safety and other testing in the Premises and to make such repairs, alterations, improvements or additions to the Premises or the Building as Landlord may deem necessary or desirable.  Janitorial and cleaning services shall be performed after Normal Business Hours.  Any entry or work by Landlord may be during Normal Business Hours after reasonable notice to Tenant (except in the case of an emergency) and Landlord agrees to use reasonable efforts to minimize interference with Tenant’s occupancy of the Premises as a result of any such entry or work.

 

(b)           If Tenant shall not be personally present to permit an entry into the Premises when for any reason an entry therein shall be necessary or permissible, Landlord (or Landlord’s agents), after attempting to notify Tenant (unless Landlord believes an emergency situation exists), may enter the Premises without rendering Landlord or its agents liable therefor (if during such entry Landlord or Landlord’s agent shall accord reasonable care to Tenant’s property), and without relieving Tenant of any obligations under this Lease.

 

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(c)           Subject to the requirements set forth in Section 17(a) above, Landlord may enter the Premises for the purpose of conducting such inspections, tests and studies as Landlord may deem desirable or necessary to confirm Tenant’s compliance with all Laws (including Hazardous Materials Laws) or for other purposes necessary in Landlord’s reasonable judgment to ensure the sound condition of the Building and the systems serving the Building.  Landlord’s rights under this Section 17 are for Landlord’s own protection only, and Landlord has not, and shall not be deemed to have assumed any responsibility to Tenant or any other party for compliance with Laws as a result of the exercise or non-exercise of such rights.

 

(d)           Landlord may do any of the foregoing, or undertake any of the inspection or work described in the preceding paragraphs without such action constituting an actual or constructive eviction of Tenant, in whole or in part, or giving rise to an abatement of Rent by reason of loss or interruption of business of the Tenant, or otherwise.  Landlord agrees to use reasonable efforts to minimize interference with Tenant’s occupancy of the Premises as a result of any such entry or work and to give Tenant reasonable prior written notice of any such entry or work, except in the case of an emergency.

 

18.          Assignment and Subletting .

 

(a)           Except for a Permitted Transfer (as defined below), Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge or hypothecate its leasehold interest or grant any concession or license within the Premises (any such assignment, sublease, mortgage, pledge, hypothecation, or grant of a concession or license being hereinafter referred to in this Section 18 as a “ Transfer ”) without the prior written consent of Landlord (which consent shall not be unreasonably withheld, conditioned or delayed) and any attempt to effect a Transfer without such consent of Landlord shall be void and of no effect.  In order for Tenant to make a Transfer, Tenant must request in writing Landlord’s consent at least thirty (30) days in advance of the date on which Tenant desires to make a Transfer and pay Landlord a $250.00 fee for reviewing such request (the “ Review Fee ”).  Such request shall include the name of the proposed assignee or sublessee, current financial information on the proposed assignee or sublessee and the terms of the proposed Transfer.  Landlord shall, within ten (10) Business Days following receipt of such request, notify Tenant in writing that Landlord elects (1) except in the case of a Permitted Transfer (as defined below), to terminate this Lease as to the space so affected as of the date so specified by Tenant, in which event Tenant will be relieved of all further obligations hereunder as to such space, (2) to permit Tenant to assign or sublet such space in accordance with the terms provided to Landlord, or (3) to refuse consent to Tenant’s requested Transfer and to continue this Lease in full force and effect as to the entire Premises.  If Landlord elects options (1) or (3)  above, Landlord shall return the Review Fee to Tenant.  If Landlord elects option (1)  above, then Tenant may within ten (10) Business Days following Tenant’s receipt of Landlord’s notice to Tenant of such election, rescind its request for consent to the Transfer and this Lease shall continue in full force and effect.  If Landlord elects to exercise option (2)  above, Tenant agrees to provide, at its expense, direct access from any sublet space or concession area to a public corridor of the Building, and such other improvements, alterations or additions as may be required by applicable law.  The prohibition against a Transfer contained herein shall be construed to include a prohibition against any Transfer by merger, sale of assets, sale of a controlling interest in stock or by operation of law. Notwithstanding the foregoing or anything else to the contrary in this Lease, if no Event of Default has occurred and is continuing, Tenant shall have the right, subject to Section 18(b) , to make a Transfer of this Lease without the prior written consent of Landlord (a “ Permitted Transfer ”) (i) to a parent or subsidiary of Tenant or any entity under common control with Tenant or (ii) in connection with (A) the merger, acquisition, consolidation or reorganization of Tenant or (B) the sale of all or substantially all of Tenant’s assets, so long as, with respect to any Transfer referred to in the preceding clauses (i) and (ii), such transferee has a tangible net worth equal to the tangible net worth of Tenant on the date of this Lease and the transferee intends to use the Premises in a comparable manner to Tenant’s use.   Any assignment or sublease must be in writing and Tenant shall have provided Landlord with copy of the executed copy of assignment or sublease within ten (10) Business Days after the date of such sublease or assignment.

 

(b)           Notwithstanding that the prior express written consent of Landlord to a Transfer may have been obtained under the provisions of Section 18(a)  or that such permission is not required, the following shall apply to all Transfers:

 

(1)           Tenant shall, in the case of an assignment, cause the assignee to expressly assume in writing and to agree to perform all of the covenants, duties and obligations of Tenant hereunder, and such

 

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transferee shall be jointly and severally liable therefor along with Tenant (i.e, Landlord’s consent to any Transfer shall not release Tenant from performing its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor) ;

 

(2)           In the event that the rent or other consideration due and payable by a sublessee or assignee under any such permitted sublease or assignment exceeds the Rent for the portion of the Premises so transferred, then Tenant shall pay to Landlord, as additional Rent, fifty percent (50%) of all such excess rental and other consideration, after deducting the amortized costs incurred by Tenant in connection with the sublease or assignment (which may include, without limitation, marketing costs, rent abatement, construction allowances, brokerage fees and attorneys’ fee), which costs shall be amortized over the term of the Transfer, immediately upon receipt thereof by Tenant from such transferee;

 

(3)           No usage of the Premises different from the usage herein permitted to be made by Tenant shall be permitted, and all of the terms and provisions of this Lease shall continue to apply after a Transfer; and

 

(4)           Any such transferee’s obligations shall include, without limitation, the obligation to pay Rent as to the portion of the Premises subject to the Transfer, and Landlord shall be permitted to enforce the provisions of this Lease against the undersigned Tenant or any transferee, or both, without demand upon or proceeding in any way against any other persons. Landlord may collect Rent directly from the transferee and apply the net amount collected to the Rent reserved in this Lease, without the requirement of any consent or approval from Tenant.

 

(c)           The consent by Landlord to a particular Transfer shall not be deemed a consent to any other subsequent Transfer.  If this Lease, the Premises or the Tenant’s leasehold interest therein, or if any portion of the foregoing is transferred, or if the Premises are occupied in whole or in part by anyone other than Tenant without the prior consent of Landlord as provided herein, Landlord may nevertheless collect rent from the transferee or other occupant and apply the net amount collected to the Rent payable hereunder, but no such transaction or collection of rent or application thereof by Landlord shall be deemed a waiver of the provisions hereof or a release of Tenant from the further performance by Tenant of its covenants, duties and obligations hereunder.

 

(d)           No assignee or subtenant of the Premises shall be a then-existing tenant or occupant of the Building or a person or entity with whom Landlord is then dealing with regard to leasing space in the Building or with whom Landlord has had any dealings with the past six months with regard to leasing space in the Building, unless Landlord does not have suitable space within the Complex to accommodate such party’s needs.

 

(e)           For purposes of this Section 18 , and in addition to any other reasonable grounds for denial, Landlord’s consent to a Transfer will be deemed reasonably withheld if, in Landlord’s good faith judgment, any one or more of the following apply: (a) the proposed transferee does not have the financial strength to perform the Tenant’s obligations under this Lease; (b) the business and operations of the proposed transferee are not of comparable quality to the business and operations being conducted by other tenants in the Building; (c) either the proposed transferee, or any Affiliate of the proposed transferee, occupies or is negotiating with Landlord to lease space in the Building, subject, however, to the provisions of Section 18(d)  above; (d) the proposed transferee does not have a good business reputation; (e) the proposed use of the Premises by the proposed transferee may or will cause the Building or Complex or any part thereof not to conform with any so-called green/LEED program(s) undertaken or maintained by Landlord; (f) the presence in the Premises of the proposed transferee would, in Landlord’s reasonable judgment, impact the Building or the Complex in a negative manner; (g) if the subject space is only a portion of the Premises and the physical subdivision of such portion is, or would render the Premises, not regular in shape with appropriate means of ingress and egress and facilities suitable for normal renting purposes, or is otherwise not readily divisible from the Premises; (h) the Transfer would require alterations to the Building or the Complex to comply with applicable Laws; (i) the transferee is a government (or agency or instrumentality thereof); or (j) an Event of Default exists under this Lease and has not been waived by Landlord at the time Tenant requests consent to the proposed Transfer.

 

19.          Mechanic’s Liens .  Tenant will not permit any mechanic’s liens, materialmen’s liens or other liens to be placed upon the Premises or the Complex for any work performed by or at the request of Tenant, or any

 

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assignee, sublessee or licensee of Tenant, and nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the Premises, or any part thereof, nor as giving Tenant any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanic’s or other liens against the Premises or the Complex.  In the event any such lien is attached to the Premises or the Complex and not discharged by payment, bonding or otherwise within fifteen (15) days after receipt of written notice from Landlord, then, in addition to any other right or remedy of Landlord, Landlord may, but shall not be obligated to, discharge the same.  Any amount paid by Landlord for the aforesaid purpose shall be paid by Tenant to Landlord within ten (10) days after written demand as additional Rent and shall bear interest at the Default Rate from the date such demand by Landlord is received by Tenant until reimbursed by Tenant.

 

20.          Property Insurance .

 

(a)           Landlord shall maintain a policy or policies of fire and extended coverage insurance, including flood and earthquake coverage, on the portion of the Complex that is the property of Landlord, including Alterations by Tenant that have become the property of Landlord, in such amounts as Landlord’s mortgagee may require, but in no event in an amount equal to less than eighty percent (80%) of the replacement cost.  Such insurance shall be maintained at the expense of Landlord (as a part of the Operating Costs), and payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interests shall appear.  Tenant shall maintain at its expense, in an amount equal to full replacement cost, fire and extended coverage insurance, including flood and earthquake coverage, on all of its personal property, including removable trade fixtures, located in the Premises and in such additional amounts as are required to meet Tenant’s obligations pursuant to Section 24 hereof.  Tenant shall, at Landlord’s request from time to time, provide Landlord with current certificates of insurance evidencing Tenant’s compliance with this Section 20 and Section 21 .  Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a policy is due to expire at least thirty (30) days prior to such expiration.

 

(b)           Tenant shall maintain throughout the Lease Term a policy or policies of “all risk” extended coverage insurance protecting Tenant against loss of or damage to Tenant’s alterations, additions, improvements, carpeting, floor coverings, paintings, decorations, fixtures, inventory and other business personal property located in or about the Premises to the full replacement value of the property so insured and endorsed to provide that Tenant’s insurance is primary in the event of any overlapping coverage with the insurance carried by Landlord.  Such insurance shall be maintained at the expense of Tenant and payment for losses thereunder shall be made solely to Tenant or the mortgagees of Tenant (if permitted hereunder) as their interests shall appear.  Tenant shall, prior to occupancy of the Premises and at Landlord’s request from time to time, provide Landlord with a current certificate of insurance evidencing Tenant’s compliance with this Section 20 .  Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a property insurance policy is due to be canceled or expire at least thirty (30) days prior to such cancellation or expiration.

 

21.          Liability Insurance .

 

(a)           In addition to the property insurance described above, Tenant shall keep in force throughout the Lease Term: (i) a Commercial General Liability insurance policy or policies to protect the Landlord against liability to the public or to any invitee of tenant or a Landlord Related Party incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of not less than $3,000,000.00 per occurrence, or such larger amount as Landlord may require from time to time that in Landlord’s reasonable judgment is then being customarily required by landlords of buildings comparable to the Building, covering bodily injury and property damage liability and $1,000,000 products/completed operations aggregate; (ii) Business Auto Liability covering owned and hired vehicles with a limit of not less than $1,000,000 per accident; (iii) insurance protecting against liability under Worker’s Compensation Laws with limits at least as required by statue; (iv) Employers Liability with limits of $1,000,000 each accident, $1,000,000 disease policy limit, $1,000,000 disease-each employee; and (v) Business Interruption Insurance with limit of liability representing loss of at least approximately one year of income.

 

(b)           Each of the aforesaid policies or certificates thereof shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance, and shall

 

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(i) be provided at Tenant’s expense; (ii) name the Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds; (iii) be issued by an insurance company authorized to issue insurance in the State and rated in Best’s Insurance Guide or any successor thereto as having a “Best’s Rating” of at least “A” and a “Financial Size Category” of at least “VII” during the Term; (iv) contain an endorsement that said insurance shall not be cancelled unless thirty (30) days prior written notice (ten days for nonpayment of premium) shall have been given to Landlord; (v) contain an endorsement that Tenant’s insurance is primary for claims arising out of an incident or event occurring within the Premises; and (vii) include coverage for the contractual liability of Tenant to indemnify Landlord and Landlord Related Parties pursuant to Section 22(a) .   Tenant shall obtain the agreement of Tenant’s insurers to notify Landlord that a liability insurance policy is due to be canceled or expire at least thirty (30) days prior to such cancellation or expiration.

 

(c)           Whenever Tenant shall undertake any Alterations, the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Alterations, without limitation including liability under any applicable structural work, act, and such other insurance as Landlord shall require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Alterations.

 

(d)           Landlord may maintain a policy or policies of comprehensive general liability insurance and environmental insurance with respect to the Complex, but excluding the Premises, in such amounts as are required by Landlord’s mortgagee or are determined to be necessary by Landlord, and the costs of such insurance shall be included in the Operating Costs.  Payments for losses thereunder shall be made solely to Landlord or the mortgagees of Landlord as their interests shall appear.

 

22.          INDEMNITY .

 

(a)           TENANT SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD AND EACH LANDLORD RELATED PARTY FROM AND AGAINST CLAIMS RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM:  (1) AN INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE PREMISES; OR (2) THE OPERATION OR CONDUCT OF TENANT’S BUSINESS WITHIN THE PREMISES.  IF ANY SUCH CLAIM IS MADE AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY, TENANT SHALL, AT TENANT’S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY OR THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO LANDLORD.  The indemnity obligations of Tenant under this Section 22(a)  shall not apply to a claim  arising out of the gross negligence or intentional misconduct of Landlord or any Landlord Related Party.

 

(b)           LANDLORD SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS TENANT AND EACH TENANT RELATED PARTY FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, DAMAGES, CLAIMS, SUITS, LOSSES, CAUSES OF ACTION, LIENS, JUDGMENTS AND EXPENSES (INCLUDING COURT COSTS, ATTORNEYS’ FEES AND COSTS OF INVESTIGATION) OF ANY KIND, NATURE OR DESCRIPTION RESULTING FROM ANY INJURIES TO OR DEATH OF ANY PERSON OR ANY DAMAGE TO PROPERTY WHICH ARISES, OR IS CLAIMED TO ARISE FROM, (1) AN INCIDENT OR EVENT WHICH OCCURRED WITHIN OR ON THE COMMON AREAS; OR (2) THE OPERATION OR CONDUCT OF LANDLORD’S BUSINESS WITHIN THE COMMON AREAS (COLLECTIVELY, THE “ CLAIMS ”).  IF ANY SUCH CLAIM IS MADE AGAINST TENANT OR ANY TENANT RELATED PARTY, LANDLORD SHALL, AT LANDLORD’S SOLE COST AND EXPENSE, DEFEND SUCH CLAIM BY OR THROUGH ATTORNEYS REASONABLY ACCEPTABLE TO TENANT.  The indemnity obligations of Landlord under this Section 22(b)  shall not apply to a claim arising out of the gross negligence or intentional misconduct of Tenant or any Tenant Related Party.

 

23.          WAIVER OF SUBROGATION RIGHTS .  NOTWITHSTANDING ANYTHING IN THIS LEASE TO THE CONTRARY, TO THE EXTENT THAT AND SO LONG AS THE SAME IS PERMITTED UNDER THE LAWS AND REGULATIONS GOVERNING THE WRITING OF INSURANCE WITHIN THE STATE, ALL INSURANCE CARRIED BY EITHER LANDLORD OR TENANT SHALL PROVIDE FOR A WAIVER OF RIGHTS OF SUBROGATION AGAINST LANDLORD AND TENANT ON THE PART OF THE INSURANCE CARRIER.  UNLESS THE WAIVERS CONTEMPLATED BY THIS SENTENCE ARE NOT

 

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OBTAINABLE FOR THE REASONS DESCRIBED IN THIS SECTION 23 , LANDLORD AND TENANT EACH HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIMS, ACTIONS OR CAUSES OF ACTION AGAINST THE OTHER, ITS AGENTS, OFFICERS, OR EMPLOYEES, FOR ANY LOSS OR DAMAGE TO PROPERTY OR ANY INJURIES TO OR DEATH OF ANY PERSON WHICH IS COVERED OR WOULD HAVE BEEN COVERED UNDER THE INSURANCE POLICIES REQUIRED UNDER THIS LEASE.  THE FOREGOING RELEASE SHALL NOT APPLY TO LOSSES OR DAMAGES IN EXCESS OF ACTUAL OR REQUIRED POLICY LIMITS (WHICHEVER IS GREATER) NOR TO ANY DEDUCTIBLE (UP TO A MAXIMUM OF $50,000) APPLICABLE UNDER ANY POLICY OBTAINED BY THE WAIVING PARTY.  THE FAILURE OF EITHER PARTY (THE “ DEFAULTING PARTY ”) TO TAKE OUT OR MAINTAIN ANY INSURANCE POLICY REQUIRED UNDER THIS LEASE SHALL BE A DEFENSE TO ANY CLAIM ASSERTED BY THE DEFAULTING PARTY AGAINST THE OTHER PARTY HERETO BY REASON OF ANY LOSS SUSTAINED BY THE DEFAULTING PARTY THAT WOULD HAVE BEEN COVERED BY ANY SUCH REQUIRED POLICY.  THE WAIVERS SET FORTH IN THE IMMEDIATELY PRECEDING SENTENCE SHALL BE IN ADDITION TO, AND NOT IN SUBSTITUTION FOR, ANY OTHER WAIVERS, INDEMNITIES, OR EXCLUSIONS OF LIABILITIES SET FORTH IN THIS LEASE.

 

24.          Casualty Damage .  If the Premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt written notice thereof to Landlord.  In case the Building shall be so damaged by fire or other casualty that (i) substantial alteration or reconstruction of the Building shall, in the judgment of an independent architect selected by Landlord, be required (whether or not the Premises shall have been damaged by such fire or other casualty), or (ii)  in the event any mortgagee under a first mortgage or first deed of trust covering the Building should require that the insurance proceeds payable as a result of said fire or other casualty be used to retire the mortgage debt, or (iii) in the event of the occurrence of a casualty which is not insured under the “all risk” extended coverage insurance required to be carried by Landlord pursuant to the terms of Section 20 , Landlord may, at its option, terminate this Lease by notifying Tenant in writing of such termination within fifteen (15) days after the date of Landlord’s receipt of the estimated cost of reconstruction or determination by a mortgagee to take the proceeds in which event the Rent hereunder shall be abated as of the date of such damage.  If  Landlord does not elect to terminate this Lease,  Landlord shall, as soon as practicable, but no more than ninety (90) days after the date of such damage, commence to repair and restore the Building and shall proceed with reasonable diligence to restore the Building to substantially the same condition which it was in immediately prior to the occurrence of the fire or other casualty, except that Landlord shall not be required to rebuild, repair, or replace any part of Tenant’s furniture, fixtures and equipment removable by Tenant under the provisions of this Lease or any Alterations to the Premises made by Tenant following the Commencement Date which were not approved by Landlord in writing, and Landlord shall not in any event be required to spend for such work an amount in excess of the insurance proceeds actually received by Landlord as a result of the fire or other casualty, plus any deductible amounts thereunder.  If Landlord determines that insurance proceeds will be insufficient to restore the Building as required by this Section 24 , Landlord may, at its option, elect to either (1) terminate this Lease by written notice to Tenant within fifteen (15) days after the date of Landlord’s receipt of written notice of the amount of insurance proceeds Landlord will receive, or (2) provide the extra funds necessary to complete the restoration.  In the event Landlord did not originally construct any Alterations to be repaired, the time for Landlord to commence and complete such repairs shall be extended by the amount of time necessary for Landlord to obtain detailed working drawings of the Alterations to be repaired.  In the event Landlord does not either commence the repairs to the Building within the time required herein, or complete the repairs to the Building within two hundred seventy (270) days after the date of such damage, Tenant may terminate the Lease by written notice thereof to Landlord given no later than thirty (30) days following the date on which Landlord was to commence or complete such repairs, as the case may be.  Landlord shall not be liable for any inconvenience or annoyance to Tenant or injury to the business of Tenant resulting in any way from such damage or the repair thereof, except that, subject to the provisions of the next sentence, Landlord shall allow Tenant an equitable abatement of Rent during the time and to the extent the Premises are unfit for occupancy and  are vacated by Tenant.  If the Premises or any other portion of the Complex is damaged by fire or other casualty resulting from the intentional acts of Tenant or any employee, officer, contractor, agent, subtenant, or licensee of Tenant, the Rent hereunder shall not be abated during the repair of such damage, and Tenant shall remain liable for the payment thereof.

 

25.          Condemnation .  If (i) the whole or substantially the whole of the Complex, or (ii) the whole or such portion of the Premises as shall render the remainder reasonably unfit for Tenant’s use, shall be taken for any public or quasi-public use, by right of eminent domain or otherwise, or sold in lieu of condemnation, then this Lease

 

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shall terminate as of the date when physical possession of the Building or the Premises are taken by the condemning authority.  If this Lease is not so terminated upon any such taking or sale, the Base Rental and Tenant’s Share of Operating Costs payable hereunder shall be diminished by an amount representing that portion of Base Rental and Tenant’s Share of Operating Costs applicable to the portion of the Premises subject to such taking or sale, and Landlord shall to the extent Landlord deems feasible, restore the Building and the Premises to substantially their former condition, except that Landlord shall not be required to rebuild, repair, or replace any Alterations to the Premises made by Tenant following the Commencement Date which were not approved by Landlord in writing, nor shall Landlord in any event be required to spend for such work an amount in excess of the amount received by Landlord as compensation for such taking.  All amounts awarded upon a taking of any part or all of the Property, Building or the Premises shall belong to Landlord, and Tenant shall not be entitled to and expressly waives all claims to any such compensation, except that Tenant may make a separate claim upon the condemning authority for expenses related to relocation and the unamortized cost of leasehold improvements paid for by Tenant.

 

26.          DAMAGES FROM CERTAIN CAUSES .  NOTWITHSTANDING ANYTHING CONTAINED IN THIS LEASE TO THE CONTRARY, AND SUBJECT TO THE TERMS OF SECTION 9 AND SECTION 23 , NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE LIABLE FOR DAMAGES TO TENANT OR ANY PARTY CLAIMING THROUGH TENANT FOR ANY INJURY TO OR DEATH OF ANY PERSON OR DAMAGE TO PROPERTY OR FOR INTERRUPTION OR DAMAGE TO BUSINESS RESULTING FROM ANY OF THE FOLLOWING REASONS:  (a) ANY ACT, OMISSION OR NEGLIGENCE OF TENANT OR TENANT’S EMPLOYEES, AGENTS, CONTRACTORS, OFFICERS, SUBTENANTS, ASSIGNEES, LICENSEES, INVITEES OR CUSTOMERS; (b) ANY ACT, OMISSION OR NEGLIGENCE OF ANY OTHER TENANT WITHIN THE BUILDING, OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS, CONTRACTORS, TENANTS, ASSIGNEES, LICENSEES, INVITEES OR CUSTOMERS; (c) THE REPAIR, ALTERATION, MAINTENANCE, DAMAGE OR DESTRUCTION OF THE PREMISES OR ANY OTHER PORTION OF THE BUILDING (INCLUDING THE CONSTRUCTION OF LEASEHOLD IMPROVEMENTS FOR OTHER TENANTS OF THE BUILDING), EXCEPT TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD RELATED PARTY; (d) VANDALISM, THEFT, BURGLARY AND OTHER CRIMINAL ACTS (OTHER THAN THOSE COMMITTED BY LANDLORD’S EMPLOYEES); (e) ANY DEFECT IN OR FAILURE OF EQUIPMENT, PIPES, WIRING, HEATING OR AIR CONDITIONING EQUIPMENT, STAIRS, ELEVATORS, OR SIDEWALKS, THE BURSTING OF ANY PIPES OR THE LEAKING, ESCAPING OR FLOWING OF GAS, WATER, STEAM, ELECTRICITY, OR OIL, BROKEN GLASS, OR THE BACKING UP OF ANY DRAINS, EXCEPT TO THE EXTENT CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD RELATED PARTY; (f) INJURY DONE OR OCCASIONED BY WIND, SNOW, RAIN OR ICE, FIRE, ACT OF GOD, PUBLIC ENEMY, INJUNCTION, RIOT, STRIKE, INSURRECTION, WAR, COURT ORDER, REQUISITION, ORDER OF ANY GOVERNMENTAL BODY OR AUTHORITY, OR (g) ANY OTHER CAUSE BEYOND THE REASONABLE CONTROL OF LANDLORD.  UNDER NO CIRCUMSTANCES SHALL LANDLORD BE LIABLE FOR DAMAGES RELATED TO BUSINESS INTERRUPTION OR LOSS OF PROFITS.  THE PROVISIONS OF THIS SECTION 26 SHALL NOT LIMIT THE OBLIGATIONS OF LANDLORD OR THE RIGHTS OF TENANT UNDER THIS LEASE NOT INVOLVING A CLAIM FOR DAMAGES.

 

27.          Default by Tenant .

 

(a)           The following events shall be deemed to be events of default by Tenant under this Lease (hereinafter called an “ Event of Default ”):

 

(1)           Tenant shall fail to timely pay any Rent and such failure shall continue for a period of ten (10) days after written notice of such default shall have been given to Tenant; provided, however, Landlord shall not be obligated to give Tenant written notice of its failure to pay Rent more than two times in any 12-month period and after the second notice, an Event of Default shall occur automatically upon Tenant’s failure to timely pay any Rent within such 12-month period without the requirement of any further notice from Landlord;

 

(2)           Tenant shall fail to comply with any terms, provisions or covenants of this Lease or any other agreement between Landlord and Tenant not requiring the payment of Rent, all of which terms, provisions and covenants shall be deemed material, and such failure shall continue for a period of thirty (30) days

 

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after written notice of such failure is delivered to Tenant or, if such failure cannot reasonably be cured within such thirty (30) day period, Tenant shall fail to commence to cure such failure within such thirty (30) day period and/or shall thereafter fail to prosecute such cure diligently and continuously to completion within sixty (60) days of the date of Landlord’s notice of default;

 

(3)           Tenant or any guarantor takes any action to, or notifies Landlord that Tenant or any guarantor intends to, file a petition under any section or chapter of the United States Bankruptcy Code, as amended from time to time, or under any similar Law of the United States or any state thereof; or a petition shall be filed against Tenant  or any guarantor under any such statute and shall not be dismissed within sixty (60) days thereafter;

 

(4)           a receiver or trustee shall be appointed for Tenant’s leasehold interest in the Premises or for all or a substantial part of the assets of Tenant or any guarantor; or

 

(5)           Tenant abandons all, or substantially all, of the Premises, without providing Landlord with (a) thirty (30) days prior written notice of its intent to vacate, (b) an affirmative statement that this Lease is in full force and effect and that there are no uncured events of default by Landlord or Tenant, (c) an affirmative statement that Tenant intends to comply with all of the terms and conditions of the Lease including, without limitation, the payment of Rent, (d) current financial statements and (e) a forwarding address and telephone number.

 

(b)           Upon the occurrence of any Event of Default, Landlord may, at its option and without further notice to Tenant and without judicial process, in addition to all other remedies given hereunder or by Law or equity, do any one or more of the following:  (1) terminate this Lease, in which event Tenant shall immediately surrender possession of the Premises to Landlord; (2) enter upon and take possession of the Premises and expel or remove Tenant therefrom, with or without having terminated this Lease; (3) apply all or any part of the Security Deposit to cure such Event of Default; (4) change or re-key all locks to entrances to the Premises, and Landlord shall have no obligation to give Tenant a new key to the Premises until such Event of Default is cured; and (5) remove from the Premises any furniture, fixtures, equipment or other personal property of Tenant, without liability for trespass or conversion, and store such items either in the Complex or elsewhere at the sole cost of Tenant and without liability to Tenant.  Any of such furniture, fixtures, equipment or personal property not claimed within thirty (30) days from the date of removal shall be deemed abandoned.

 

(c)           Exercise by Landlord of any one or more remedies hereunder shall not constitute forfeiture or an acceptance of surrender of the Premises by Tenant, it being understood that such surrender can be effected only by the written agreement of Landlord and Tenant.

 

(d)           If Landlord terminates this Lease by reason of an Event of Default, Tenant shall pay to Landlord the sum of (1) the cost of recovering the Premises, (2) the cost of repairing any damage to the Premises, (3) any amounts owed by Tenant under this Lease that have accrued but not been paid, (4) any other damages or relief which Landlord may be entitled to for any Event of Default other than the non-payment of rent at law or in equity, and (5) the Rent payable over what would have been the remainder of the Term absent such Lease termination less fair market value of the Premises over such remainder of the Term, as discounted by present value at one percent (1%) per annum.  In no event shall Landlord have any obligation to refund to Tenant any of the Base Rental prepaid on this Lease, irrespective of whether Landlord relets all or any portion of the Premises following an Event of Default.

 

(e)           If Tenant should fail to make any payment, perform any obligation, or cure any default hereunder within the notice and cure period set forth in Section 27(a), Landlord, without obligation to do so and without thereby waiving such failure or default, may make such payment, perform such obligation, and/or remedy such other default for the account of Tenant (and enter the Premises for such purpose), and Tenant shall, within ten (10) days following written demand, pay all costs, expenses and disbursements (including attorneys’ fees) incurred by Landlord in taking such remedial action, plus, at the option of Landlord, interest thereon at the Default Rate.

 

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(f)            If an Event of Default occurs, Landlord shall use reasonable efforts to mitigate its damages. Landlord’s duty to mitigate damages as a result of an Event of Default will be satisfied in full if Landlord undertakes to lease the Premises to another tenant (a “ Substitute Tenant ”) in accordance with the following criteria: (a) Landlord will have no obligation to solicit or entertain negotiations with any other prospective tenants for the Premises until Landlord obtains full and complete possession of the Premises including, without limitation, the final and unappealable legal right to relet the Premises free of any claim of Tenant; (b) Landlord will not be obligated to lease or show the Premises on a priority basis, or offer the Premises to a prospective tenant when other space in the Building suitable for the prospective tenant’s use is (or soon will be) available; (c) Landlord will not be obligated to lease the Premises to a Substitute Tenant for a Base Rental less than the current fair market Base Rental then prevailing for similar uses in comparable buildings in the same market area as the Building, nor will Landlord be obligated to enter into a new lease under other terms and conditions that are unacceptable to Landlord under Landlord’s then current leasing policies for comparable space in the Building; (d) Landlord will not be obligated to enter into a lease with a Substitute Tenant whose use would (i) violate any restriction, covenant, or requirement contained in the lease of another tenant of the Building; (ii) adversely affect the reputation of the Building; or (iii) be incompatible with other uses of the Building; (e) Landlord will not be obligated to enter into a lease with any proposed Substitute Tenant that does not have, in Landlord’s reasonable opinion, sufficient financial resources to operate the Premises in a first class manner; and (f) Landlord will not be required to expend any amount of money to alter, remodel, or otherwise make the Premises suitable for use by a proposed Substitute Tenant unless: (i) Tenant pays any such sum to Landlord in advance of Landlord’s execution of a lease with the proposed Substitute Tenant (which payment will not be in lieu of any damages or other sums to which Landlord may be entitled as a result of Tenant’s default under this Lease); or (ii) Landlord, in Landlord’s reasonable discretion, determines that any such expenditure is financially justified in connection with entering into a lease with the prospective Substitute Tenant.  Tenant hereby waives any right to assert, claim or allege that Landlord has not fulfilled its duty to mitigate damages as a result of an Event of Default if Landlord’s efforts to mitigate are in compliance with the provisions of this Section 27 .

 

(g)           Tenant will reimburse and compensate Landlord on demand and as Additional Rent for any actual loss Landlord incurs in connection with, resulting from or related to any breach or default of Tenant under this Lease, regardless of whether the breach or default constitutes an Event of Default, and regardless of whether suit is commenced or judgment is entered.  Such loss includes all reasonable legal fees, costs and expenses (including paralegal fees, expert fees, and other professional fees and expenses) Landlord incurs investigating, negotiating, settling or enforcing any of Landlord’s rights or remedies or otherwise protecting Landlord’s interests under this Lease.  In addition to the foregoing, Landlord is entitled to reimbursement of all of Landlord’s reasonable fees, expenses and damages, including, but not limited to, reasonable attorneys’ fees and paralegal and other professional fees and expenses, Landlord incurs in connection with any bankruptcy or insolvency proceeding involving Tenant including, without limitation, any proceeding under any chapter of the Bankruptcy Code; by exercising and advocating rights under Section 365 of the Bankruptcy Code; by proposing a plan of reorganization and objecting to competing plans; and by filing motions for relief from stay.  Such fees and expenses are payable on demand, or, in any event, upon assumption or rejection of this Lease in bankruptcy.

 

(h)           Tenant waives and releases all Claims, Tenant may have resulting from Landlord’s re-entry and taking possession of the Premises pursuant to this Section 27 by any lawful means and removing, storing or disposing of Tenant’s property as permitted under this Lease, regardless of whether this Lease is terminated and, to the fullest extent allowable under the Laws, Tenant releases and will indemnify, protect, defend (with counsel reasonably acceptable to Landlord) and hold harmless Landlord and the Landlord Related Parties from and against any and all Claims arising therefrom.  No such re-entry is to be considered or construed as a forcible entry by Landlord.  THIS INDEMNITY PROVISION IS INTENDED TO INDEMNIFY LANDLORD, LANDLORD RELATED PARTIES AND THEIR RESPECTIVE AGENTS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE OR FAULT WHEN LANDLORD OR ITS AGENTS ARE JOINTLY, COMPARATIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT (BUT NOT WHEN THE NEGLIGENCE OR FAULT OF LANDLORD, LANDLORD RELATED PARTIES  OR THEIR AGENTS IS THE SOLE BASIS OF THE CLAIM).  No such re-entry is to be considered or construed as a forcible entry by Landlord.

 

28.          Default by Landlord .  Landlord shall be in default under this Lease if Landlord fails to perform any of its obligations hereunder and such failure continues for a period of thirty (30) days after Tenant delivers written notice of such failure to Landlord and to the holder(s) of any indebtedness or other obligations secured by

 

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any mortgage or deed of trust affecting the Premises, the name and address of which have been provided to Tenant in writing, provided that if such failure cannot reasonably be cured within such thirty (30) day period, Landlord shall not be in default hereunder as long as Landlord or such holder(s) commences the remedying of such failure within such thirty-day period and diligently prosecutes the same to completion, during which time Landlord and such holder(s), or either of them, or their agents or employees, shall be entitled to enter upon the Premises and do whatever may be necessary to remedy such failure.  Notwithstanding any provision of this Lease to the contrary, in no event shall Landlord or Tenant be liable to the other for consequential, special or punitive damages under this Lease, except in the case of a hold over by Tenant under Section 31 below.

 

29.          Quiet Enjoyment .  Tenant, on paying all sums herein called for and performing and observing all of its covenants and agreements hereunder, shall and may peaceably and quietly occupy and use the Premises during the Lease Term, subject to the provisions of this Lease, all matters of record affecting the Complex and applicable Laws; and Landlord agrees to warrant and forever defend Tenant’s right to such occupancy against the claims of any and all persons whomsoever lawfully claiming the same or any part thereof, subject only to the provisions of this Lease, all matters of record affecting the Complex and all applicable Laws.

 

30.          Right to Relocate .  Notwithstanding anything contained herein to the contrary, Landlord reserves the right from time to time, at Landlord’s sole cost and expense, and after first giving Tenant at least sixty (60) days advance written notice (“ Landlord’s Relocation Notice ”), to remove Tenant from the Premises and relocate Tenant to some other “like kind” space in the Building (the “ New Premises ”) of approximately the same dimensions and size as the Premises, with substantially similar views, and not immediately facing the train.  Landlord shall incur all costs for Tenant’s relocation from the Premises to the New Premises, including, but not limited to, all design and engineering fees, “hard” construction costs (which shall mean and be limited to the costs of labor and materials), costs for moving any audio visual and security systems, cost for moving any telephone/data cabling, costs for moving any furniture, fixtures and equipment, and moving costs.  The New Premises shall be finished out and decorated by Landlord at Landlord’s sole cost and expense so that the New Premises shall be comparable in its interior design and decoration to the Premises.  If Landlord exercises such relocation option, the Effective Date of such relocation (the “ Relocation Effective Date ”) shall be the later of (i) sixty (60) days following the delivery of Landlord’s Relocation Notice, and (ii) the date on which Landlord substantially completes the tenant finish work required of Landlord under this Section 30.  Upon the Relocation Effective Date, Tenant shall surrender possession of the Premises and move into the New Premises.  In the event of any such relocation, this Lease shall continue in full force and effect with no change in the terms, covenants or conditions hereof other than the substitution of the New Premises for the Premises.

 

31.          Holding Over .  Should Tenant continue to occupy the Premises after the expiration of the Lease Term without the prior written consent of Landlord, such occupancy shall be a tenancy at sufferance under all of the terms, covenants and conditions of this Lease, but at a daily Base Rental equal to the sum determined by dividing one hundred and fifty percent (150%) of the Base Rental, plus any sums due pursuant to Section 6 , for the final month of the Lease Term by thirty (30).  Tenant shall also pay any and all costs, expenses or damages (including consequential damages, if the holdover exceeds thirty (30) days, and direct damages) sustained by Landlord as a result of such holdover.  If Tenant consists of more than one person or entity, and if any of the persons or entities comprising Tenant continue to occupy the Premises after the expiration of the Lease Term, all other persons or entities comprising Tenant shall be deemed to have consented to such occupancy and shall continue to be jointly and severally liable for all of the terms, covenants and conditions contained in this Lease during the holdover term.

 

32.          Rights Reserved to Landlord .  Landlord reserves the right at any time:

 

(a)           To change the name of the Building upon thirty (30) days advance written notice.

 

(b)           To decorate and to make inspections, repairs, alterations, additions, changes, or improvements, whether structural or otherwise, in and about the Building, or any part thereof; for such purposes, to enter upon the Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Building; to interrupt or temporarily suspend Building services and facilities; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Building; provided, however, Landlord shall use reasonable efforts to

 

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minimize interference with Tenant’s operations in the Premises when performing such work in or about the Premises.

 

(c)           To take such reasonable measures as Landlord deems advisable for the security of the Building and its occupants; evacuating the Building for cause, suspected cause, or for drill purposes; temporarily denying access to the Building; and closing the Building after Normal Business Hours and on Saturdays, Sundays, and holidays, subject, however, to Tenant’s right to enter when the Building is closed after Normal Business Hours under such reasonable regulations as Landlord may prescribe from time to time which may include by way of example, but not of limitation, that persons entering or leaving the Building, whether or not during Normal Business Hours, identify themselves to a security officer by registration or otherwise and that such persons establish their right to enter or leave the Building.

 

(d)           Upon at least twenty-four (24) hours’ notice to Tenant, to enter the Premises to show the Premises to prospective purchasers, lenders, or tenants; provided, however, Landlord shall use reasonable efforts to minimize any disruption to the conduct of Tenant’s business by reason of such entry.

 

33.          Subordination to Mortgage; Estoppel Agreement .

 

(a)           Subject to subsection (d) below, this Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (a “ Mortgage ”), or any ground lease, master lease, or primary lease (a “ Primary Lease ”), that hereafter covers all or any part of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as “ Landlord’s Mortgagee ”).

 

(b)           Tenant shall attorn to any party succeeding to Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, upon such party’s request, and shall execute such agreements confirming such attornment as such party may reasonably request within ten (10) Business Days after such request.

 

(c)           Tenant shall not seek to enforce any remedy it may have for any default on the part of the Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord’s Mortgagee whose address has been given to Tenant, and affording such Landlord’s Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.

 

(d)           Notwithstanding anything contained in this Section 33 to the contrary, the subordination of this Lease to any Mortgage or Primary Lease now existing or hereafter placed upon the Premises or the Building or any part thereof and Tenant’s agreement to attorn to Landlord Mortgagee as provided in this Section 33 is and shall be conditioned upon such holder’s entering into a commercially reasonable non-disturbance and attornment agreement providing that Tenant’s right to quiet possession of the Premises during the Lease Term shall not be disturbed if there is no Event of Default.

 

(e)           Tenant agrees that it will, from time to time, within ten (10) Business Days after written request by Landlord, execute and deliver to such persons as Landlord shall designate, an estoppel agreement in recordable form certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as so modified), stating the dates to which Rent and other charges payable under this Lease have been paid, stating that the Landlord is not in default hereunder (or if Tenant alleges a default, stating the nature of such alleged default) and further stating such other matters as Landlord shall reasonably require.

 

34.          Intentionally Omitted .

 

35.          Attorney’s Fees .  Tenant must pay to Landlord on demand all reasonable attorney’s fees, costs and expenses incurred by Landlord in recovery of any Rent or enforcement of Landlord’s rights under this Lease.  Furthermore, if Landlord or Tenant employs an attorney to assert or defend any action arising out of the breach of any term, covenant or provision of this Lease, or to bring legal action for the unlawful detainer of the Premises, the prevailing party shall be entitled to recover from the non-prevailing party reasonable attorney’s fees and costs of suit

 

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incurred in connection therewith.  For purposes of this Section 35 , a party shall be considered to be the “prevailing party” to the extent that (a) such party initiated the litigation and substantially obtained the relief which it sought (whether by judgment, voluntary agreement or action of the other party, trial, or alternative dispute resolution process), (b) such party did not initiate the litigation and either (1) received a judgment in its favor, or (2) did not receive judgment in its favor, but the party receiving the judgment did not substantially obtain the relief which it sought, or (c) the other party to the litigation withdrew its claim or action without having substantially received the relief which it was seeking.  In the interest of obtaining a speedier and less costly hearing of any dispute, the parties hereby each irrevocably waive the right to trial by jury in any action or proceeding under or arising out of or related to this Lease or the Premises.

 

36.          No Implied Waiver .  The failure of either party to insist at any time upon the strict performance of any covenant or agreement in this Lease or to exercise any right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future.  The acceptance by Landlord of late payments shall not be construed as a waiver by Landlord of the requirement for timely payment nor create a course of dealing permitting such late payments.  Any payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Rent due under this Lease shall be deemed to be on account of the earliest Rent due hereunder.  No endorsement or statement on any check or any letter accompanying any check or payment as Rent shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this Lease.

 

37.          Independent Obligations .  The obligation of Tenant to pay Rent hereunder and the obligation of Tenant to perform Tenant’s other covenants and duties hereunder constitute independent, unconditional obligations to be performed at all times provided for hereunder and are independent of the Landlord’s performance of Landlord’s duties and obligations hereunder.  Except as expressly provided in this Lease, Tenant waives and relinquishes all rights which Tenant might have to claim any nature of lien against or withhold, abate or deduct from, or offset against Rent.

 

38.          Recourse Limitation .  Tenant shall be entitled to look solely to Landlord’s equity in the Complex for the recovery of any judgment against Landlord, and Landlord shall not be personally liable for any deficiency with respect to the recovery of such judgment.  The provision contained in the foregoing sentence shall not limit any right that Tenant might otherwise have to obtain specific performance of Landlord’s obligations under this Lease.

 

39.          Notices .  Any notice under this Lease must be in writing, and shall be given or be served by (a) personal delivery to the person identified on the signature page of this Lease as the person to receive notices, so long as a copy of the personally delivered notice is deposited in the United States mail, return receipt requested, or recognized overnight courier within three (3) days thereafter, (b) delivery via a recognized overnight courier, or (c) depositing the same in the United States mail, postage prepaid, certified mail, return receipt requested,  and addressed to the person identified herein as the person to receive such notices at the Tenant’s Notice Address or the Landlord’s Notice Address, as the case may be, as stated in this Lease or such other address in the continental United States of which notice has been given to the other party in the manner provided herein.  Notice by personal delivery or overnight courier shall be effective upon receipt, and notice by mail shall be effective upon deposit in the United States mail in the manner above described.

 

40.          Severability .  If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by Law.

 

41.          Recordation .  Tenant agrees not to record this Lease or any memorandum hereof.

 

42.          Governing Law .  This Lease and the rights and obligations of the parties hereto shall be interpreted, construed, and enforced in accordance with the Laws of the State.  This Lease is performable in, and the exclusive venue for any action brought with respect hereto, shall be in Cook County, Illinois.

 

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43.          Force Majeure .  Whenever a period of time is herein prescribed for the taking of any action by Landlord or Tenant, the party responsible for taking such action shall not be liable or responsible for, and there shall be excluded from the computation of such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental Laws, regulations or restrictions, or any other cause whatsoever beyond the control of the party responsible for taking such action; provided, however, the provisions of this Section 43 shall never be construed as allowing an extension of time with respect to Tenant’s obligation to pay Rent when and as due under this Lease.

 

44.          Time of Performance .  Except as otherwise expressly provided herein, time is of the essence under this Lease, including all Exhibits.

 

45.          Transfers by Landlord .  Landlord shall have the right to transfer and assign, in whole or in part, all of its rights and obligations hereunder and in the Complex, and in such event and upon the assumption by the transferee of the obligations of Landlord hereunder, Landlord shall be released from any further obligations accruing after the date of transfer, and Tenant agrees to look solely to such successor-in-interest of Landlord for the performance of such obligations.

 

46.          Commissions .  Landlord and Tenant agree that the two parties identified as Broker in the Basic Lease Terms above, are the only brokers involved in the procurement, negotiation or execution of this Lease, and that their respective commissions shall be paid by Landlord pursuant to a separate commission agreement.  Landlord and Tenant hereby agree to defend, indemnify and hold each other harmless against any loss, claim, expense or liability with respect to any commissions or brokerage fees claimed on account of the execution and/or renewal of this Lease or the expansion of the Premises due to any action of the indemnifying party.

 

47.          Financial Statements .  Tenant represents and warrants that as of the date hereof any financial statements provided by it to Landlord were true, correct and complete when provided, and that no material adverse change has occurred since that date that would render them inaccurate or misleading.  Subject to restrictions on disclosure under applicable law, Tenant, within 15 days after request, shall provide Landlord with current audited or certified financial statements and such other information with respect to Tenant and any guarantor hereunder as Landlord may reasonably request  in order to create a “business profile” of Tenant and determine Tenant’s ability to fulfill its obligations under this Lease.  Landlord, however, shall not require Tenant to provide such information unless (i) Landlord is requested to produce such information in connection with a proposed financing or sale of the Building, and (ii) such lender or perspective purchaser has agreed to keep such information confidential except to the extent required by application law.  Landlord agrees to keep such information confidential except to the extent required by applicable Law.  In addition, Tenant agrees upon prior written request to meet with Landlord, any lender or prospective purchaser during Normal Business Hours at mutually convenient times, from time to time, to discuss such information about Tenant’s business and financial condition requested by Landlord.

 

48.          Tenant’s Standing and Authority .  Tenant is a corporation duly organized, validly existing and in good standing under the Laws of Delaware and has due authority to enter into this Lease, and all organizational action requisite for the execution and delivery of this Lease has been taken.  The signatory to this Lease on behalf of Tenant has been duly authorized to execute and deliver this Lease.  Tenant shall contemporaneously with its execution and delivery of this Lease deliver to Landlord evidence of Tenant’s good standing, authority and authorization for the execution and delivery of this Lease.

 

49.          Effect of Delivery of This Lease .  Landlord has delivered a copy of this Lease to Tenant for Tenant’s review only, and the delivery hereof does not constitute an offer to Tenant or an option to be exercised by Tenant.  This Lease shall not be effective until a copy of this Lease executed by both Landlord and Tenant is delivered by Landlord to Tenant.

 

50.          WAIVER OF WARRANTIES AND ACCEPTANCE OF CONDITION .  TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE, TENANT HAS AGREED TO ACCEPT THE PREMISES IN “AS IS” CONDITION, AND NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY HAS MADE ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE HABITABILITY, MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE WITH REGARD

 

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TO THE PREMISES OR THE COMPLEX AND THAT THIS LEASE CONSTITUTES THE FULL AND FINAL AGREEMENT OF LANDLORD AND TENANT WITH RESPECT TO THIS LEASE OF SPACE IN THE BUILDING BY TENANT.  TENANT HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY CLAIM OR CAUSE OF ACTION BASED UPON ANY WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO HABITABILITY, MERCHANTABILITY, SUITABILITY, QUALITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE WITH REGARD TO THE PREMISES OR THE COMPLEX.  TENANT FURTHER REPRESENTS AND WARRANTS TO LANDLORD THAT TENANT HAS HAD AN OPPORTUNITY TO MEASURE THE ACTUAL DIMENSIONS OF THE PREMISES AND THE BUILDING AND AGREES TO THE SQUARE FOOTAGE CALCULATIONS SET FORTH IN DEFINITIONS OF THE “PREMISES”, “RENTABLE AREA OF THE BUILDING” AND “RENTABLE AREA OF THE PREMISES” FOR ALL PURPOSES. TENANT’S TAKING POSSESSION OF THE PREMISES SHALL BE CONCLUSIVE EVIDENCE THAT (a) TENANT HAS INSPECTED (OR HAS CAUSED TO BE INSPECTED) THE PREMISES AND THE COMPLEX, (b) TENANT ACCEPTS THE PREMISES AND THE COMPLEX AS BEING IN GOOD AND SATISFACTORY CONDITION AND SUITABLE FOR TENANT’S PURPOSES, AND (c) THE PREMISES AND THE COMPLEX FULLY COMPLY WITH LANDLORD’S COVENANTS AND OBLIGATIONS HEREUNDER.

 

51.          Merger of Estates .  The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not constitute a merger of the Landlord’s fee estate in the Property and the leasehold interest created hereby; and upon such surrender or cancellation of this Lease, Landlord shall have the option, in Landlord’s sole discretion, to (a) either terminate all or any existing subleases or subtenancies, or (b) assume Tenant’s interest in any or all subleases or subtenancies.

 

52.          Survival of Indemnities and Covenants .  Any and all indemnities of Landlord or Tenant and any and all covenants of Landlord or Tenant not fully performed on the date of the expiration or termination of this Lease shall survive such expiration or termination.

 

53.          Headings .  Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Lease.

 

54.          Entire Agreement; Amendments .  This Lease, including the exhibits and addenda, if any, listed in Section 55, embodies the entire agreement between the parties hereto with relation to the transaction contemplated hereby, and there have been and are no covenants, agreements, representations, warranties or restrictions between the parties hereto, other than those specifically set forth herein.  To be effective, any amendment or modification of this Lease must be in writing and signed by Landlord and Tenant.

 

55.          Exhibits .  The following exhibits are attached hereto and incorporated herein and made a part of this Lease for all purposes:

 

Exhibit “A-1”

-

Legal Description of Property

Exhibit “A-2”

-

Legal Description of Retail Parcel

Exhibit “A-3”

-

Excluded Retail Parcel

Exhibit “B”

-

Floor Plan

Exhibit “C”

-

Rules and Regulations

Exhibit “D”

-

Tenant Improvements Agreement [Tenant Performs TI]

Exhibit “E”

-

Parking

Exhibit “F”

-

Confidentiality Agreement

Exhibit “G”

-

Renewal Option

Exhibit “H”

-

Right of First Refusal

Exhibit “I”

-

Intentionally Omitted

Exhibit “J”

 

Intentionally Omitted

Exhibit “K”

-

Existing Expansion and ROFRs Encumbering the Premises

Exhibit “L”

-

Intentionally Omitted

Exhibit “M”

-

Letter of Credit Terms and Conditions

Exhibit “N”

-

Laboratory Use Rider

 

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56.          Joint and Several Liability .  If Tenant consists of more than one person or entity, the obligations of such parties under this Lease shall be joint and several.

 

57.          Multiple Counterparts .  This Lease may be executed in multiple counterparts, each of which shall constitute an original instrument, but all of which shall constitute one and the same agreement.

 

58.          Mail .  Tenant understands and agrees that mail delivery in the Building shall be to the Premises by the mail carrier.

 

59.          Roof Rights . During the Lease Term, Tenant shall have the right to maintain its microwave antenna and related equipment on the roof of the Building that are existing and in place as of the date of this Lease (the “ Existing Antenna ”).  Any changes to, modifications to, or replacements of the Existing Antenna (the “ Antenna Changes ”) shall be subject to the prior written consent of Landlord, such consent to be given or withheld in Landlord’s sole discretion.  Tenant’s shall comply with the following terms and conditions with respect to the Existing Antenna and any Antenna Changes (collectively, the “ Equipment ”): (a) the Equipment shall be in conformity with all applicable zoning and other laws, (b) with respect to the Antenna Changes, Landlord must first approve the size of, location of, and specifications for the Antenna Changes, and (c) the location, installation and maintenance of the Equipment shall (i) be subject to and completed in accordance with the terms and conditions of Section 15 of this Lease and with any and all applicable governmental laws, codes, rules, regulations and ordinances in effect from time to time; (ii) be located on that part of the roof as Landlord may from time to time designate away from the perimeter of the roof so as not to be visible from the street level (except that Landlord may after the initial installation of any portion of such Equipment from time to time cause Tenant to relocate such Equipment to another portion of the roof, at Landlord’s sole cost and expense); and (iii) in no manner interfere with the use of any other communications equipment installed on the roof prior to the time Tenant installs the Equipment.  Tenant shall not be obligated to pay any additional rent for such use of the roof.  During the Lease Term, Tenant warrants that it will, at its sole cost and expense, maintain in force and effect, in addition to any other insurance requirements of this Lease, insurance (such insurance to provide coverage for both Landlord and Tenant, as named insureds) with coverage limits of not less than One Hundred Thousand and 00/100 Dollars ($100,000.00) for roof damage claims.  Tenant shall furnish Landlord with a copy of such insurance policy or a certificate thereof upon Tenant’s execution of this Lease.  Tenant shall indemnify, defend and hold Landlord harmless from and against any claims, damages, costs, expenses or liabilities arising in connection with Tenant’s installation, maintenance (or failure to maintain), removal or use of the Equipment or with Tenant’s activities on or having access to the roof of the Building, except to the extent caused by Landlord’s gross negligence or willful misconduct.  Landlord reserves the right to grant to other tenants and licensees similar rights on or around the Building roof which do not unreasonably interfere with Tenant’s rights hereunder.  Tenant, at its sole cost and expense, will keep the Equipment and surrounding area in good order and repair and free from any hazard to person or property.  Upon termination of this Lease, Tenant, at its sole cost and expense, shall remove the Equipment and shall restore the roof of the Building to its condition existing prior to the installation of the Equipment, ordinary wear and tear excepted.  Tenant shall further repair, at its sole cost and expense, any damage or destruction caused by the removal of the Equipment.  All work performed by or on behalf of Tenant on the rooftop shall be done under the supervision of a representative of Landlord at such time and in such a manner that is satisfactory to Landlord and in such a  manner so as to not void any roof warranty or guaranty.

 

60.          OFAC and Anti-Money Laundering Compliance Certifications .  Tenant hereby represents, certifies and warrants to Landlord as follows:  (i)  Tenant is not named and is not acting, directly or indirectly, for or on behalf of any person, group, entity or nation named by an Executive Order, including without limitation Executive Order 13224, or the United State Treasury Department as a terrorist, “Specially Designated National and Blocked Person,” or other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule or regulation that is enacted, enforced or administered by the Office of Foreign Assets Control (“ OFAC ”); (ii) Tenant is not engaged in this transaction, directly or indirectly, for or on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation; and (iii) none of the proceeds used to pay rent have been or will be derived from a “specified unlawful activity” as defined in, and Tenant is not otherwise in violation of, the Money Laundering Control Act of 1986, as amended, or any other applicable Laws regarding money laundering activities.  Furthermore, Tenant agrees to immediately notify Landlord if Tenant was, is, or in the future becomes, a “senior foreign political figure,” and immediate family member or close associate of a senior foreign political figure,” within the meaning of Section 312 of the USA PATRIOT Act of 2001.

 

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Notwithstanding anything in this Lease to the contrary, Tenant understands that this Lease is a continuing transaction and that the foregoing representations, certifications and warranties are ongoing and shall be and remain true and in force on the date hereof and throughout the term of the Lease and that any breach thereof shall be a default under the Lease (not subject to any notice or cure rights) giving rise to Landlord remedies including but not limited to eviction, and Tenant hereby agrees to defend, indemnify and hold harmless Landlord and Landlord Related Parties from and against any and all claims, damages, losses, risks, liabilities, fines, penalties, forfeitures and expenses (including without limitation costs and attorney’s fees) arising from or related to any breach of the foregoing representations, certifications and warranties.

 

61.          Landlord Cancellation Option .  If Tenant vacates or abandons the Premises for a period of sixty (60) days, such vacation or abandonment shall not ipso facto constitute a default by Tenant under this Lease, but in such event Landlord shall have the option to cancel this Lease and recapture the Premises, without payment of any cancellation fee or penalty by or to Landlord or Tenant, by written notice to Tenant at any time following such vacation or abandonment.  In such event, Tenant shall surrender possession of the Premises on the date set forth in Landlord’s notice as the effective date of cancellation and thereafter neither party shall have any rights or obligations under this Lease, except the terms and conditions which expressly survive the termination of this Lease.

 

62.          Representations .  Landlord represents to Tenant that as of the date of this Lease, Landlord has received no written notice from any governmental authority that the Building is in violation of any Laws that remain uncured and, to Landlord’s knowledge, the Building is not in violation of any Laws that remain uncured.  Each party represents to the other that it has the full power and authority to enter into this Lease and that it has obtained any necessary consents and taken all actions necessary in connection therewith.

 

LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL PURPOSE, AND TENANT’S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.

 

[SIGNATURE PAGE TO FOLLOW]

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date first above written.

 

Landlord’s Notice Address :

LANDLORD :

 

 

Franklin Street Properties

401 Edgewater Place

FSP 909 DAVIS STREET LLC, a Delaware limited liability company

Suite 201

 

Wakefield, Massachusetts 01880-6210

By:

FSP Property Management LLC, its asset manager

Attn: Scott Carter, Esq.

 

 

 

 

 

and

 

By:

/s/ William S. Friend, Jr.

 

 

Name:

William S. Friend, Jr.

Franklin Street Properties

 

Title:

Executive Vice President — Regional Director

401 Edgewater Place

 

Suite 201

 

Wakefield, Massachusetts 01880-6210

 

Attn: Asset Management

 

 

 

With a copy to:

 

 

 

Dykema Gossett PLLC

 

10 South Wacker Drive, Suite 2300

 

Chicago, Illinois 60606

 

Attention: Robert C. Linton, Esq.

 

 

Tenant’s Notice Address ::

TENANT :

 

 

 

APTINYX INC., a Delaware corporation

909 Davis Street

 

Evanston, Illinois 60201

By:

/s/ Norbert G. Riedel

Attn: Patricia Adams, Vice President of Human Resources and Administration

Name:

Norbert G. Riedel, PhD

Title:

President and CEO

 

OFFICE LEASE AGREEMENT/Aptinyx, Inc. — Signature Page

 



 

EXHIBIT “A-1”

 

LEGAL DESCRIPTION OF THE PROPERTY

 

LOT 2 IN DAVIS CHURCH SECOND RESUBDIVISION, BEING A RESUBDIVISION OF LOT 1 IN DAVIS CHURCH RESUBDIVISION RECORDED OCTOBER 2, 2000 AS DOCUMENT NO. 00766688, IN THE SOUTHWEST QUARTER OF SECTION 18, TOWNSHIP 41 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF DAVIS CHURCH SECOND RESUBDIVISION RECORDED APRIL 12, 2000 AS DOCUMENT NO. 0020426116 IN COOK COUNTY, ILLINOIS.

 

Commonly known as 909 Davis Street, Evanston, Illinois

 

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EXHIBIT “A-2”

 

LEGAL DESCRIPTION OF THE RETAIL PARCEL

 

LOT 1 IN DAVIS CHURCH SECOND RESUBDIVISION, BEING A RESUBDIVISION OF LOT 1 IN DAVIS CHURCH RESUBDIVISION RECORDED OCTOBER 2, 2000 AS DOCUMENT NO. 00766688, IN THE SOUTHWEST QUARTER OF SECTION 18, TOWNSHIP 41 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT OF DAVIS CHURCH SECOND RESUBDIVISION RECORDED APRIL 12, 2002 AS DOCUMENT NO. 0020426116 IN COOK COUNTY, ILLINOIS.

 

Commonly known as 900-950 Church Street, Evanston, Illinois

 

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EXHIBIT “A-3”

 

EXCLUDED RETAIL PROPERTY

 

The cooling tower located at the Property which services the Retail Parcel (including, without limitation, fluid cooler (BAC-Model No. FL1843-L), Glycol Fill System and two (2) base mounted pumps) and any and all Facilities (as hereinafter defined), which (a) are located within, on, under, through or across any part of the Retail Parcel or the Property and (b) are used exclusively to provide services (including, without limitation, air conditioning, alarm, electric, internet, plumbing and drainage service) to any part of the Retail Parcel but not including any and all columns, beams or other structural supports penetrating or located in whole or in part the Retail Parcel.  As used in this Exhibit, “Facilities” shall mean any and all enunciators, antennae, boxes, brackets, cabinets, cables, coils, computers, conduits, controls, control centers, cooling towers, couplers, devices, ducts, equipment (including, without limitation, heating, ventilating, air conditioning and plumbing equipment), fans, fixtures, generators, hangers, heat traces, indicators, junctions, lines, machines, meters, motors, outlets, panels, pipes, pumps, radiators, risers, satellite dishes, microwave dishes, starters, switches, switchboards, systems, tanks, transformers, valves, wiring, black metal exhaust shafts and the like.

 

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EXHIBIT “B”

 

FLOOR PLAN

 

 

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EXHIBIT “C”

 

RULES AND REGULATIONS

 

Any capitalized terms not defined in this Exhibit “C” shall have the meaning set forth in the Lease to which this Exhibit “C” is attached.

 

(1)                                  Sidewalks, doorways, vestibules, halls, stairways, and similar areas shall not be obstructed, nor shall refuse, furniture, boxes or other items be placed therein by Tenant or Tenant’s officers, agents, servants, contractors and employees, or used for any purpose other than ingress and egress to and from the Premises, or for going from one part of the Building or Complex to another part of the Building or Complex.  Tenant shall be responsible, at its sole cost, for the removal of any large boxes or crates not used in the ordinary course of business.  Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways.

 

(2)                                  Canvassing, soliciting, distributing handbills, advertising and peddling in the Building and Complex are prohibited.

 

(3)                                  Plumbing fixtures and appliances shall be used only for the purpose for which such were constructed or installed, and no unsuitable material shall be placed therein.  The cost of repair of any stoppage or damage to any such fixtures or appliances from misuse on the part of Tenant or Tenant’s officers, agents, servants, contractors, employees, guests and customers shall be paid by Tenant, and Landlord shall not in any case be responsible therefor.

 

(4)                                  No signs, directories, posters, advertisements, or notices visible to the public shall be painted or affixed on or to any of the windows or doors, or in corridors or other parts of the Building, except in such color, size, and style, and in such places, as shall be first approved in writing by Landlord.  Landlord shall have the right to remove, at the expense of Tenant, all unapproved signs, directories, posters, advertisements or notices following reasonable prior notice to Tenant.

 

(5)                                  Tenant shall not do, or permit anything to be done, in or about the Building or Complex, or bring or keep anything therein, that will in any way increase the rate of fire or other insurance on the Building, or on property kept therein, or otherwise increase the possibility of fire or other casualty.  No cooking (other than cooking through the use of a microwave oven), including grills or barbecues, shall be permitted within the Premises or on any patio adjoining the Premises.

 

(6)                                  Landlord shall have the power to prescribe the weight and position of heavy equipment or objects which may overstress any portion of the floor of the Premises.  All damage done to the Building by the improper placing of such heavy items shall be repaired at the sole expense of Tenant.  Tenant shall notify the Building manager when safes or other heavy equipment are to be taken in or out of the Building and the moving of such equipment shall be done only after written permission is obtained from Landlord and shall be performed under such conditions as Landlord may reasonably require.

 

(7)                                  Corridor doors, when not in use, shall be kept closed.

 

(8)                                  All movement of furniture and equipment into and out of the Building shall be scheduled through the Building manager and conducted outside of Normal Business Hours unless prior approval from the Building manager is obtained.  All deliveries must be made via the service entrance and service elevator, when provided, during Normal Business Hours.  Any delivery after Normal Business Hours must be coordinated with the Building manager.  When conditions are such that Tenant must dispose of crates, boxes, and other such items, Tenant shall dispose of such items prior to or after Normal Business Hours.

 

(9)                                  Tenant shall cooperate with Landlord’s employees in keeping the Premises neat and clean.

 

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(10)                           Tenant shall not cause or permit any improper noises in the Building, or allow any unpleasant odors to emanate from the Premises, or otherwise interfere, injure or annoy in any way other tenants, or persons having business with such tenants.

 

(11)                           No animals or birds shall be brought into or kept in or about the Building, except those assisting the disabled.

 

(12)                           No machinery of any kind, other than ordinary office machines such as copiers, fax machines, personal computers and related mainframe equipment, electric typewriters and word processing equipment, shall be operated on the Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

 

(13)                           Tenant shall not use or keep in the Building any flammable or explosive fluid or substance (including Christmas trees and ornaments but excluding those fluids and substances in amounts commonly accepted as standard office products that are maintained in accordance with the manufacturers requirements)), or any illuminating materials, without the prior written approval of the Building manager.

 

(14)                           No bicycles, motorcycles or similar vehicles will be allowed in the Building, provided such bicycles, motorcycles or similar vehicles will be allowed in the Building’s underground parking garage, subject to (i) availability of space for such bicycles, motorcycles or similar vehicles, (ii) payment by Tenant to Landlord of any then applicable additional parking or bicycle fee, and (iii) compliance with Landlord’s rules and regulations with respect to such use.

 

(15)                           No nails, hooks, or screws (other than those necessary for hanging artwork, diplomas, posterboards and other such items on interior walls) shall be driven into or inserted in any part of the Building (including doors), except as approved by Landlord.

 

(16)                           Landlord has the right to evacuate the Building in the event of an emergency or catastrophe.  Tenant shall cause its officers, agents and employees to participate in any fire safety or emergency evacuation drills scheduled by Landlord.

 

(17)                           No food or beverages shall be prepared, cooked or distributed from the Premises without the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed; provided, however, Tenant shall be permitted to install refrigerators, microwave ovens, coffee machines and vending machines for the use of its own employees and guests.

 

(18)                           No additional or replacement locks shall be placed upon any doors without the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed.  All necessary keys shall be furnished by Landlord.  Upon termination of the Lease, Tenant shall return all such keys to Landlord and shall provide the Landlord the combination of all locks on doors or vaults.  No duplicates of  keys shall be made by Tenant.

 

(19)                           Tenant will not locate furnishings or cabinets adjacent to mechanical or electrical access panels or over air conditioning outlets so as to prevent Landlord’s personnel or contractors from servicing such units as routine or emergency service may require.  Tenant shall pay the cost of moving such furnishings for Landlord’s access.  Tenant shall instruct all of its employees to refrain from any attempts to adjust thermostats.  The lighting and air conditioning equipment of the Building shall be exclusively controlled by Landlord’s personnel.

 

(20)                           No portion of the Building shall be used for the purpose of lodging rooms.

 

(21)                           Tenant shall obtain Landlord’s prior written approval, which approval shall not be unreasonably withheld or delayed, for the installation of window shades, blinds, drapes or any other window treatment or object that may be visible from the exterior of the Building or affect the heating and cooling of the Building.  Landlord will control all internal lighting that may be visible from the exterior of the Building and shall have the right to change, at Tenant’s expense, any unapproved lighting following reasonable prior notice to Tenant.

 

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(22)                           No supplemental heating, air ventilation or air conditioning equipment, including space heaters and fans, shall be installed or used by Tenant without the prior written consent of Landlord.

 

(23)                           No smoking shall be permitted within the Premises or anywhere else within the Complex, other than those smoking areas designated by the Building manager.

 

(24)                           No unattended children shall be allowed within the Complex.

 

(25)                           Other than during Normal Business Hours, Building access shall be limited, with the result that access will require entry cards or keys and compliance with Landlord’s registration procedures.

 

(26)                           In no event shall Tenant bring onto the Complex or permit its invitees, employees, contractors or agents to bring onto the Complex firearms, weapons, explosives or any other article of intrinsically dangerous nature irrespective of whether the person has a permit to carry such firearm, weapon or be in possession of such explosive.

 

(27)                           Tenant shall comply with all rules, regulations and measures adopted by Landlord from time to time in connection with any green/LEED program(s) undertaken or maintained by Landlord from time to time including, without limitation, requirements to adopt proven energy and carbon reduction measures and participate in waste recycling and management programs.

 

(28)                           Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency and shall cooperate and participate in all reasonable security and safety programs affecting the Building.

 

(29)                           Access to the Building’s underground parking garage will be limited to those who have signed an indemnification form.  Violation of the rules and regulations on said form will be grounds for parking denial.

 

(30)                           All access to the Building’s roof, telecom closet, or other areas not normally accessible by tenant shall be coordinated with the management office with at least 24 hours’ notice (except in the case of an emergency as determined by Landlord).

 

(31)                           All vendors who will be performing work in the Building will be union vendors.

 

(32)                           All vendors working in the Building will have provided insurance to the Managing Agent’s office in such form and at such levels to meet the Building’s insurance requirements.

 

(33)                           After hours work must be scheduled through the Managing Agent at (847) 424-1987 with at least 24 hours’ notice.  Contractor’s name and location of work must be provided.  If necessary, the Building engineer will remain at the property to oversee the work, at tenant’s expense.

 

(34)                           Except with the prior approval of Landlord, all cleaning, repairing, janitorial, decoration, painting or other services and work in and about the Premises shall be done only by authorized Building personnel.  Landlord’s janitorial service shall remove all ordinary and customary trash and refuse from the receptacles in Tenant’s Premises on a nightly basis (other than on weekends or holidays).  At Tenant’s sole cost and expense Landlord or Landlord’s agents may remove excessive or non-customary trash or refuse from the Premises upon Tenant’s prior written request.

 

(35)                           No floor covering shall be affixed to any floor in the Premises by means of glue or other adhesive without Landlord’s prior written consent (which consent shall be deemed given as to any such matters included as part of the plans and specifications for Tenant’s Work or for subsequent alterations which are otherwise approved by Landlord).

 

(36)                           Landlord reserves the right to rescind any of these Rules and Regulations and make such other and further Rules and Regulations as in its judgment shall from time to time be necessary or advisable for the operation of the Building or the Complex or for the maintenance of any third party certification of the Building or Complex

 

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under any so-called green/LEED program(s) undertaken or maintained by Landlord, providing that such Rules and Regulations are in writing and uniformly enforced against all other tenants of the Building.  Such Rules and Regulations shall be binding upon Tenant upon delivery to Tenant of notice thereof in writing.

 

(37)                           In the event of any inconsistency between these Rules and Regulations and the terms of this Lease, the terms of the Lease shall control.

 

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EXHIBIT “D”

 

TENANT IMPROVEMENTS AGREEMENT

[Tenant Performs Tenant Improvements]

 

This Tenant Improvements Agreement (herein so called) describes and specifies the rights and obligations of Landlord and Tenant under the Lease to which this Exhibit “D” is attached, with respect to the design, construction and payment for the completion of the Tenant Improvements within the Premises.  Performance of the Work shall occur after the Effective Date [subject to Tenant’s compliance with the terms and conditions of the Existing Sublease (if then applicable), including, without limitation, Tenant’s receipt of approval from Tenant’s sublessor thereunder].

 

1.                                       Definitions .  Any capitalized terms not defined in this Tenant Improvements Agreement shall have the meaning set forth in the Lease.  Additionally, as used in this Tenant Improvements Agreement, the following terms (when delineated with initial capital letters) shall have the respective meaning indicated for each as follows:

 

Approved Costs ” means all costs reasonably incurred by Tenant in connection with the design, construction and installation of the Tenant Improvements, which shall include and be limited to “hard” construction costs (which shall mean and be limited to the costs of labor and materials), design and engineering fees, other consulting fees, audio visual and security systems costs, and telephone/data cabling costs.  Landlord may charge Tenant a construction management fee in an amount equal to one percent (1%) of the “hard” construction costs (which shall mean and be limited to the costs of labor and materials) of the Tenant Improvements, which amount may be included in the Approved Costs and may be deducted from the Improvement Allowance and retained by Landlord when Landlord disburses the Improvement Allowance.  Any moving costs and costs paid by Tenant to independent contractors and vendors for the purchase and installation of furniture, fixtures and equipment in the Premises shall not be included in Approved Costs.

 

Contractor ” means the union general contractor selected to perform the Work.

 

Plans and Specifications ” means the detailed construction documents for the Tenant Improvements referred to in paragraph 3 below.

 

Space Plan ” means the space plan to be prepared by Tenant in accordance with paragraph 2 below and approved by Landlord and Tenant, and showing the general configuration of the Tenant Improvements.

 

Certificate of Occupancy ” means a certificate of occupancy, governmental sign-off or other document, permit or approval (whether conditional, unconditional, temporary or permanent) which must be obtained by Landlord from the appropriate governmental authority as a condition to the lawful initial occupancy by Tenant of the Premises.

 

Improvement Allowance ” means $25.00 per rentable square foot of the Premises.

 

Substantial Completion ” means either (a) the date a Certificate of Occupancy (or all approvals required for the issuance thereof) is obtained for the Premises, or (b) if a Certificate of Occupancy is not required as a condition to Tenant’s lawful occupancy of the Premises, the date that the Tenant Improvements are substantially completed (subject to punch list items), as confirmed in writing by Landlord’s architect.

 

Tenant Improvements ” means the initial improvements to the Premises that are more particularly described in the Plans and Specifications.

 

Tenant’s Architect ” means a licensed architect selected and engaged by Tenant reasonably acceptable to Landlord.

 

Work ” means all materials and labor to be added to the existing improvements in the Premises, if any, in order to complete the installation of the Tenant Improvements within the Premises in accordance with the

 

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Plans and Specifications, including, without limitation, all air balancing and other mechanical adjustments to Building equipment serving the Premises.  Tenant acknowledges and agrees that only Building Standard materials may be utilized in the performance of the Work unless otherwise approved by Landlord in writing, such approval not to be unreasonably withheld.

 

2.                                       Space Plan .  Tenant will engage Tenant’s Architect to develop and design a space plan for the Tenant Improvements and will deliver such space plan to Landlord prior to commencing any Work (including without limitation any design, construction or installation of any Tenant Improvements).  The space plan must (a) be compatible with the base building (as reasonably determined by Landlord); (b) be adequate, in Landlord’s reasonable discretion, for the preparation of Plans and Specifications for the Tenant Improvements; (c) show, in reasonable detail, the design and appearance of the finishing materials to be used in connection with installing the Tenant Improvements; (d) contain such other detail or description as Landlord may reasonably deem necessary to adequately outline the scope of the Tenant Improvements; (e) conform to all applicable governing codes and ordinances; and (f) contain all information necessary for construction cost estimating.  All space plan drawings must be not less than 1/8” scale.  Without limiting those general requirements, the space plan must expressly specify and include (without limitation) all of the following: (1) wall types and heights and insulation, if needed; (2) door types and hardware groups; (3) door frame types; (4) ceiling heights; (5) ceiling materials; (6) floor covering materials and locations; (7) all wall finishes; (8) any appliances, special systems or equipment to be furnished as a part of the construction; (9) any mechanical requirements beyond that provided in the base building; (10) any fire protection requirements beyond that provided in the base building; (11) any plumbing requirements; (12) all power and data locations; (13) any power required other than building standard power distribution; (14) any power requirements for modular furniture; (15) any emergency power requirement; (16) any lighting requirements beyond that provided in the base building; (17) millwork elevations and details; (18) specific floor material selections and designations; and (19) specific wall material selections and designations.  The Space Plan must also include enlarged sketch layouts for any non-standard rooms, including reflected ceiling plans, and must state the approximate usable and rentable square footage of the Premises.  If Tenant fails to provide Landlord with a Space Plan meeting the foregoing requirements by the date set forth above in this Section there shall be no extension of the Commencement Date.  In addition to the Improvement Allowance, Landlord shall pay for a portion of the costs associated with the initial Space Plan and any revisions thereto in an amount not to exceed $0.12 per rentable square foot of the Premises (the “ Space Plan Allowance ”).  The Space Plan Allowance shall be subject to all the terms and conditions of this Lease applicable to the Improvement Allowance, including without limitation Section 5 below with respect to Landlord’s receipt of satisfactory documentation before funding any portion of the Space Plan Allowance and Tenant’s forfeiture of any Space Plan Allowance not utilized on or before October 1, 2017.

 

3.                                       Plans and Specifications .  After Landlord receives and approves Tenant’s Space Plan as provided above, Tenant will cause Tenant’s Architect to prepare the Plans and Specifications for the Tenant Improvements.  Landlord will approve or disapprove (specifically describing any reasons for disapproval) the Plans and Specifications in writing within ten (10) Business Days after receiving them.  If Landlord disapproves the Plans and Specifications, Tenant will provide appropriately revised Plans and Specifications to Landlord for approval (or disapproval) within five (5) Business Days on the same basis as set forth above.  After Landlord’s approval, Tenant will submit the Plans and Specifications for permits and construction bids.  No deviation from the Building Standard will be permitted in the Space Plan or the Plans and Specifications, provided reasonable deviations with respect to the ceiling, lighting, painting, flooring and wall covering may be permitted with Landlord’s approval.  Landlord will not approve any deviations which Landlord believes (a) do not conform to applicable codes, ordinances and other Laws or are disapproved by any governmental agency, (b) require services beyond the level normally provided to other tenants in the Building, or (c) are of a nature or quality that are inconsistent with Landlord’s overall plan or objectives for the Building.  No approval by Landlord of any deviation constitutes an acknowledgment by Landlord that such deviations are in conformance with applicable codes, ordinances and other Laws.  In the event that Landlord’s approval shall be required in this Tenant Improvements Agreement, then notwithstanding anything to the contrary set forth in the Lease, Landlord’s approval shall not be unreasonably withheld, conditioned, or delayed.

 

4.                                       Tenant Improvements .  Tenant will cause to be constructed, at Tenant’s sole cost and expense (subject to Landlord’s payment of the Improvement Allowance), the Tenant Improvements. The Tenant Improvements will be designed and constructed as described in this Exhibit “D” .  Tenant will select the Contractor to be the general contractor to perform the Work.  Landlord shall have the right to approve (such approval not to be unreasonably withheld, conditioned or delayed) the Contractor and all subcontractors that will be performing any

 

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portion of the Work.  All contractors that will be performing any portion of the Work shall be union contractors.  Tenant will pay all direct and indirect costs of the design and construction of the Tenant Improvements (subject to the Landlord’s payment of the Improvement Allowance as provided for herein).  Such costs may include, without limitation, all costs of preparing the Space Plan, construction document preparation, design, Plans and Specifications, general conditions, labor, materials, and other construction costs, the fees (on an hourly basis) of Contractor’s project manager and site superintendent for the Tenant Improvements, and all costs incurred in connection with obtaining permits for the Tenant Improvements.  For all purposes of ownership, including risk of loss thereto, the Tenant Improvements will immediately upon installation be and remain a part of the Building and the property of Landlord, provided that as provided in Section 15 of this Lease, Landlord may require Tenant to remove same upon the expiration or earlier termination of the Lease Term.

 

Tenant currently occupies the Premises under the Existing Sublease and Landlord permits Tenant to immediately commence construction of the Tenant Improvements from and after the Effective Date of this Lease [subject to Tenant’s compliance with the terms and conditions of the Existing Sublease (if then applicable), including, without limitation, Tenant’s receipt of approval from Tenant’s sublessor thereunder].  Tenant shall use its best efforts to complete the Tenant Improvements on or before July 31, 2017.  Notwithstanding the foregoing sentence to the contrary, as part of the Tenant Improvements, Tenant shall perform the work necessary to separately demise the Premises from the remaining portion of the sixth (6 th ) floor of the Building, including the installation of a demising wall (the “ Demising Work ”) on or before April 1, 2017.  Tenant acknowledges that the tenant in the premises adjacent to the Premises will also be performing demising work.  Tenant’s performance of the Demising Work shall be coordinated with Landlord and Tenant shall cooperate with Landlord and/or Landlord’s contractors in all ways to ensure the efficient and expeditious scheduling, staging and performance of the Demising Work.  The Demising Work shall not adversely affect any construction work being performed by or for Landlord or its tenants and shall be performed in harmony with Landlord’s contractors and subcontractors and with other contractors and subcontractors in the Complex.  Tenant shall impose on and enforce all applicable terms of this Tenant Improvements Agreement against Tenant’s contractors.  Landlord shall have the right to order Tenant or any of Tenant’s contractors who violate the requirements imposed on Tenant or Tenant’s contractors in performing the Demising Work to cease performance of the Demising Work and to remove its equipment and employees from the Building.  No such action by Landlord shall cause any extension of the Commencement Date nor relieve Tenant from any of its obligations under the Lease.  Further, notwithstanding anything herein to the contrary, any delay in the completion of the Demising Work, or any interference to Tenant’s business operations or inconvenience suffered by Tenant during the performance of any adjacent tenant’s demising work shall not subject Landlord to any liability for any loss or damages resulting there from nor entitle Tenant to any credit, abatement or adjustment of Rent or other sum payable under the Lease, as amended hereby.

 

During Tenant’s design, construction and installation of the Tenant Improvements, Tenant shall pay for all Building services and utilities, if and to the extent required, (i) in accordance with the Existing Sublease from the Effective Date through March 31, 2017, and (ii) in accordance with this Lease from and after April 1, 2017.

 

5.                                       Funding of the Improvement Allowance .  Tenant may from time to time deliver to Landlord a request for payment of all or a portion of the Improvement Allowance (provided that in no event shall Tenant make more than one [1] request in any calendar month), accompanied by all of the following in form and substance satisfactory to Landlord:  (a) a certificate duly executed by Tenant’s Architect certifying that the applicable portion of the Tenant Improvements for which reimbursement is being sought are Substantially Completed; (b) with respect to the final request for disbursement, a final Certificate of Occupancy for the Premises; (c) duly executed conditional lien waivers (or duly executed final and unconditional lien waivers, if in connection with the final request for disbursement) and such other affidavits, sworn statements, certificates, information, and data as may be requested by Landlord from all general contractors, subcontractors and materialmen performing work on the Premises for which reimbursement is being sought; (d) such documentation as Landlord deems reasonably necessary to obtain an endorsement to the policy of title insurance insuring Landlord’s lender, if any; (e) with respect to the final request for disbursement, copies of all warranties and guaranties relating to the Tenant Improvements together with duly executed assignments thereof to Landlord; (f) an itemized computation of the actual Approved Costs incurred by Tenant (“ Actual Costs ”) for the applicable portion of the Tenant Improvements; (g) with respect to the final request for disbursement, final as-built plans and specifications for the Tenant Improvements; and (h) with respect to the final request for disbursement, such other information and documentation as Landlord may reasonably request to evidence the proper, lien-free Substantial Completion of the Tenant Improvements.  Unless Landlord reasonably

 

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disputes Tenant’s assertion that Substantial Completion of the Tenant Improvements has occurred, upon Landlord’s receipt, review and reasonable approval of all of the foregoing, Landlord will pay to Tenant the amount of the Actual Costs, up to the maximum amount of the Improvement Allowance.  Landlord may retain from each such payment an amount equal to 10% of each such disbursement, which retained amount will be paid to Tenant when all punch list items for the Tenant Improvements are completed to Landlord’s satisfaction.   In no event will Landlord have any obligation to pay for any costs of the Tenant Improvements in excess of the Improvement Allowance or to perform any work in the Premises that is not expressly contemplated by this Lease, unless otherwise hereafter agreed to in writing by the parties hereto.  Tenant shall be solely responsible for any and all costs of constructing the Tenant Improvements in excess of the Improvement Allowance.  Tenant shall not be entitled to any credit or payment from Landlord for any portion of the Improvement Allowance not used by Tenant on or before March 1, 2018.

 

6.                                       Changes to Plans and Specifications .  Tenant will immediately notify Landlord if Tenant desires to make any changes to the Tenant Improvements after Tenant has approved the Plans and Specifications.  If Landlord approves (such approval not to be unreasonably withheld, conditioned or delayed) the revisions (which Landlord shall approve or deny within five [5] Business Days after Landlord’s receipt of any and all information requested by Landlord with respect to such revisions), Tenant may carry out the changes contemplated therein. If Landlord reasonably estimates that the change order will cause the cost of the Tenant Improvements to exceed the Improvement Allowance (or if the cost of the Tenant Improvements already exceeds the Improvement Allowance), Landlord may require Tenant to deposit such estimated additional cost with Landlord before the change order work is performed.

 

7.                                       Landlord’s Approval Rights .  Landlord may withhold its approval of any Space Plan, Plans and Specifications, change orders, or other work requested by Tenant which Landlord reasonably determines may require work which: (a) exceeds or adversely affects the structural integrity of the Building; (b) adversely affects, or exceeds Tenant’s pro rata capacity of, any part of the heating, ventilating, air conditioning, plumbing, mechanical, electrical, communication or other systems of the Building; (c) will increase the cost of operation or maintenance of any of the systems of the Property; (d) does not conform to applicable building codes or is not approved by any governmental authority with jurisdiction over the Premises; (e) is not a building standard item or an item of equal or higher quality; (f) may detrimentally affect the uniform appearance of the Property; or (g) is reasonably disapproved by Landlord for any other reason.

 

8.                                       Tenant’s Representative .  Tenant designates Patricia Adams, Tenant’s Vice President of Human Resources and Administration, as the representative of Tenant having authority to approve the Plans and Specifications, request or approve any change order, give and receive all notices, consents, approvals and directions regarding the Tenant Improvements, and to otherwise act for and bind Tenant in all matters relating to the Tenant Improvements.

 

9.                                       Tenant Finish Work .  All finish work and decoration and other work desired by Tenant and not included within the Tenant Improvements to be performed by Landlord as set forth in the approved Plans and Specifications (including specifically, without limitation, the design and installation of all computer systems, telephone systems, telecommunications systems, removable fixtures, furnishings, and equipment) will be designed, furnished and installed by Tenant and to the extent not included in the Improvement Allowance shall be at Tenant’s sole expense and will not be chargeable against the Improvement Allowance.  Tenant will perform all such work in the same manner and following the same procedures as are provided in this Lease for Alterations.  Landlord is under no obligation to inspect, or supervise any such work, and Landlord shall have no liability or responsibility whatsoever therefor.

 

10.                                Liens and Claims .  Tenant will keep the Property and the Complex free from any mechanics’, materialmen’s, designers’ or other liens arising out of any work performed, materials furnished or obligations incurred by or for Tenant or any person or entity claiming by, through or under Tenant.  Tenant will upon request record and post notices of non-responsibility or such similar protective notices as Landlord may reasonably request. If any such liens are filed and Tenant, within 15 days after such filing, does not release the same of record or provide Landlord with a bond or other surety satisfactory to Landlord protecting Landlord and the Property and the Complex against such liens, Landlord may, without waiving its rights and remedies based upon such breach by Tenant and without releasing Tenant from any obligation under the Lease, cause such liens to be released by any means

 

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Landlord deems proper, including, but not limited to, paying the claim giving rise to the lien or posting security to cause the discharge of the lien.  In such event, Tenant will reimburse Landlord, as Rent, for all amounts Landlord pays (including, without limitation, reasonable attorneys’ fees and costs).  To the fullest extent allowable under the Laws, Tenant releases and will indemnify, protect, defend (with counsel reasonably acceptable to Landlord) and hold harmless the Landlord Related Parties and the Property and the Complex from and against any Claims in any manner relating to or arising out of the Tenant Improvements, any of the Work or any other work performed, materials furnished or obligations incurred by or for Tenant or any person or entity claiming by, through or under Tenant.

 

11.                                Hoisting Charges .  Landlord shall not impose any charges for a personnel operator or hoisting charges for utilizing the Building’s freight elevator(s) or loading dock during the construction of Tenant Improvements or during Tenant’s physical move into the Premises.

 

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EXHIBIT “E”

 

PARKING

 

Parking Areas of Building .  Tenant shall have a non-exclusive right to use four (4) reserved parking spaces in the Parking Areas of the Building in locations designated by Landlord.  Use of the Parking Areas shall be subject to such terms, conditions, and regulations as are, from time to time, promulgated by the Landlord.  Tenant shall pay a monthly parking fee for each such parking space at the then prevailing rate therefor, which shall be due and payable on the first day of each month during the Lease Term (regardless of whether Tenant actually uses the foregoing 4 reserved parking spaces).  The anticipated parking fee rate for reserved parking spaces in the Parking Areas of the Building is $100.00 per space per month.

 

Offsite Parking Garage .  Tenant shall have a non-exclusive right to use twenty-one (21) unreserved parking spaces in the Offsite Parking Garage.  Use of the Offsite Parking Garage shall be subject to such reasonable terms, conditions, and regulations as are, from time to time, promulgated by the owner or operator of the Offsite Parking Garage.  For each such parking space, Tenant shall pay to Landlord, quarterly in advance, an amount equal to the parking fee rate which Landlord must pay the owner of the Offsite Parking Garage pursuant to the agreement between Landlord and the owner of the Offsite Parking Garage (regardless of whether Tenant actually uses the foregoing 21 unreserved parking spaces).  The anticipated parking fee rate for unreserved parking spaces in the Offsite Parking Garage is $85.00 per space per month (i.e., a minimum of $5,355.00 per quarter for the 21 spaces).  Tenant must complete the Offsite Parking Agreement Form available from the Building manager at the management office, and return same to the Offsite Parking Garage office along with $25 deposit per transponder.

 

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EXHIBIT “F”

 

CONFIDENTIALITY AGREEMENT

 

THIS CONFIDENTIALITY AGREEMENT (this “ Agreement ”), dated as of             , is entered into by APTINYX INC., a Delaware corporation (“ Tenant ”), and                                     (“ Auditor ”), for the benefit of FSP 909 DAVIS STREET LLC, a Delaware limited liability company (“ Landlord ”).

 

W I T N E S S E T H  T H A T:

 

WHEREAS, in connection with that certain Lease (the “ Lease ”) dated                  , between Landlord and Tenant, Tenant has the right to hire an independent accounting firm to audit Landlord’s books and records pertaining to Operating Costs (as defined in the Lease); and

 

WHEREAS, it is expected that in connection with such audit, Tenant and Auditor will receive or have access to Confidential Information (defined below); and

 

WHEREAS, as a condition of Tenant’s audit right, Landlord requires that Tenant and Auditor keep confidential the Confidential Information.

 

NOW, THEREFORE, in consideration of and as a condition of Tenant’s audit right and in consideration of payment by Tenant for Auditor’s services for performing the audit, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, Auditor and Tenant agree as follows, for the benefit of Landlord:

 

1.                                       Auditor and Tenant acknowledge that the information which Auditor and Tenant may receive in connection with such audit is non-public, confidential and/or proprietary information relating to Landlord, its business operations and the Complex, and that Landlord would be irreparably damaged if such information were disclosed to or utilized on behalf of any other person (including Auditor and Tenant), firm, corporation or any other tenant of the Complex for any reason other than Tenant’s audit of Landlord.  Auditor and Tenant agree that any information given to Auditor or Tenant by Landlord during the course of such audit is, and shall remain, property owned by Landlord, and neither Auditor nor Tenant shall have any right in or to such information, other than to use the information for the purposes set forth in the Lease.

 

2.                                       Auditor and Tenant agree to keep confidential, and agree to cause their employees, associates, agents and advisors to keep confidential, any information belonging to Landlord and any information not generally known to the public about the business and affairs of Landlord, including, without limitation, (a) all books, manuals, records, memoranda, projections, business plans, tenant lists, cost information, contractual relationships, and (b) other information, whether computerized, written or oral, relating specifically or generally to Operating Costs, the Complex and the business operations of Landlord (the “ Confidential Information ”).

 

3.                                       Auditor and Tenant each hereby represent and warrant that its internal policies, procedures and practices are adequate to safeguard against any breach of this Agreement by it or its employees, associates, agents and advisors, and Auditor and Tenant each agree to maintain such internal policies, procedures and practices as are necessary to adequately safeguard against a breach of this Agreement.

 

4.                                       The phrase “ to keep confidential ,” as used herein, means that the information or document, including the content, substance or effect of such information or document, (a) shall not be disclosed or distributed by Auditor or Tenant to any other person, firm, organization or entity, including to any associate, agent, advisor or affiliate of Auditor or Tenant not directly involved in the audit, or to any other tenant of the Complex, (b) shall not be utilized by either Auditor or Tenant for any purpose other than as described in the Lease.

 

5.                                       Notwithstanding anything to the contrary set forth herein, in the event that Auditor or Tenant is required to do so in legal, arbitration, governmental or regulatory proceedings, Auditor or Tenant may disclose only that portion of the Confidential Information which its counsel advises in writing that it is legally compelled to

 

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disclose and will exercise its best efforts to obtain assurances that confidential treatment will be accorded such Confidential Information even after such disclosure .

 

6.                                       Auditor and Tenant acknowledge that the subject matter of this Agreement is unique and that no adequate remedy at law would be available for breach of the obligations specified herein.  Accordingly, in the event of a breach or threatened breach by Auditor or Tenant of the provisions of this Agreement, Landlord shall, in addition to any other rights and remedies available to it, at law or in equity, be entitled to injunctive relief by a court or agency of competent jurisdiction enjoining and restraining the violating party from committing or continuing any violation of this Agreement.

 

7.                                       Any waiver by Landlord of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or of any other provision hereof.

 

8.                                       In case any one or more of the provisions or parts of a provision contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement; and this Agreement shall, to the fullest extent possible, be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent possible.

 

9.                                       This Agreement shall be binding upon Tenant, Auditor and their successors and assigns for the benefit of Landlord, and shall be fully enforceable by Landlord against Tenant, Auditor and their successors and assigns.

 

10.                                Agreement may be amended or modified in whole or in part, only by an instrument in writing signed by Landlord, Tenant and Auditor.

 

11.                                This Agreement shall be construed in accordance with and governed for all purposes by the Laws of the State of Illinois, without regard to conflicts of law principles.  Venue for any action arising herefrom shall be in Cook County, Illinois, and the parties hereto submit themselves to the jurisdiction of the state and federal courts of Cook County, Illinois.

 

IN WITNESS WHEREOF, Tenant and Auditor have duly executed this Agreement as of the date first above written.

 

TENANT :

APTINYX INC., a Delaware corporation

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

AUDITOR :

 

 

a

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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EXHIBIT “G”

 

RENEWAL OPTION

 

So long as no Event of Default exists and Tenant is occupying the entire Premises at the time of such election, Tenant may renew this Lease for one (1) additional period of five (5) years on the same terms provided in this Lease (except as set forth below), by delivering written notice of the exercise thereof to Landlord not earlier than one year and not later than two hundred-seventy (270) days before the expiration of the Lease Term.  On or before the commencement date of the extended Lease Term in question, Landlord and Tenant shall execute an amendment to this Lease extending the Lease Term on the same terms provided in this Lease, except as follows:

 

(1)                                  The Base Rental payable for each month during each such extended Lease Term shall be the prevailing rental rate (the “ Market Rate ”), prevailing six (6) months prior to the commencement of such extended Lease Term, for space of equivalent quality, size, utility and location in the Market Area, with the length of the extended Lease Term and the credit standing of Tenant to be taken into account. The Market Rate shall include all standard lease components then being offered to tenants in such submarket, including, but not limited to, rental rate, expenses, escalations, tenant improvements, and rent abatement. Within ten (10) days after receipt of written notice of Tenant’s exercise of its renewal option, Landlord shall give to Tenant a written determination of Market Rate.  Tenant shall have fifteen (15) days in which to give written notice to Landlord that Tenant (a) disagrees with Landlord’s proposed Market Rate, or (b) accepts Landlord’s proposed Market Rate.  If Tenant disagrees with Landlord’s proposed Market Rate then Landlord and Tenant shall endeavor in good faith to agree upon the Market Rate within the next fifteen (15) days.  If Landlord and Tenant are unable to agree upon the Market Rate within such 15-day period, then Tenant, by written notice to Landlord prior to the expiration of such 15-day period, may, as its sole and exclusive remedy, either (i) terminate this Lease as of end of the initial Lease Term, or (ii) dispute Landlord’s determination of the Market Rate and proceed to arbitration as set forth below.  If Tenant fails to deliver such written notice prior to the expiration of such 15-day period, then Tenant shall be deemed to have rejected Landlord’s proposed Market Rate and rescinded Tenant’s notice electing to exercise the renewal option.

 

(2)                                  If Tenant disputes Landlord’s determination of the Market Rate for an extension of the Lease Term as set forth above, then the Market Rate shall be selected by three appraisers as provided in this section.  Upon delivery and receipt of such notice, each party will within seven days thereafter separately select an appraiser that must (i) have at least five years of full-time commercial appraisal experience with projects comparable to the Complex, (ii) be a member of the American Institute of Real Estate Appraisers or a similar appraisal association, and (iii) not have any material financial or business interest in common with either of the parties, which two appraisers will, within seven days of their selection, mutually appoint a third appraiser meeting the criteria set forth above (and who also does not have any material financial or business interest in common with either of the two selecting appraisers).  Within seven days of the appointment of the third appraiser, Landlord and Tenant will submit to the three appraisers their respective determinations of Market Rate and any related information.  Within twenty-one (21) days of such appointment of the third appraiser, the three appraisers will review each party’s submittal (and such other information as the three appraisers deems necessary) and will select, in total and without modification, the submittal presented by either Landlord or Tenant as the Market Rate.  Subject to the previous sentence, if the three appraisers timely receive one party’s submittal, but not both, the appraisers must designate the submitted proposal as the Market Rate for the applicable extension of the Lease Term.  Any determination of Market Rate made by the three appraisers in violation of the provisions of this section shall be beyond the scope of authority of the three appraisers and shall be null and void.  Landlord and Tenant will each separately pay all costs, fees, and expenses for its selected appraiser and each will pay directly to the third appraiser, one-half (½) of all fees, costs and expenses of the third appraiser.

 

(3)                                  Tenant shall have no further renewal options unless expressly granted by Landlord in writing.

 

Tenant’s rights under this Exhibit “G” shall terminate if (i) the Lease or Tenant’s right to possession of the Premises is terminated, (ii) Tenant assigns any of its interest in the Lease or sublets any portion of the Premises, or (iii) Tenant fails to timely exercise its option under this Exhibit “G” , time being of the essence with respect to Tenant’s exercise thereof.

 

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EXHIBIT “H”

 

RIGHT OF FIRST OFFER

 

So long as no Event of Default then exists under this Lease, Tenant will have the first right (“ First Right ”) to be offered by Landlord the opportunity to lease all contiguous space on the fifth (5th) floor of the Building shown on Exhibit “H-1” attached hereto (the “ First Right Space ”).  The First Right is subject to the terms and conditions set forth in this section, and is further subject to any prior rights to such space granted to any other tenants in the Building, which are as follows: Houghton Mifflin Harcourt Publishing Company and Medpoint Digital, Inc.  If at any time after the Commencement Date while this First Right is in effect Landlord receives a request for proposal that covers all or any part of the First Right Space (“ RFP ”) and intends to lease all or any part of the First Right Space, then Landlord will first notify Tenant that such First Right Space, and any other space described in the RFP (including space on other floors), is available for lease (collectively, the “ Available Space ”).  Tenant must notify Landlord in writing within ten (10) Business Days of receiving Landlord’s notice whether Tenant desires to lease all of the Available Space from Landlord.  If Tenant notifies Landlord that Tenant does not desire to lease all of the Available Space, or if Tenant does not respond in writing to Landlord’s notice within such ten-Business Day period, then Landlord may freely lease the Available Space without restriction.  If Tenant notifies Landlord in writing within such ten-Business Day period that Tenant desires to lease all of the Available Space, the parties will thereafter negotiate for Tenant’s lease of all of the Available Space from Landlord.  If Landlord and Tenant fail to mutually agree upon the terms of Tenant’s lease of all of the Available Space and to execute a written amendment to this Lease within ten (10) Business Days after Tenant delivers Tenant’s offer notice to Landlord, then Landlord’s obligations under this section shall automatically terminate and be of no further force or effect at the end of such ten-Business Day period.  Tenant’s First Right shall apply during the Term (including any extensions thereof) and shall automatically terminate on the last day of the Term.  The purpose of this section is to provide notice to Tenant so that Tenant may be in a position to offer to lease such space on a competitive basis with others, and, notwithstanding anything to the contrary contained in this section, nothing in this section shall be deemed to be an option or right of first refusal.  Furthermore, notwithstanding anything to the contrary contained in this Exhibit, nothing in this Exhibit shall be deemed to prevent, limit, or otherwise restrict Landlord from responding to or otherwise engaging any third party regarding the First Right Space or Available Space during the ten-Business Day period described herein.

 

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EXHIBIT “H-1”

 

FIRST RIGHT SPACE

 

 

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EXHIBIT “I”

 

INTENTIONALLY OMITTED

 

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EXHIBIT “J”

 

INTENTIONALLY OMITTED

 

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EXHIBIT “K”

 

EXISTING EXPANSION RIGHTS AND ROFRS ENCUMBERING THE PREMISES

 

None.

 

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EXHIBIT “L”

 

INTENTIONALLY OMITTED

 

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EXHIBIT “M”

 

LETTER OF CREDIT TERMS AND CONDITIONS

 

1.                                       Letter of Credit .  Concurrently with the execution of this Lease, Tenant must deliver to Landlord an unconditional, irrevocable standby letter of credit (“ Letter of Credit ”) which conforms in form and substance to the attached Schedule “1” (or is otherwise reasonably acceptable to Landlord) and which:

 

(a)                                  is issued by a United States federal or state chartered bank (“ Issuer ”) that (i) is a commercial bank or trust company reasonably acceptable to Landlord, and (ii) has total assets of at least One Billion Dollars ($1,000,000,000.00), as determined in accordance with generally accepted accounting principles consistently applied (“ Total Assets ”);

 

(b)                                  names Landlord as beneficiary thereunder;

 

(c)                                   has a term ending not less than one year after the date of issuance;

 

(d)                                  automatically renews for one-year periods unless Issuer notifies beneficiary in writing, at least 60 days prior to the expiration date, that Issuer elects not to renew the Letter of Credit;

 

(e)                                   provides for payment to beneficiary of immediately available funds (denominated in United States dollars) in the amount of Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00), subject to reduction as may be provided in Section 9 below, within 24 hours after presentation of the Sight Draft substantially conforming to the form attached as Exhibit “A” to the Letter of Credit;

 

(f)                                    provides that draws may be presented, and are payable, at Issuer’s letterhead office, the office located at Chicago, Illinois or any other full service office of Issuer;

 

(g)                                   is payable in sight drafts which only require the beneficiary to state that the draw is payable to the order of beneficiary;

 

(h)                                  permits partial and multiple draws;

 

(i)                                      permits multiple transfers by beneficiary;

 

(j)                                     waives any rights Issuer may have, at law or otherwise, to subrogate to any claims beneficiary may have against applicant or applicant may have against beneficiary; and

 

(k)                                  is governed by the International Standby Practices 1998, published by the International Chamber of Commerce.

 

The Letter of Credit (as transferred, extended, renewed or replaced) must be maintained during the entire Lease Term, as extended or renewed, and for a period of 45 days thereafter.

 

2.                                       Transfer; Fees .  Landlord may freely transfer the Letter of Credit in connection with an assignment of this Lease without (i) Tenant’s consent, (ii) restriction on the number of transfers or (iii) condition, other than presentment to Issuer of the original Letter of Credit and a duly executed transfer document conforming to the form attached as Exhibit “B” to the Letter of Credit. Tenant is solely responsible for any bank fees or charges imposed by Issuer in connection with the issuance of the Letter of Credit or any transfer, renewal, extension or replacement thereof.  If Tenant fails to timely pay such transfer fee, Landlord may, at its option and without notice to Tenant, elect to pay any transfer fees to Issuer when due, and upon payment, such amount will become immediately due and payable from Tenant to Landlord as Additional Rent under this Lease.

 

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3.                                       Draw and Use of Draw Proceeds .  Immediately upon the occurrence of an Event of Default (as defined in the Lease), and at any time thereafter, Landlord may draw on the Letter of Credit, in whole or in part (if partial draw is made, Landlord may make multiple draws), as Landlord may determine in Landlord’s sole and absolute discretion in accordance with the Lease.  The term “ Draw Proceeds ” means the cash proceeds of any draw or draws made by Landlord under the Letter of Credit.  Any delays by Landlord in drawing on the Letter of Credit or using the Draw Proceeds will not constitute a waiver by Landlord of any of its rights hereunder with respect to the Letter of Credit or the Draw Proceeds.  Landlord will hold the Draw Proceeds in its own name and may co-mingle the Draw Proceeds with other accounts of Landlord or invest them as Landlord may determine in its sole and absolute discretion.

 

In addition to any other rights and remedies Landlord may have, Landlord may in its sole and absolute discretion and at any time, use and apply all or any portion of the Draw Proceeds to pay Landlord for any one or more of the following:

 

(a)                                  Rent or any other sum which is past due, due or becomes due, or to which Landlord is otherwise entitled under the terms of this Lease, due to an Event of Default (including, without limitation, late payment fees or charges and any amounts which Landlord is or would be allowed to collect under this Lease, and without deducting therefrom any offset for proceeds of any potential reletting or other potential mitigation which has not in fact occurred at the time of the draw);

 

(b)                                  any and all amounts incurred or expended by Landlord in connection with the exercise and pursuit of any one or more of Landlord’s rights or remedies under this Lease after an Event of Default, including, without limitation, reasonable attorneys’ fees and costs;

 

(c)                                   any and all amounts incurred or expended by Landlord in obtaining the Draw Proceeds, including, without limitation, reasonable attorneys’ fees and costs; or

 

(d)                                  any and all other damage, injury, expense or liability caused to or incurred by Landlord as a result of any Event of Default.

 

To the extent that Draw Proceeds exceed the amounts so applied, such excess Draw Proceeds will be held by Landlord as a Security Deposit in accordance with the terms of Section 8 of the Lease.  Following any use or application of the Draw Proceeds, Tenant, if requested by Landlord in writing, must, within 10 days after receipt of Landlord’s request, cause a replacement Letter of Credit complying with Section 1 above to be issued and delivered to Landlord; provided, however, that the amount of the replacement Letter of Credit will be an amount equal to the amount of the Letter of Credit (as set forth in Section 1(e) above) required hereunder from time to time less any unapplied Draw Proceeds on the date the replacement Letter of Credit is issued.  Upon Landlord’s receipt of the replacement Letter of Credit, Landlord will deliver the prior original Letter of Credit to Issuer for cancellation (if not theretofore fully drawn) and any unapplied Draw Proceeds will be applied in accordance with Sections 3(a), (b), (c) and (d) above.

 

If it is determined or adjudicated by a court of competent jurisdiction that Landlord was not entitled to draw on the Letter of Credit, Tenant may, as its sole and exclusive remedy, cause Landlord to (i) deliver the prior original Letter of Credit to Issuer for cancellation (if not theretofore fully drawn), (ii) return to Issuer the amount of the Draw Proceeds which the court determines Landlord was not entitled to draw and (iii) reimburse Tenant for all out-of-pocket fees, costs and interest expenses actually incurred by Tenant as a direct result of Landlord’s draw on the Letter of Credit; provided, however, Tenant may exercise its exclusive remedy only after Tenant has (y) cured all defaults under this Lease and (z) caused a replacement Letter of Credit complying with Section 1 above to be issued and delivered to Landlord. Landlord will not be liable for any other actual damages or any indirect, consequential, special or punitive damages incurred by Tenant in connection with either a draw by Landlord on the Letter of Credit or the use or application by Landlord of the Draw Proceeds.  Nothing in this Lease or in the Letter of Credit will confer upon Tenant any property right or interest in any Draw Proceeds.

 

4.                                       Renewal and Replacement .  The Letter of Credit must provide that it will be automatically renewed unless Issuer provides written notice of nonrenewal to Landlord at least 60 days prior to the expiration date of the Letter of Credit.  If written notice of nonrenewal is received from Issuer, Tenant must renew the Letter of

 

2



 

Credit or replace it with a new Letter of Credit, at least 30 days prior to the stated expiration date of the then-current Letter of Credit.  Any renewal or replacement Letter of Credit must meet the criteria set forth in Section 1 above, and must have a term commencing at least one day prior to the stated the expiration date of the immediately prior Letter of Credit.  Failure to provide a renewal or replacement Letter of Credit as provided above will, at Landlord’s election, be an Event of Default under this Lease.

 

5.                                       Issuer Quality Event .  If an Issuer Quality Event occurs, Tenant, upon 30 days advance written notice from Landlord, must, at its own cost and expense, provide Landlord with a replacement Letter of Credit meeting all of the requirements of Section 1 above and upon receipt of such replacement Letter of Credit Landlord shall immediately return the existing letter of credit to Tenant.  The term “ Issuer Quality Event ” means the Issuer fails to meet the criteria set forth in Section 1(a) above.  If Tenant does not provide Landlord with a replacement Letter of Credit meeting the requirements of Section 1 above within thirty (30) days after Tenant receives written notice from Landlord that an Issuer Quality Event has occurred, such failure will, at Landlord’s election, be an Event of Default under this Lease.

 

6.                                       Additional Agreements of Tenant .  Tenant expressly acknowledges and agrees that:

 

(a)                                  the Letter of Credit constitutes a separate and independent contract between Landlord and Issuer, and Tenant has no right to submit a draw to Issuer under the Letter of Credit;

 

(b)                                  Tenant is not a third-party beneficiary of such contract, and Landlord’s ability to either draw under the Letter of Credit for the full or any partial amount thereof or to apply Draw Proceeds may not, in any way, be conditioned, restricted, limited, altered, impaired or discharged by virtue of any Laws to the contrary, including, but not limited to, any Laws that restrict, limit, alter, impair, discharge or otherwise affect any liability that Tenant may have under this Lease or any claim that Landlord has or may have against Tenant;

 

(c)                                   During the Term, neither the Letter of Credit nor any Draw Proceeds will be or become the property of Tenant, and Tenant does not and will not have any property right or interest therein;

 

(d)                                  Tenant is not entitled to any interest on any Draw Proceeds;

 

(e)                                   neither the Letter of Credit nor any Draw Proceeds constitute an advance payment of Rent, security deposit or rental deposit;

 

(f)                                    neither the Letter of Credit nor any Draw Proceeds constitute a measure of Landlord’s damages resulting from any Event of Default; and

 

(g)                                   Tenant will cooperate with Landlord, at Tenant’s own expense, in promptly executing and delivering to Landlord all modifications, amendments, renewals, extensions and replacements of the Letter of Credit, as Landlord may reasonably request to carry out the terms and conditions of this Exhibit “M” .

 

7.                                       Restrictions on Tenant Actions .  Tenant hereby irrevocably waives any and all rights and claims that it may otherwise have at law or in equity, to contest, enjoin, interfere with, restrict or limit, in any way whatsoever, any requests or demands by Landlord to Issuer for a draw or payment to Landlord under the Letter of Credit.  If Tenant, or any person or entity on Tenant’s behalf or at Tenant’s discretion, brings any proceeding or action to contest, enjoin, interfere with, restrict or limit, in any way whatsoever, any one or more draw requests or payments under the Letter of Credit, Tenant will be liable for any and all direct and indirect damages resulting therefrom or arising in connection therewith, including, without limitation, reasonable attorneys’ fees and costs.

 

8.                                       Cancellation After End of Term .  Provided that no Event of Default then exists, Landlord will deliver the Letter of Credit to the Issuer for cancellation within 45 days after Tenant surrenders the Premises to Landlord upon the expiration of the Term.

 

9.                                       Potential Reduction .  Notwithstanding the foregoing, if at the end of the first seventeen (17) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default

 

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during such seventeen (17)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $280,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first twenty-nine (29) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default during such twenty-nine (29)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $210,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first forty-one (41) months of the Lease Term (a) no Event of Default then exists, and (b) there has been no monetary Event of Default during such forty-one (41)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $140,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

Furthermore, if at the end of the first fifty-three (53) months of the Lease Term (a) no Event of Default then exists and (b) there has been no monetary Event of Default during such fifty-three (53)-month period, then, upon the written request of Tenant, the face amount of the Letter of Credit may be reduced to $70,000.00, and immediately upon delivery to Landlord of a satisfactory replacement Letter of Credit in such reduced face amount but meeting all of the other requirements of this Exhibit “M,” the then existing Letter of Credit will be deemed canceled and shall be returned to Tenant.

 

For purposes of this Section 9, “monetary Event of Default” shall mean late payment of Rent.

 

4


 

SCHEDULE 1

TO

EXHIBIT “M” OF THE LEASE

 

FORM OF LETTER OF CREDIT

 

[LETTERHEAD OF ISSUING BANK]

 

IRREVOCABLE STANDBY LETTER

DATE OF ISSUANCE:                                           

OF CREDIT NO:

                    

EXPIRATION DATE:

                                

 

 

BENEFICIARY:

APPLICANT:

 

 

(LANDLORD)

 

(TENANT)

 

 

 

 

 

 

 

 

 

 

AS THE ISSUING BANK (“ISSUER”), WE HEREBY ESTABLISH THIS IRREVOCABLE STANDBY LETTER OF CREDIT NO.                  IN FAVOR OF THE ABOVE-NAMED BENEFICIARY (“BENEFICIARY”) FOR THE ACCOUNT OF THE ABOVE-NAMED APPLICANT (“APPLICANT”) IN THE AMOUNT OF USD $                 (                                               U.S. DOLLARS).

 

BENEFICIARY MAY DRAW ALL OR ANY PORTION OF THIS LETTER OF CREDIT AT ANY TIME AND FROM TIME TO TIME AND ISSUER WILL MAKE FUNDS IMMEDIATELY AVAILABLE TO BENEFICIARY UPON PRESENTATION OF BENEFICIARY’S DRAFT(S) AT SIGHT IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT “A”) (“SIGHT DRAFT”), DRAWN ON ISSUER AND ACCOMPANIED BY THIS LETTER OF CREDIT.  ALL SIGHT DRAFT(S) MUST BE SIGNED AND ENDORSED ON BEHALF OF BENEFICIARY AND SIGNATOR MUST INDICATE HIS OR HER TITLE OR OTHER OFFICIAL CAPACITY.  NO OTHER DOCUMENTS WILL BE REQUIRED TO BE PRESENTED.  THE ISSUER WILL EFFECT PAYMENT UNDER THIS LETTER OF CREDIT WITHIN 24 HOURS AFTER PRESENTMENT OF THE SIGHT DRAFT(S).

 

ISSUER WILL HONOR ANY SIGHT DRAFT(S) PRESENTED IN SUBSTANTIAL COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT AT THE ISSUER’S LETTERHEAD OFFICE, THE OFFICE LOCATED AT                                                     OR ANY OTHER FULL SERVICE OFFICE OF THE ISSUER ON OR BEFORE THE ABOVE STATED EXPIRATION DATE, AS SUCH EXPIRATION DATE MAY BE EXTENDED HEREUNDER.  PARTIAL AND MULTIPLE DRAWS AND PRESENTATIONS ARE PERMITTED ON ANY NUMBER OF OCCASIONS.  FOLLOWING ANY PARTIAL DRAW, ISSUER WILL ENDORSE THIS LETTER OF CREDIT AND RETURN THE ORIGINAL TO BENEFICIARY.

 

ISSUER ACKNOWLEDGES THAT THIS LETTER OF CREDIT IS ISSUED PURSUANT TO THE PROVISIONS OF THAT CERTAIN OFFICE LEASE AGREEMENT BETWEEN THE BENEFICIARY AND THE APPLICANT FOR SPACE LOCATED AT                                                                                                                                                                    (“LEASE”).  NOTWITHSTANDING ANY REFERENCE IN THIS LETTER OF CREDIT TO THIS LEASE OR ANY OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS, OR REFERENCES IN THIS LEASE OR ANY OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS TO THIS LETTER OF CREDIT, THIS LETTER OF CREDIT CONTAINS THE ENTIRE AGREEMENT BETWEEN BENEFICIARY AND ISSUER RELATING TO THE OBLIGATIONS OF ISSUER HEREUNDER.

 

1



 

THIS LETTER OF CREDIT WILL BE AUTOMATICALLY EXTENDED EACH YEAR WITHOUT AMENDMENT FOR A PERIOD OF ONE YEAR FROM THE EXPIRATION DATE HEREOF, AS EXTENDED, UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE EXPIRATION DATE, ISSUER NOTIFIES BENEFICIARY BY REGISTERED MAIL THAT IT ELECTS NOT TO EXTEND THIS LETTER OF CREDIT FOR SUCH ADDITIONAL PERIOD.  NOTICE OF NON-EXTENSION WILL BE GIVEN BY ISSUER TO BENEFICIARY AT BENEFICIARY’S ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS AS BENEFICIARY MAY DESIGNATE TO ISSUER IN WRITING AT ISSUER’S LETTERHEAD ADDRESS

 

THIS LETTER OF CREDIT IS FREELY TRANSFERABLE IN WHOLE OR IN PART, AND THE NUMBER OF TRANSFERS IS UNLIMITED.  ISSUER AGREES THAT IT WILL EFFECT ANY TRANSFERS IMMEDIATELY UPON PRESENTATION TO ISSUER THIS LETTER OF CREDIT AND A WRITTEN TRANSFER REQUEST SUBSTANTIALLY IN THE FORM OF THE COMPLETED TRANSFER FORM ATTACHED HERETO AS EXHIBIT “B.”  SUCH TRANSFER WILL BE EFFECTED AT NO COST TO BENEFICIARY.  ANY TRANSFER FEES ASSESSED BY ISSUER WILL BE PAYABLE SOLELY BY APPLICANT, AND THE PAYMENT OF ANY TRANSFER FEES WILL NOT BE A CONDITION TO THE VALIDITY OR EFFECTIVENESS OF THE TRANSFER OR THIS LETTER OF CREDIT.

 

ISSUER WAIVES ANY RIGHTS IT MAY HAVE, AT LAW OR OTHERWISE, TO SUBROGATE TO ANY CLAIMS BENEFICIARY MAY HAVE AGAINST APPLICANT OR APPLICANT MAY HAVE AGAINST BENEFICIARY.

 

EXCEPT AS OTHERWISE EXPRESSLY MODIFIED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES 1998, PUBLISHED BY THE INTERNATIONAL CHAMBER OF COMMERCE.

 

 

ISSUER:

 

 

 

By:

 

 

AUTHORIZED SIGNATURE

 

 

 

Its:

 

 

2



 

EXHIBIT “A”

TO LETTER OF CREDIT

 

SIGHT DRAFT

 

Sight Draft

 

$                        

 

At sight, pay to the order of [Name of Beneficiary to be inserted], the amount of USD $                 (                              and 00/100ths U.S. Dollars).

 

Drawn under [Name of Issuer to be inserted] Standby Letter of Credit No.                       .

 

 

Dated:                  , 20              

 

 

 

[Name of Beneficiary to be inserted]

 

 

 

By:

 

 

 

Its Authorized Representative and [Title

 

 

or Other Official Capacity to be inserted]

 

 

To:

[Name and Address of Issuer to be inserted]

 

 

1



 

EXHIBIT “B”

TO LETTER OF CREDIT

 

FORM OF TRANSFER REQUEST

 

IRREVOCABLE STANDBY LETTER OF

 

CREDIT NO:

                                                 

 

 

 

CURRENT BENEFICIARY:

APPLICANT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TO:

[NAME OF ISSUING BANK]

 

 

The undersigned, as the current “Beneficiary” of the above referenced Letter of Credit, hereby requests that you reissue the Letter of Credit in favor of the transferee named below [INSERT TRANSFEREE NAME AND ADDRESS BELOW]:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From and after the date this transfer request is delivered to the Issuer, the transferee shall be the “Beneficiary” under the Letter of Credit for all purposes and shall be entitled to exercise and enjoy all of the rights, privileges and benefits thereof.

 

 

DATED:

[NAME OF BENEFICIARY]

 

 

 

By

 

 

Name

 

 

Title

 

 

 

 

[NOTARY ACKNOWLEDGMENT]

 

[TO BE SIGNED BY A PERSON PURPORTING TO BE AN AUTHORIZED REPRESENTATIVE OF THE BENEFICIARY AND INDICATING THEIR TITLE OR OTHER OFFICIAL CAPACITY, AND ACKNOWLEDGED BY A NOTARY PUBLIC.]

 

1



 

EXHIBIT “N”

 

LABORATORY USE RIDER

 

In the event Tenant uses all or any portion of the Premises for a laboratory for research and development of medicine and drugs, and/or any ancillary uses related thereto as described in Section 4 of this Lease above, then Tenant shall at all times thereafter comply with the terms of this Laboratory Use Rider.

 

Compliance with Laws .  Tenant shall comply with all Laws applicable to Tenant’s use or occupancy of the Premises, including without limitation, the rules and regulations promulgated by the Illinois Department of Public Health, and any other governmental bodies and authorities which regulate laboratory facilities in the State of Illinois.

 

Special Prohibited Uses .  Without limitation, Tenant shall not use the Premises or allow the Premises to be used for: (1) the operation of any medical offices seeing patients; (2) the operation of any type of clinic; (3) the performance of studies, tests, or trials that allow participants to enter and/or exit the Premises; or (4) any use which in Landlord’s reasonable judgment would materially adversely affect the image, use or operation of the Property.

 

Medical Waste Policy .  Prior to operating a laboratory in the Premises, to the extent any hazardous medical waste will be generated, Tenant shall furnish to Landlord a written policy (the “ Medical Waste Policy ”) concerning the identification, collection, storage, decontamination and disposal of “hazardous medical waste” at the Premises, which Medical Waste Policy shall be subject to the written approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) and once approved by Landlord shall not be amended or modified without the further written approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed).  Except for normal and ordinary hazardous materials used in an office environment in normal and ordinary types and amounts (such as lubricants, solvents, copier toner, white out, etc.), Tenant agrees that such Medical Waste Policy shall incorporate the following elements:  (i) Tenant and its employees and agents shall be expressly forbidden from disposing of any hazardous medical waste within the Premises or the Property in a manner which is contrary to the terms of the Medical Waste Policy; (ii) all such hazardous medical waste will be collected, stored, decontaminated and removed from the Premises and the Property by a qualified party in compliance with all applicable Laws (including, without limitation, those of the Illinois Department of Public Health and the Occupational Safety and Health Act) of the City of Evanston, County of Cook, State of Illinois, the Center for Disease Control and any other local, state or federal agency having jurisdiction over this matter; and (iii) Tenant shall at all times employ proper procedures, including, without limitation, the use of tags, signs or other appropriate written communication, to prevent accidental injury or illness to other tenants in the Building (including their employees, agents and invitees) resulting from Tenant’s collection, storage, decontamination and disposal of hazardous medical waste.  Tenant agrees that at all times during the Term, Tenant and its employees and agents shall adhere to the terms and conditions of the Medical Waste Policy.  For purposes of this paragraph, “hazardous medical waste” shall include, but not be limited to, the following: any potentially infectious materials; blood and other body fluids in any form (including, without limitation, lab specimens); any material contaminated by potentially infectious materials or by blood or other body fluids; scalpels, needles and syringes; gloves and other disposable protective clothing or devices; contaminated linen; uniforms or laundry; and cleaning equipment or materials used to clean any of the foregoing.

 

Laboratory Equipment .  No electrical or electronic or electromagnetic or similar equipment or machines or devices shall be installed or used in the Premises unless the same is properly electrically filtered and insulated so that there is no interference in the Property with telephonic, video, fiber optic, data processing, radio, television or other communication, transmission or reception.  All walls, ceilings, floors and doors of any room used for any such use shall be properly shielded to the extent required to comply with any applicable federal, state and local laws, ordinances, rules and regulations. Notwithstanding anything in this Lease to the contrary, any and all specialized equipment related to Tenant’s laboratory use at the Premises must be approved in writing by Landlord before being brought into, installed or used in the Premises, and Tenant shall remove any and all such equipment upon the expiration or sooner termination of the Term (and repair any damage caused by such removal).

 

Noise, Vibration, and Odors.  Tenant shall not allow or permit any excessive vibration, noise or odor to emanate from the Premises, or any machine or other installation therein, or otherwise allow or permit the same to

 

1



 

constitute a disturbance or nuisance to occupants of the Property. Furthermore, the Premises shall not be used for any purpose which creates strong, unusual, or offensive odors, fumes, dust or vapors, including any such odors, fumes, dust or vapors caused by the heating, burning or other use of chemicals in the Premises.

 

Licensing .  Tenant represents that it is and will be licensed to operate the Permitted Use in the Premises at all times, and Tenant agrees to obtain and maintain at all times, at its expense, all requisite permits and/or licenses in connection therewith and shall furnish copies of same to Landlord upon request.  Landlord shall in no event be obligated to make any additions, alterations or improvements to the Property, or to increase or alter any existing management function or procedure for the Property, which may be required by any governmental authority as a condition precedent to the issuance or renewal of any such permit or license, any and all such required additions, alterations or improvements to be made, at Tenant’s sole expense, subject to the terms and provisions of this Lease.

 

Floor Loading .  Tenant agrees not to overload the floor(s) of the Building.  Subject to applicable Laws, Tenant, at its expense, may reinforce certain areas within the Premises.  The actual areas to be reinforced and the plans and specifications for such reinforcement shall be subject to Landlord’s prior written approval (which approval shall not be unreasonably withheld, conditioned or delayed).  Tenant shall also pay the fees of any structural engineer engaged by Landlord to review Tenant’s structural reinforcement plans and specifications, unless Tenant engages Landlord’s designated structural engineers for the Property to provide the structural engineering drawings and services for the Tenant Improvements.

 

Insurance .  Tenant shall not knowingly conduct or permit to be conducted in the Premises any activity, or place any equipment in or about the Premises or the Building, which will invalidate the insurance coverage in effect or increase the rate of fire insurance or other insurance on the Premises or the Building.  If any invalidation of coverage or increase in the rate of fire insurance or other insurance occurs or is threatened by any insurance company due to activity conducted from the Premises, or any act or omission by Tenant, or its agents, employees, representatives, or contractors, such statement or threat shall be conclusive evidence that the increase in such rate is due to such act of Tenant or the contents or equipment in or about the Premises, and, as a result thereof, Tenant shall be in default and liable therefor, including (without limitation) for the costs of any premium increase and such increase shall be considered additional Rent payable with the next monthly installment of Base Rental due under this Lease, and Landlord’s acceptance of such amount shall not waive any of Landlord’s other rights.

 

In addition to the insurance requirements described in Section 20 and Section 21 of this Lease, Tenant shall maintain Pollution or Environmental Impairment Insurance covering: (1) first-party costs for cleanup and remediation; (2) third party liability for bodily injury; and (3) property damage on-site and off-site, with limits of no less than one million ($1,000,000) per occurrence.  This policy shall name the Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds.  Further, this policy shall provide for loss of rental income for up to 12 months (e.g. in the event of extensive remediation).

 

Hazardous Materials .  Without limiting the terms and conditions of Section 16 of this Lease, in no event shall Tenant introduce or permit to be kept on the Premises or brought into the Building any dangerous, noxious, radioactive or explosive substance, unless in accordance with the Medical Waste Policy or otherwise expressly approved in writing by Landlord.  Tenant hereby indemnifies Landlord, its agents and employees, from any judgment, loss or claim, including attorney’s fees incurred in defending against any such loss or claim entered against, incurred or sustained by any or either of them as the result of any injury to any individual or entity occasioned by contact with or exposure to any infectious, infected, dangerous, noxious, radioactive, explosive, hazardous or contaminated material, substance or thing utilized, applied, removed or received by Tenant, its agents, employees, concessionaires, or invitees.

 

Alterations Related to Laboratory Use .  Notwithstanding anything contained in Section 15 of this Lease to the contrary, (i) Tenant shall make no Alterations related to Tenant’s laboratory use at the Premises without the prior written consent of Landlord, and (ii) with respect any Alterations related to Tenant’s laboratory use at the Premises, Tenant shall remove all such Alterations upon the expiration or sooner termination of the Term in a good and workmanlike manner and upon such removal Tenant shall restore the Premises to its original condition prior to the installation of such Alterations (including, without limitation, restoring the Premises to Building standard office finishes and mechanical, electrical and plumbing systems).

 

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Janitorial .  Without limiting the terms and conditions of the Medical Waste Policy described above, at Tenant’s sole cost and expense, Tenant shall provide cleaning and janitorial services with respect to any laboratory space in the Premises, at a level comparable to that provided in similar first class office buildings in the Market Area.  Notwithstanding anything contained in the Lease to the contrary, Landlord shall not be required to provide cleaning and janitorial services with respect to any laboratory space in the Premises.  Landlord must approve in advance the scope and provider of such cleaning or janitorial services, including any contract therefor.  Any such service provider shall be licensed and reputable and shall maintain, at its own expense, insurance coverage against such risks with such companies as Landlord may reasonably require, in amounts no less than: (i) Commercial General Liability insurance on an occurrence basis in amounts not less than $2,000,000 ($1,000,000 of which may be in excess umbrella coverage) naming Landlord, FSP Property Management LLC, any mortgagee designated by Landlord and the building management company, if any, as additional insureds; (ii) workers’ compensation insurance in amounts required by statute; and (iii) Business Automobile Liability insurance on an occurrence basis in amounts not less than $1,000,000.  Tenant shall provide Landlord with insurance certificates evidencing the above coverage, identities, mailing addresses and telephone numbers for any such service provider prior to commencement of any services.  Each insurance certificate will contain a provision that no cancellation or material change in the policies will be effective except upon thirty (30) days prior written notice.  Any such service provider shall (i) comply with all Laws and Landlord’s waste practices, (ii) not interrupt or interfere with other tenants, (iii) use care and consideration for others on the Property when using any public areas, (iv) prohibit abusive language or actions on the part of its workers, and (v) require all workers to wear company identification.  Landlord and its building manager reserve the right to implement additional rules and regulations applicable to any service provider.

 

Excessive Use of Building Systems, Services or Common Areas .  Tenant’s use and occupancy of the Premises (including, without limitation, Tenant’s use of all or any portion of the Premises for a laboratory) shall not in any manner:  (i) cause the design loads for the Building or the systems providing exhaust, heating, cooling, ventilation, electrical (including, without limitation, as provided in Section 9(a)(6)  of this Lease), life safety, water, sewer or other utility or safety services to the Building (collectively, the “ Systems ”) to be exceeded, (ii) adversely affect the Building or the operation of said Systems in the Premises or the Building or cause deterioration or damage to the Building or to such Systems, or (iii) result in excessive use of any Building services or Common Areas.  If Landlord determines, in Landlord’s reasonable judgment, that Tenant’s use or occupancy of the Premises (including, without limitation, Tenant’s use of all or any portion of the Premises for a laboratory) (i) will cause (or have caused) the design loads for the Building or the Systems or other utility or safety services to the Building to be exceeded, (ii) will adversely affect (or have adversely affected) the Building or the operation of said Systems in the Premises or the Building or will cause (or have caused) deterioration or damages to the Building or to such Systems, or (iii) will result (or have resulted) in excessive use of any Building services or Common Areas, then Landlord shall deliver written notice thereof to Tenant and Tenant shall (X) temper such excess loads and correct, repair and restore the portion of the Building or Systems so affected in a timely and expeditious manner by installing supplementary structural support, exhaust, heating, cooling, ventilation, electrical, life safety, water, sewer or other utility or safety systems in the Premises or elsewhere in the Building where necessary at the sole cost of Tenant, including, without limitation, the cost of preparing and submitting to Landlord for review and approval working drawings and specifications (plus fifteen percent (15%) of such cost as an overhead and supervision fee payable to Landlord) from time to time as the work progresses as additional Rent within ten (10) days after Landlord’s written demand therefor, from time to time, and/or (Y) reimburse Landlord within ten (10) days after Landlord’s written demand, from time to time, for any incremental cost resulting from such excess use of the Building services or Common Areas.  Any expense to Landlord resulting from the operation, repair, maintenance, replacement and removal of any such supplementary structural support, or Systems  or other utility or safety systems, including rent for space occupied by any such supplementary structural support or Systems or other utility or safety systems installed outside the Premises, shall be borne exclusively by Tenant and shall be paid by Tenant to Landlord as additional Rent at rates fixed by Landlord from time to time.  Without limiting the foregoing, Section 9(b)  of this Lease will continue to apply in the event Landlord agrees to provide any additional services at the specific request of Tenant as a result of its laboratory use at the Premises, without implying any obligation on the part of Landlord to do so.

 

3




Exhibit 21.1

 

Subsidiaries of Aptinyx Inc.

 

None.

 




Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the use in this Registration Statement on Form S-1 of our report dated March 30, 2018 relating to the financial statements of Aptinyx Inc. appearing in the Prospectus, which is part of such Registration Statement.

 

We also consent to the reference to us under the heading “Experts” in such Prospectus.

 

 

/s/ Deloitte & Touche LLP

 

 

 

Chicago, Illinois

 

May 23, 2018