Table of Contents

As filed with the Securities and Exchange Commission on January 10, 2014.

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

under

THE SECURITIES ACT OF 1933

 

 

APPLIED GENETIC TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   2836   59-3553710

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code No.)

 

(I.R.S. Employer

Identification No.)

11801 Research Drive, Suite D

Alachua, Florida 32615

(386) 462-2204

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

 

 

Susan B. Washer

President and Chief Executive Officer

11801 Research Drive, Suite D

Alachua, Florida 32615

(386) 462-2204

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Robert W. Sweet, Jr., Esq.

Hemmie Chang, Esq.

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, MA 02110

(617) 832-1000

 

Divakar Gupta, Esq.

Peter N. Handrinos, Esq.

Latham & Watkins LLP

811 Main Street

Suite 3700

Houston, TX 77002

(713) 546-5400

 

 

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

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 (the “Securities Act”) please check the following box.   ¨

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.   ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) 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.   ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

 

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

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

  Proposed
maximum
aggregate
offering price (1)
 

Amount of

registration fee (2)

Common Stock, par value $0.001 per share

  $70,000,000   $9,016

 

 

(1) Estimated solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. Includes the offering price attributable to shares that the underwriters have the option to purchase from the registrant and the selling stockholders solely to cover over-allotments, if any.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

 

 

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

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, dated January 10, 2014

 

PR OSPECTUS

 

 

                 Shares

 

LOGO

Applied Genetic Technologies Corporation

Common Stock

 

 

This is the initial public offering of the common stock of Applied Genetic Technologies Corporation. We are offering              shares of our common stock. No public market currently exists for our common stock.

We have applied to list our shares of common stock on the NASDAQ Global Market under the symbol “AGTC.”

We anticipate that the initial public offering price will be between $         and $         per share.

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

Investing in our common stock involves risks. See “ Risk Factors ” beginning on page 12 of this prospectus.

 

     Per share      Total  

Initial public offering price

   $                    $                

Underwriting discounts and commissions(1)

   $         $     

Proceeds to us (before expenses)

   $         $     

 

(1) We refer you to “Underwriting” beginning on page 159 of this prospectus for additional information regarding total underwriter compensation.

We have granted the underwriters the option to purchase              additional shares of common stock on the same terms and conditions set forth above if the underwriters sell more than              shares of common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                 , 2014.

 

 

 

Barclays   BMO Capital Markets

 

 

 

Wedbush PacGrow Life Sciences   

Cantor Fitzgerald

  

Roth Capital Partners

Prospectus dated                 , 2014.


Table of Contents

Table of Contents

 

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     12   

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     55   

USE OF PROCEEDS

     56   

DIVIDEND POLICY

     57   

CAPITALIZATION

     58   

DILUTION

     60   

SELECTED FINANCIAL DATA

     62   

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

     63   

OUR BUSINESS

     84   

MANAGEMENT

     126   

EXECUTIVE COMPENSATION

     132   

RELATED PERSON TRANSACTIONS

     143   

PRINCIPAL STOCKHOLDERS

     146   

DESCRIPTION OF CAPITAL STOCK

     149   

SHARES ELIGIBLE FOR FUTURE SALE

     152   

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

     155   

UNDERWRITING

     159   

LEGAL MATTERS

     166   

EXPERTS

     166   

WHERE YOU CAN FIND MORE INFORMATION

     166   

INDEX TO FINANCIAL STATEMENTS

     F-1   

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf or to which we have referred you. We and the underwriters have not authorized anyone to provide you with information that is different. We and the underwriters are offering to sell shares of our common stock, and seeking offers to buy shares of our common stock, only in jurisdictions where such offers and sales are permitted. Regardless of the time of delivery of this prospectus or any free writing prospectus or any sale of our common stock, the information in this prospectus is accurate only as of the date of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.

Until                 , 25 days after the date of this prospectus, 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 requirement is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have taken any action to permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any free writing prospectus outside of the United States.

Estimates in this prospectus of the patient populations for the diseases that we are targeting are based on published estimates of the rates of incidence of the diseases from scientific and general publications and research, surveys and studies conducted by third parties that we consider to be reliable, although such publications do not guarantee the accuracy or completeness of such information. We assume populations of approximately 300 million persons in the United States and approximately 500 million persons in Europe.


Table of Contents

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our financial statements and related notes and the risk factors beginning on page 12 before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms “AGTC,” “Company,” “we,” “us” and “our” in this prospectus to refer to Applied Genetic Technologies Corporation.

Overview

We are a clinical-stage biotechnology company that uses our proprietary gene therapy platform to develop products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology. Our lead product candidates, which are each in the preclinical stage, focus on rare diseases of the eye, caused by mutations in single genes, that significantly affect visual function and currently lack effective medical treatments. We have also obtained preliminary evidence of the safety and efficacy of our gene therapy approach in clinical-stage programs involving other diseases outside our current area of focus that we believe provide proof of concept for our gene therapy platform.

Our gene therapy approach uses a viral vector to deliver a functional copy of a gene to the patient’s own cells through a variety of delivery methods. A viral vector is a virus that has been modified to carry a gene and deliver it to a cell. Our viral vectors utilize a modified version of a non-replicating strain of virus known as an adeno-associated virus, or AAV, which is incapable of causing disease in humans. When an AAV vector containing a functional copy of a gene is administered, the functional genetic material resides in the nucleus of the patient’s cell, providing safe, sustained expression of the therapeutic protein to treat the disease without modifying the existing DNA of the patient.

We have developed extensive internal expertise in viral vector design, delivery and manufacturing that is supported by a broad intellectual property estate. Our proprietary AAV vector manufacturing process is both reproducible and scalable. We have assembled an experienced management team and a world-class group of scientific advisors, and we have strong collaborative relationships with key opinion leaders in the field of gene therapy. Combining these attributes, we have built a gene therapy platform that we believe will provide patients with treatments that may have life-long clinical benefits, potentially based on a one-time therapeutic administration.

Our product pipeline

Our lead product candidates are designed to treat:

 

   

X-linked retinoschisis, or XLRS . XLRS is an inherited retinal disease caused by mutations in the RS1 gene, which encodes the retinoschisin protein. It is characterized by abnormal splitting of the layers of the retina, resulting in poor visual acuity in young boys, which can progress to legal blindness in adult men. In preclinical studies, treatment by injection of our XLRS product candidate in mice improved responses to light in the retina and visual acuity. In late 2014, we plan to submit an Investigational New Drug Application, or IND, to the United States Food and Drug Administration, or FDA, and to initiate a Phase 1/2 clinical trial in XLRS, with initial clinical data expected in mid-2015.

 

   

Achromatopsia, or ACHM . ACHM is an inherited retinal disease, which is present from birth and is characterized by the lack of cone photoreceptor function. The condition results in markedly reduced visual acuity, light sensitivity, day blindness and complete loss of color discrimination. Best-corrected visual acuity in persons affected by ACHM, even under subdued light conditions, is usually about 20/200, a level at which people are considered legally blind. Preclinical studies in both mouse and dog models of our

 

- 1 -


Table of Contents
 

ACHM product candidate have shown the ability to restore photoreceptor function, improve visual acuity and mitigate light sensitivity and day blindness. In early 2015, we plan to submit an IND and to initiate a Phase 1/2 clinical trial in one form of ACHM, with initial clinical data expected in late 2015.

 

   

X-linked retinitis pigmentosa, or XLRP . XLRP is an inherited retinal dystrophy characterized by the progressive loss of vision, one form of which is caused by mutations in the RPGR gene, which encodes a protein essential for normal vision. It is commonly first observed in young men, who notice problems with vision under low light conditions, or night blindness, followed by tunnel vision, leading to poor central vision and eventual total blindness. A preclinical study in a dog model of XLRP caused by mutations in the RPGR gene demonstrated a delay in the rate of disease progression in dogs that received a subretinal injection of our XLRP product candidate.

We initially developed our gene therapy platform in clinical-stage proof-of-concept programs involving three other diseases:

 

   

Leber congenital amaurosis (type 2), or LCA2, an orphan eye disease caused by mutation in the RPE65 gene;

 

   

the wet form of age-related macular degeneration, or wet AMD, an eye disease affecting a large patient population; and

 

   

Alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease.

While not our principal focus at this time, these proof-of-concept programs are important because they have provided initial evidence of safety and efficacy of our gene therapy approach in both preclinical studies and clinical trials. They have also enabled us to develop substantial experience in vector design, delivery and manufacturing, clinical trial design and conduct, and in working with clinical investigators and regulatory agencies. In these proof-of-concept programs, our manufacturing process has been successfully vetted by regulatory agencies and partners and we have demonstrated our ability to produce clinical material for multiple studies.

In clinical trials conducted by our licensee Genzyme Corporation, or Genzyme, up to 34 patients with wet AMD were treated by intravitreal injection of an AAV vector, and in other trials conducted by us and others, more than 50 patients with LCA2 have been treated with subretinal injections of AAV vectors, in both cases without reports of serious adverse events attributed to the vector, and with promising indications of efficacy for LCA2 patients. See “Business—Strategic collaborations—Our license to Genzyme.” We believe our AAT deficiency program provides proof of concept for the use of our gene therapy platform in indications outside our focus area of orphan ophthalmology. We have conducted Phase 1 and Phase 2 clinical trials for our AAT deficiency product candidate in 30 patients and expect to start a Phase 2b trial in early 2015, with initial clinical data expected in mid-2015.

 

- 2 -


Table of Contents

The chart below summarizes our current gene therapy programs:

 

LOGO

Our gene therapy platform

Our gene therapy platform is built on our core competencies in three key areas: vector selection and design, vector manufacturing and vector delivery:

Vector selection and design. The success of a gene therapy platform is highly dependent on the vector selected. Our gene therapy platform is based on viral vectors that utilize a modified version of the non-replicating adeno-associated virus to deliver a functional copy of a gene to the patient’s own cells. We believe that AAV vectors are particularly well-suited for treating our target diseases and offer advantages including safety, stability and sustained expression compared with viral vectors such as adenovirus, herpes virus and lentivirus used by others. AAV vectors can carry genes of up to 4,000 base pairs in length, a carrying capacity sufficient to accommodate more than 90% of human genes.

One of our key capabilities is our understanding of the complex interplay between the clinical disease, the cells in the patient’s body that need treatment, the selection of the protein shell, or capsid, and a promoter, the design of the gene construct and the physical administration method. We have spent years

 

- 3 -


Table of Contents

conducting research on the best combinations of these elements with the aim of developing safe and effective gene therapy treatments.

Vector manufacturing. We have developed a proprietary, high-yield vector manufacturing process using scalable technologies, which addresses problems of low productivity and low efficacy that have historically plagued efforts to manufacture AAV vectors and enables us to produce vectors with improved potency, efficiency and safety over processes previously used by us and others.

Our manufacturing process has been reviewed by both the FDA and the European Medicines Agency, or EMA, has been authorized for production of product candidates for use in clinical trials in the United States and Europe and has been transferred successfully to Genzyme and to our contract manufacturing organization. We hold or have licensed 80 issued and 28 pending patents covering our manufacturing technology. We believe that our core competency and intellectual property estate in vector manufacturing differentiate us competitively and provide a key element of our gene therapy platform.

Vector delivery. Our gene therapy platform allows for vector delivery by a variety of methods, and we select the method that is most beneficial for the disease we are targeting. In ophthalmology, the product candidate can best be delivered to cells in the eye by injection. For other indications, such as AAT deficiency, we plan to administer the product candidate by intramuscular injection or vascular delivery. These methods of administration are well-established for the safe and effective delivery of other drugs and protein products.

Because our AAV vectors can be used to introduce functional genes into many different cell types and by a variety of delivery methods and have a carrying capacity sufficient to accommodate most of the individual genes in the human genome, our gene therapy platform has the potential to provide treatments for many other diseases outside of our current focus on orphan ophthalmology, including those with large dosing requirements or in larger markets. We have already conducted preclinical proof-of-concept studies and Phase 1 and Phase 2 clinical trials of a treatment for AAT deficiency. We expect to explore other therapeutic areas selectively, either alone or through partnerships.

Our focus on orphan ophthalmology

We focus on orphan ophthalmology because we believe there is a significant unmet medical need in orphan eye diseases that provides an attractive business opportunity. The prevalence of the diseases we are pursuing is large by orphan standards, but small enough to permit clinical trials on a manageable scale and to provide markets that we believe can be served using a small, targeted commercial infrastructure. The eye diseases we are targeting are also of interest to us due to a number of factors that have enabled us to predict the potential safety and efficacy of our product candidates at an early stage of development:

 

   

these diseases involve well-understood disease mechanisms;

 

   

these are monogenic diseases, meaning they are caused by mutations in a single gene, which mitigates the uncertainty of disease biology;

 

   

highly predictive animal models are available;

 

   

local delivery of the therapeutic agent is possible via methods already widely used in ophthalmology;

 

   

these diseases have clearly defined clinical endpoints that have been accepted by regulatory agencies in review of other ophthalmology products; and

 

   

we anticipate a short time to meaningful clinical data.

 

- 4 -


Table of Contents

Our strategy

Our objective is to become the world leader in developing and commercializing gene therapy treatments for inherited orphan diseases in ophthalmology, for which there are no currently available treatments, and to thereby provide a better life for people with these diseases. Our strategy to accomplish this goal is to:

 

   

develop and commercialize drugs in orphan ophthalmology;

 

   

continue our leadership position in orphan ophthalmology;

 

   

extend our expertise in AAV vector selection and design, delivery and manufacturing;

 

   

pursue monogenic orphan indications with high unmet medical need and greater probability of clinical, regulatory and commercial success; and

 

   

develop and partner selectively to expand the scope of our pipeline and the utilization of our gene therapy platform.

Recent developments

On November 15, 2012, we entered into a Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement, or Series B Purchase Agreement, with the holders of our issued and outstanding Series B-1 and Series B-2 preferred stock, or Series B holders. Pursuant to the Series B Purchase Agreement, such Series B holders were entitled to purchase an aggregate of 58,816,897 shares of our Series B-3 preferred stock, or Series B-3 shares, for an aggregate of $10.7 million. The Series B holders exercised this right and we completed the sale of these Series B-3 shares on November 5, 2013.

Risks associated with our business

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in the section entitled “Risk Factors” beginning on page 12 of this prospectus. You are encouraged to read that section in its entirety before making an investment decision. These risks include, but are not limited to, the following:

 

   

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

 

   

Our ability to generate revenue from product sales is highly uncertain and we may never achieve or sustain profitability.

 

   

In order to obtain regulatory approval for and commercialize our product candidates we will need to raise additional funding in the future, which may not be available on acceptable terms, or at all.

 

   

All of our product candidates are in preclinical or clinical development. Clinical drug development is expensive, time consuming and uncertain, and we may ultimately not be able to obtain regulatory approvals for the commercialization of some or all of our product candidates.

 

   

Our gene therapy product candidates are based on a novel technology, no gene therapy products have been approved in the United States and only one such product has been approved in Europe, which makes it difficult to predict the time and cost of product candidate development and regulatory approval.

 

   

Success in animal studies or early clinical trials may not be indicative of results obtained in later trials.

 

   

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

 

   

Even if we complete the necessary clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a more narrow indication than we expect.

 

- 5 -


Table of Contents
   

We expect to rely on third parties to conduct, supervise and monitor our clinical trials and to conduct certain aspects of our product manufacturing and protocol development, and if these third parties perform in an unsatisfactory manner, it may harm our business.

 

   

The insurance coverage and reimbursement status of our product candidates is uncertain, and failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

 

   

Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business, raise additional funding, obtain regulatory approvals or achieve market acceptance for our product candidates.

 

   

If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Corporate information

We were incorporated in Florida in January 1999 and reincorporated in Delaware in October 2003. Our principal executive offices are located at 11801 Research Drive, Suite D, Alachua, Florida 32615, and our telephone number is (386) 462-2204. Our corporate website address is www.agtc.com. Information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

We use “AGTC” and the double helix logo as trademarks in the United States and other countries. We have begun the registration process for these trademarks in the United States.

This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork, and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any such companies.

Implications of being an emerging growth company

As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, 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” disclosure;

 

   

reduced disclosure about our executive compensation arrangements;

 

   

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

 

   

exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting.

 

 

- 6 -


Table of Contents

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 would cease to be an emerging growth company if we have more than $1 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

- 7 -


Table of Contents

The Offering

 

Common stock offered by AGTC

                 shares

 

Common stock to be outstanding after this offering

                 shares (                 shares in the event the underwriters elect to exercise in full their over-allotment option to purchase additional shares from us)

 

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $         million, or approximately $         million if the underwriters exercise in full their over-allotment option, based on the initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We plan to use the net proceeds from this offering to extend development of our XLRS and ACHM product candidates beyond Phase 1/2 trials (which we believe are already adequately funded), and if successful to initiate pivotal Phase 3 trials for these product candidates, to continue preclinical studies of our XLRP product candidate and to explore in early preclinical studies potential applications of our gene therapy platform in other indications in orphan ophthalmology. We intend to use remaining amounts for working capital and other general corporate purposes. We may also use a portion of the net proceeds to in-license, acquire or invest in complementary gene therapy businesses, technologies, products or assets, as well as to selectively explore potential applications of our gene therapy platform in indications outside of orphan ophthalmology. See “Use of Proceeds.”

 

Risk factors

You should read the “Risk Factors” section and other information included in this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.

 

Proposed NASDAQ Global Market symbol

“AGTC”

 

The number of shares of our common stock to be outstanding after this offering set forth above is based on the 3,816,836 shares of our common stock outstanding as of September 30, 2013, gives effect to the issuance of 58,816,897 shares of our Series B-3 preferred stock, which occurred on November 5, 2013, and assumes the conversion of all outstanding shares of our preferred stock, including the Series B-3 shares, into 319,203,488 shares of common stock upon the closing of this offering.

The number of shares of common stock to be outstanding after this offering excludes:

 

   

2,425,928 shares of common stock issuable upon the exercise of preferred stock warrants outstanding as of September 30, 2013, at a weighted average exercise price of $0.26 per share;

 

   

27,404,184 shares of common stock issuable upon the exercise of stock options outstanding under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan as of September 30, 2013, at a weighted average exercise price of $0.09 per share;

 

- 8 -


Table of Contents
   

2,221,300 shares of common stock available for future issuance under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan as of September 30, 2013; and

 

   

an additional              shares of our common stock that will be made available for future issuance under our equity compensation plans upon the closing of this offering.

Except as otherwise noted, all information in this prospectus:

 

   

gives effect to a 1-for-     reverse split of our common stock effected on         ;

 

   

assumes no exercise of outstanding options or warrants described above;

 

   

assumes no exercise by the underwriters of their over-allotment option to purchase          additional shares of common stock from us;

 

   

gives effect to the issuance of 58,816,897 shares of our Series B-3 preferred stock, which occurred on November 5, 2013;

 

   

gives effect to the automatic conversion of all outstanding shares of our preferred stock into 319,203,488 shares of our common stock upon the closing of this offering; and

 

   

gives effect to the amendment and restatement of our certificate of incorporation and bylaws upon the closing of this offering.

 

- 9 -


Table of Contents

Summary Financial Data

The following summary financial data should be read together with our financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. Our summary statement of operations data for the fiscal years ended June 30, 2012 and 2013 and our summary balance sheet data as of June 30, 2012 and 2013 are derived from our audited financial statements included elsewhere in this prospectus. Our summary statement of operations data for the three months ended September 30, 2012 and 2013 and our summary balance sheet data as of September 30, 2013 have been derived from our unaudited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any future period, and our interim results are not necessarily indicative of our results for the entire year or any future period. The summary financial data in this section are not intended to replace our financial statements and the related notes.

The pro forma balance sheet data as of September 30, 2013 gives effect to the issuance of 58,816,897 shares of our Series B-3 preferred stock for cash proceeds of $10.7 million, which occurred on November 5, 2013, the reclassification of $8,000 of deferred issuance costs related to the Series B-3 preferred stock closing to additional paid in capital, the conversion of all of our preferred stock, including the Series B-3 shares, into 319,203,488 shares of common stock upon the closing of this offering, the reclassification of our Series B purchase rights liability to additional paid-in capital and the conversion of all outstanding warrants exercisable for shares of Series A-1, Series A-1A and Series B-1 preferred stock into warrants exercisable for shares of common stock, resulting in our preferred stock warrant liability being reclassified to additional paid-in capital. The pro forma as adjusted balance sheet data as of September 30, 2013 gives effect to (1) the pro forma adjustments described above and (2) our receipt of estimated net proceeds of $         million from this offering, based on the initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and estimated offering expenses payable by us, as if each had occurred as of September 30, 2013. The pro forma as adjusted summary financial data are not necessarily indicative of what our financial position would have been if this offering had been completed as of the date indicated, nor are these data necessarily indicative of our financial position for any future date or period.

 

     Fiscal Year Ended
June 30,
    Three Months Ended
September 30,
 
     2012     2013     2012     2013  
    

(in thousands except per share data)

 

Statement of Operations Data:

        

Revenue:

        

Grant revenue

   $ 718      $ 439      $ 177      $ 191   

Sponsored research revenue

     364        503        82        67   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     1,082        942        259        258   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     2,354        3,133        539        1,443   

General and administrative

     787        1,403        280        781   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,141        4,536        819        2,224   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (2,059     (3,594     (560     (1,966
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 10 -


Table of Contents
     Fiscal Year Ended
June 30,
    Three Months Ended
September 30,
 
     2012     2013     2012     2013  
    

(in thousands except per share data)

 

Other income (expense):

        

Interest income

     —          10        —          7   

Interest expense

     (69     (191     (44     —     

Fair value adjustments to warrant liabilities (1)

     204        (8     —          (140

Fair value adjustments to Series B purchase rights (1)

     —          (1,207     —          (4,965
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

     135        (1,396     (44     (5,098
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (1,924   $ (4,990   $ (604   $ (7,064
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted (2)

   $ (0.50   $ (1.31   $ (0.16   $ (1.85
        

Weighted-average shares outstanding, basic and diluted (2)

     3,817        3,817        3,817        3,817   
        

Pro forma net loss per share, basic and diluted (unaudited) (2)

     $ (0.03     $ (0.04
        

Weighted-average pro forma shares outstanding, basic and diluted (unaudited) (2)

       145,105       

 

192,329

  

        

 

     As of June 30,     As of September 30,  
     2012     2013     2013  
                 Actual     Pro Forma (2)      Pro Forma As
Adjusted (3)
 
     (in thousands)  

Balance Sheet Data:

           

Cash and cash equivalents

   $ 774      $ 8,893      $ 7,857      $ 18,579       $                        

Short-term investments

   $ —        $ 14,000      $ 13,000      $ 13,000       $     

Working capital

   $ (399   $ 20,051      $ 13,162      $ 30,937       $     

Total assets

   $ 2,824      $ 25,490      $ 23,722      $ 34,436       $     

Current liabilities

   $ 1,494      $ 3,460      $ 8,581      $ 1,520       $     

Total stockholders’ (deficit) equity

   $ (31,290   $ (36,183   $ (43,213   $ 32,916       $     

 

(1) See note 6 of the notes to financial statements appearing elsewhere in this prospectus for a description of the fair value adjustments to our warrant liabilities and Series B purchase rights.
(2) See note 2 of the notes to financial statements appearing elsewhere in this prospectus for a description of the method used to calculate basic and diluted net loss per share and pro forma basic and diluted net loss per share.
(3) A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by $         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 discounts and commissions and estimated offering expenses payable by us.

 

- 11 -


Table of Contents

RISK FACTORS

Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose part or all of your investment.

Risks related to our financial condition and capital requirements

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

We are a clinical-stage biotechnology company, and we have not yet generated revenues from product sales. We have incurred losses from operations in each year since our inception in 1999, and net losses of $1.9 million and $5.0 million for the years ended June 30, 2012 and 2013, respectively. As of September 30, 2013, we had an accumulated deficit of $55.5 million. Our prior losses, combined with expected future losses, have had and may continue to have an adverse effect on our stockholders’ equity and working capital.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities. To date, we have financed our operations primarily through the sale of equity securities and, to a lesser extent, through research grants from third parties or milestone payments from a collaborator. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations or additional grants. We have not begun clinical trials for our lead product candidates and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

 

   

continue our research and preclinical and clinical development of our product candidates;

 

   

expand the scope of our current clinical trials for our product candidates;

 

   

initiate additional preclinical studies, clinical trials or other studies for our product candidates;

 

   

further develop our gene therapy platform, including the process for design, delivery and manufacturing of our vectors for our product candidates;

 

   

change or add additional manufacturers or suppliers;

 

   

seek regulatory and marketing approvals for our product candidates that successfully complete clinical trials;

 

   

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

 

   

seek to identify and validate additional product candidates;

 

   

acquire or in-license other product candidates and technologies;

 

   

make milestone or other payments under any in-license agreements;

 

- 12 -


Table of Contents
   

maintain, protect and expand our intellectual property portfolio;

 

   

attract and retain skilled personnel;

 

   

create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts; and

 

   

experience any delays or encounter issues with any of the above.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

Our ability to generate revenue from product sales is highly uncertain and we may never achieve or sustain profitability, which could depress the market price of our common stock, and could cause you to lose part or all of your investment.

All of our revenue generated to date has come from research grants from third parties or license fees or milestone payments from a collaborator. Our ability to generate substantial revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, our product candidates. We do not anticipate generating revenues from product sales for at least the next several years, if ever. If any of our product candidates fail in clinical trials or do not gain regulatory approval, or if any of our product candidates, if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our ability to generate future revenues from product sales depends heavily on our success in:

 

   

completing research and preclinical and clinical development of our product candidates;

 

   

seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical trials;

 

   

establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products and services to support clinical development and the market demand for our product candidates, if approved;

 

   

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

 

   

obtaining and maintaining adequate coverage and reimbursement from third-party payors for our product candidates;

 

   

obtaining market acceptance of our product candidates and gene therapy as a viable treatment option;

 

   

addressing any competing technological and market developments;

 

   

implementing additional internal systems and infrastructure, as needed;

 

   

identifying and validating new gene therapy product candidates;

 

   

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

 

   

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

 

   

attracting, hiring and retaining qualified personnel.

 

- 13 -


Table of Contents

Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or other regulatory agencies, domestic or foreign, to perform clinical trials and other studies in addition to those that we currently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations. Our failure to become and remain profitable would depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

In order to obtain regulatory approval for and commercialize our product candidates, we will need to raise additional funding in the future, which may not be available on acceptable terms, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

All of our lead programs in orphan ophthalmology are currently in preclinical development. Developing gene therapy products is expensive, and we expect our research and development expenses to increase substantially as we advance our current product candidates in clinical trials and as we undertake preclinical studies of new product candidates.

Our operations have consumed substantial amounts of cash since inception. As of September 30, 2013, our cash and cash equivalents and short-term investments were $20.9 million. Our research and development expenses were $2.4 million and $3.1 million for the fiscal years ended June 30, 2012 and 2013, respectively, and $0.5 million and $1.4 million for the three months ended September 30, 2012 and 2013, respectively. We estimate that the net proceeds from this offering will be approximately $        , based on the initial public offering price of $        , after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to enable us to complete planned preclinical studies and clinical trials for our lead product candidates for at least the next 24 months. See “Use of Proceeds.” In order to complete the process of obtaining regulatory approval for our lead product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding. Also, our current 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.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, financing may not be available to us in the future 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 a portion of our operating cash flows, if any, being dedicated to the payment of principal and interest on such indebtedness, 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 or on terms that are less favorable than might otherwise be available, and we may be required to relinquish or license on unfavorable terms rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, financial condition, results of operations and prospects and cause the price of our common stock to decline.

 

- 14 -


Table of Contents

If we are unable to obtain needed 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 candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition, results of operations and prospects and cause the price of our common stock to decline.

Risks related to the discovery and development of our product candidates

All of our product candidates are in preclinical or clinical development. Clinical drug development is expensive, time consuming and uncertain, and we may ultimately not be able to obtain regulatory approvals for the commercialization of some or all of our product candidates.

The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities, which regulations differ from country to country. Our product candidates are in various stages of development and are subject to the risks of failure typical of drug development. The development and approval process is expensive and can take many years to complete, and its outcome is inherently uncertain. We have not submitted an application for or received marketing approval for any of our product candidates. We have limited experience in conducting and managing the later stage clinical trials necessary to obtain regulatory approvals, including approval by the FDA. To receive approval, we must, among other things, demonstrate with substantial evidence from clinical trials that the product candidate is both safe and effective for each indication for which approval is sought, and failure can occur in any stage of development. Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. We cannot predict if or when we might receive regulatory approvals for any of our product candidates currently under development.

The FDA and foreign regulatory authorities also have substantial discretion in the drug approval process. The number and types of preclinical studies and clinical trials that will be required for regulatory approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. 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, and there may be varying interpretations of data obtained from preclinical studies or clinical trials, either of which may cause delays or limitations in the approval or the decision not to approve an application. Regulatory agencies can delay, limit or deny approval of a product candidate for many reasons, including:

 

   

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

 

   

we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

 

   

the results of clinical trials may not meet the level of statistical or clinical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

   

the patients recruited for a particular clinical program may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

 

   

the results may not confirm the positive results from earlier preclinical studies or clinical trials;

 

   

we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

 

   

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

 

- 15 -


Table of Contents
   

the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of FDA or comparable foreign regulatory authorities to support the submission of a biologics license application, or BLA, or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;

 

   

regulatory agencies might not approve or might require changes to our manufacturing processes or facilities; or

 

   

regulatory agencies may change their approval policies or adopt new regulations in a manner rendering our clinical data insufficient for approval.

Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price. Furthermore, any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. These limitations may limit the size of the market for the product.

We are not permitted to market our product candidates in the United States or in other countries until we receive approval of a BLA from the FDA or marketing approval from applicable regulatory authorities outside the United States. Obtaining approval of a BLA can be a lengthy, expensive and uncertain process. If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our product candidates in the United States, which will significantly impair our ability to generate any revenues. In addition, failure to comply with FDA and non-U.S. regulatory requirements may, either before or after product approval, if any, subject our company to administrative or judicially imposed sanctions, including:

 

   

restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;

 

   

restrictions on the products, manufacturers or manufacturing process;

 

   

warning letters;

 

   

civil and criminal penalties;

 

   

injunctions;

 

   

suspension or withdrawal of regulatory approvals;

 

   

product seizures, detentions or import bans;

 

   

voluntary or mandatory product recalls and publicity requirements;

 

   

total or partial suspension of production;

 

   

imposition of restrictions on operations, including costly new manufacturing requirements; and

 

   

refusal to approve pending BLAs or supplements to approved BLAs.

Even if we do receive regulatory approval to market a product candidate, any such approval may be subject to limitations on the indicated uses for which we may market the product. 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 the appropriate regulatory approvals necessary for us or our collaborators to commence product sales. Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates, generating revenues and achieving and sustaining profitability.

 

- 16 -


Table of Contents

Our gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. At the moment, no gene therapy products have been approved in the United States and only one such product has been approved in Europe.

We have concentrated our product research and development efforts on our gene therapy platform, and our future success depends on the successful development of this approach. There can be no assurance that any development problems we experience in the future related to our gene therapy platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience unanticipated problems or delays in expanding our manufacturing capacity or transferring our manufacturing process to commercial partners, which may prevent us from completing our clinical trials or commercializing our products on a timely or profitable basis, if at all.

In addition, the clinical trial requirements of the FDA, the EMA and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidates. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. At the moment, only one gene therapy product, UniQure’s Glybera, which received marketing authorization from the EMA in 2012, has been approved in Europe but has not yet been launched for commercial sale, which makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or Europe. Approvals by the EMA may not be indicative of what the FDA may require for approval.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. For example, the FDA has established the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the United States National Institutes of Health, or the NIH, are also subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC. Although the FDA decides whether individual gene therapy protocols may proceed, the RAC review process can delay the initiation of a clinical trial, even if the FDA has reviewed the trial design and details and approved its initiation. Conversely, the FDA can put an IND on clinical hold even if the RAC has provided a favorable review of the drug. Also, before a clinical trial can begin at an NIH-funded institution, that institution’s institutional review board, or IRB, and its Institutional Biosafety Committee have to review the proposed clinical trial to assess the safety of the trial. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our product candidates.

These regulatory review committees and advisory groups and the new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected for orphan ophthalmology product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.

 

- 17 -


Table of Contents

Success in animal studies or early clinical trials may not be indicative of results obtained in later trials.

Trial designs and results from animal studies or previous clinical trials are not necessarily predictive of our future clinical trial designs or results, and interim results of a clinical trial are not necessarily indicative of final results. Our product candidates may also fail to show the desired safety and efficacy in clinical development despite demonstrating positive results in animal studies or having successfully advanced through initial clinical trials. For example, our animal studies of our AAT product candidate resulted in evidence of significant production of AAT levels, but early clinical trials of our product candidate showed significantly lower levels of AAT production in treated patients. There can be no assurance that the success we achieved in the animal studies for our lead product candidates will result in success in our clinical trials of those product candidates.

There is a high failure rate for drugs and biological products proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials even after achieving promising results in earlier stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.

Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates as well as completion of required follow-up periods. If patients are unwilling to participate in our gene therapy studies because of negative publicity from adverse events in the biotechnology or gene therapy industries or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of our product candidates may be delayed. For example, trials using early versions of lentiviral vectors, which integrate with, and thereby alter, the host cell’s DNA, have led to several well-publicized adverse events, including reported cases of leukemia. If there are delays in accumulating the required number of clinical events in trials for our product candidates where clinical events are a primary endpoint, there may be delays in completing the trial. These delays could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a trial, to complete our clinical trials in a timely manner. In particular, each of the conditions for which we plan to evaluate our product candidates are rare genetic disorders with limited patient pools from which to draw for clinical trials. The eligibility criteria of our clinical trials will further limit the pool of available trial participants.

Patient enrollment is affected by factors including:

 

   

severity of the disease under investigation;

 

   

design of the clinical trial protocol;

 

   

size and nature of the patient population;

 

   

eligibility criteria for the trial in question;

 

   

perceived risks and benefits of the product candidate under trial;

 

   

proximity and availability of clinical trial sites for prospective patients;

 

   

availability of competing therapies and clinical trials;

 

- 18 -


Table of Contents
   

clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating;

 

   

efforts to facilitate timely enrollment in clinical trials;

 

   

patient referral practices of physicians; and

 

   

our ability to monitor patients adequately during and after treatment.

If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may be forced to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business. We could encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles.

We plan to seek initial marketing approval for our product candidates in the United States and the European Economic Area, or EEA. We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA, the EMA or other foreign regulatory authorities. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

 

   

difficulty in establishing or managing relationships with contract research organizations, or CROs, and physicians;

 

   

different standards for conducting clinical trials;

 

   

our inability to locate qualified local consultants, physicians and partners; and

 

   

the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatments.

We may encounter substantial delays in our clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of such product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:

 

   

delays in raising, or inability to raise, sufficient capital to fund the planned clinical trials;

 

   

inability to generate sufficient preclinical, toxicology, or other data to support the initiation of human clinical trials;

 

   

delays in reaching a consensus with regulatory agencies on trial design;

 

   

identifying, recruiting and training suitable clinical investigators;

 

   

delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

 

   

delays in obtaining required IRB approval at each clinical trial site;

 

   

delays in recruiting suitable patients to participate in our clinical trials;

 

   

delays due to changing standard of care for the diseases we are targeting;

 

- 19 -


Table of Contents
   

adding new clinical trial sites;

 

   

imposition of a clinical hold by regulatory agencies, after review of an IND application or equivalent application or an inspection of our clinical trial operations or trial sites;

 

   

failure by our CROs, other third parties or us to adhere to clinical trial requirements;

 

   

loss of product due to shipping delays or delays in customs in connection with delivery to foreign countries for use in clinical trials;

 

   

failure to perform in accordance with the FDA’s good clinical practices, or GCP requirements or applicable regulatory guidelines in other countries;

 

   

inability to manufacture, test, release, import or export for use sufficient quantities of our product candidates for use in clinical trials;

 

   

failure to manufacture our product candidate in accordance with the FDA’s good manufacturing practice, or GMP, requirements or applicable regulatory guidelines in other countries;

 

   

delays in the testing, validation and delivery of our product candidates to the clinical trial sites;

 

   

delays in having patients complete participation in a trial or return for post-treatment follow-up;

 

   

clinical trial sites deviating from trial protocol or clinical trial sites or patients dropping out of a trial;

 

   

occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits;

 

   

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

 

   

the costs of clinical trials of our product candidates may be greater than we anticipate; or

 

   

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon drug development programs.

Further, a clinical trial may be suspended or terminated by us, our collaborators, the IRBs, in the institutions in which such trials are being conducted, the Data Safety Monitoring Board, or DSMB, for such trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Furthermore, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we or our third-party collaborators make manufacturing or formulation changes to product candidates, we or they may need to conduct additional trial to bridge the modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

 

- 20 -


Table of Contents

If the results of our clinical trials are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:

 

   

be delayed in obtaining marketing approval for our product candidates, if at all;

 

   

obtain approval for indications or patient populations that are not as broad as intended or desired;

 

   

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

 

   

be subject to changes with the way the product is administered;

 

   

be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

 

   

have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy;

 

   

be subject to the addition of labeling statements, such as warnings or contraindications;

 

   

be sued; or

 

   

experience damage to our reputation.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize our product candidates.

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

As with many pharmaceutical and biological products, treatment with our product candidates may produce undesirable side effects or adverse reactions or events. These adverse events may occur despite our belief that our AAV vectors have an improved safety profile over prior such treatments.

Known adverse side effects that could occur with treatment with AAV vectors include an immunologic reaction to the capsid protein or gene at early timepoints after administration. In previous clinical trials involving AAV viral vectors for gene therapy, some subjects experienced serious adverse events, including the development of T-cell response due to immune response against the vector capsid proteins. If our vectors demonstrate a similar effect, or other adverse events, we may be required to halt or delay further clinical development of our product candidates. In addition, theoretical adverse side effects of AAV vectors include replication and spread of the virus to other parts of the body and insertional oncogenesis, which is the process whereby the insertion of a functional gene near a gene that is important in cell growth or division results in uncontrolled cell division, also known as cancer, which could potentially enhance the risk of malignant transformation. Potential procedure-related events, including inflammation or injury to the eye, are similar to those associated with standard ophthalmic intervention procedures. There is also the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

If any such adverse events occur, our clinical trials could be suspended or terminated and the FDA, the EMA or other foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The product-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial. If we elect or are required to delay, suspend or terminate any clinical trial of any of our product candidates, the commercial prospects of such product candidates will be harmed and our ability to generate product revenues from any of these product candidates will be delayed or eliminated. Any of these occurrences may harm our business, financial condition and prospects significantly.

 

- 21 -


Table of Contents

Additionally, if any of our product candidates receive marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits outweigh its risks, which may include, among other things, a medication guide outlining the risks of gene therapies for distribution to patients and a communication plan to health care practitioners. Furthermore, if we or others later identify undesirable side effects caused by our product candidate, a number of potentially significant negative consequences could result, including:

 

   

regulatory authorities may withdraw approvals of such product candidate;

 

   

regulatory authorities may require additional warnings on the label;

 

   

we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

 

   

we may be required to change the way a product candidate is administered or conduct additional clinical trials;

 

   

we could be sued and held liable for harm caused to patients; and

 

   

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could significantly harm our business, prospects, financial condition and results of operations.

We may be unable to obtain orphan product designation or exclusivity for some of our product candidates. If our competitors are able to obtain orphan product exclusivity for their products that are the same as our product candidates, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals diagnosed annually in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 5 in 10,000 persons in the European Union Community. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product. Our product candidates for the treatment of LCA2, XLRS, ACHM (in the form caused by mutations in the CNGB3 gene) and AAT deficiency have been granted orphan drug designations by the FDA, but at this time we have neither requested nor obtained orphan drug designation for any of our other product candidates. Even if we request orphan drug designation for our other product candidates, there can be no assurances that the FDA will grant any of our product candidates such designation. Additionally, the designation by the FDA of any of our product candidates as an orphan drug does not guarantee that the FDA will accelerate regulatory review of or ultimately approve that product candidate.

Generally, if a product candidate with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the EMA or the FDA from approving another marketing application for the same drug and indication for that time period, except in limited circumstances. The applicable period is seven years in the United States and 10 years in Europe. The European exclusivity period can be reduced to six years if a product no longer meets the criteria for orphan drug designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines

 

- 22 -


Table of Contents

that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition.

Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition. In the United States, even after an orphan drug is approved, the FDA can subsequently approve another drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

Even if we complete the necessary clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate or the approval may be for a more narrow indication than we expect.

We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested, may not approve the price we intend to charge for our product candidate, may impose significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use or may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

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

Even if we obtain regulatory approval in a jurisdiction for our product candidates, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, and submission of safety and other post-market information. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. FDA guidance advises that patients treated with some types of gene therapy undergo follow-up observations for potential adverse events for as long as 15 years. The holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with GMP requirements and adherence to commitments made in the BLA or foreign marketing application. If we or 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 that product, a regulatory agency may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

 

- 23 -


Table of Contents

If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may:

 

   

issue a warning letter asserting that we are in violation of the law;

 

   

seek an injunction or impose civil or criminal penalties or monetary fines;

 

   

suspend or withdraw regulatory approval;

 

   

suspend any ongoing clinical trials;

 

   

refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our strategic partners;

 

   

restrict the marketing or manufacturing of the product;

 

   

seize or detain product or otherwise require the withdrawal of product from the market;

 

   

refuse to permit the import or export of products; or

 

   

refuse to allow us to enter into supply contracts, including government contracts.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenues.

In addition, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

Even if we obtain and maintain approval for our product candidates from the FDA, we may never obtain approval for our product candidates outside of the United States, which would limit our market opportunities and adversely affect our business.

Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Sales of our product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries must also approve the manufacturing and marketing of the product candidates in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our products, if approved, is also subject to approval. We intend to submit a marketing authorization application to the EMA for approval in the EEA, but obtaining such approval is a lengthy and expensive process and the EMA has its own procedures for approval of product candidates. Even if a product candidate is approved, the FDA or the EMA, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the EEA also have requirements for approval of product candidates with which we must comply prior to marketing in those countries. 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 product candidates in certain countries.

 

- 24 -


Table of Contents

Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries and regulatory approval of a product candidate in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Also, regulatory approval for any of our product candidates may be withdrawn. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected.

Risks related to our reliance on third parties

We expect to rely on third parties to conduct aspects of our product manufacturing and protocol development, and these third parties may not perform satisfactorily.

We do not expect to independently conduct all aspects of our vector production, product manufacturing, protocol development, and monitoring and management of our ongoing and planned preclinical and clinical programs. We currently rely, and expect to continue to rely, on third parties for the production of our clinical trial materials. In such cases, we expect to control only certain aspects of their activities.

Under certain circumstances, these third parties may be entitled to terminate their engagements with us. If we need to enter into alternative arrangements, it could delay our product development activities. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibility to ensure compliance with all required regulations and study and trial protocols. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study and trial plans and protocols, or if there are disagreements between us and these third parties, we will not be able to complete, or may be delayed in completing, the preclinical studies and clinical trials required to support future IND submissions and approval of our product candidates. In some such cases we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay with respect to the approval of our product candidates and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

 

   

the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

 

   

reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities;

 

   

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and

 

   

disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier.

Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future product candidates. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of product manufacture.

We and our contract manufacturer are subject to significant regulatory oversight with respect to manufacturing our products. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and may have limited capacity.

All parties involved in the preparation of therapeutics for clinical trial or commercial sale, including our existing contract manufacturer for our product candidates, SAFC Pharma, are subject to extensive regulation.

 

- 25 -


Table of Contents

Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with GMP requirements. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s GMP requirements enforced by the FDA through its facilities inspection program. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted.

The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party manufacturers. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or our third-party manufacturers to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a manufacturing facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new product candidate, or revocation of a pre-existing approval. Such an occurrence may cause our business, financial condition and results of operations to be materially harmed.

Additionally, if supply from an approved manufacturer is interrupted, there could be a significant disruption in commercial supply of our products. We do not currently have a backup manufacturer of our product candidate supply for clinical trials or commercial sale. An alternative manufacturer would need to be qualified through a BLA supplement which could result in further delay. The regulatory agencies may also require additional trials if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.

We expect to rely on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.

We expect to rely on academic research institutions and other CROs along with clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have agreements governing their activities, we will have limited influence over their actual performance and will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

 

- 26 -


Table of Contents

We and our CROs are required to comply with the FDA’s and other regulatory authorities’ GCP, GMP and good laboratory practice, or GLP, requirements for conducting, recording and reporting the results of our preclinical studies and clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces these requirements through periodic inspections of study sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable GCP requirements, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCP requirements, which may render the data generated in those trials unreliable. In addition, our future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.

Our CROs are not our employees, and, except for remedies available to us under our agreements with such CROs, we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials 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, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

Switching or adding CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, prospects, financial condition and results of operations.

We also expect to rely on other third parties to store and distribute our vectors and products for any clinical trials that we may conduct. Any performance failure on the part of our distributors could delay clinical development, regulatory review or marketing approval of our product candidates or commercialization of our products, if approved, producing additional losses and depriving us of potential product revenue.

Collaborations with third parties may be important to our business. If these collaborations are not successful, our business could be adversely affected.

We entered into a collaboration with Genzyme relating to a wet AMD product candidate, which subsequently was modified to take the form of a license to Genzyme. Under our modified relationship, Genzyme became responsible for all future clinical and commercial development of the licensed wet AMD product candidate. Genzyme recently informed us that it no longer intends to use our HSV-based manufacturing technology to produce the AAV vector being used for the wet AMD product. Our license agreement with Genzyme was further amended in December 2013 to reflect this fact. We do not currently expect to derive substantial revenue from our license arrangement with Genzyme, but an unsuccessful outcome in pending and future clinical trials for which Genzyme is responsible could be harmful to the public perception and prospects of our gene therapy platform. Our license relationship with Genzyme, and any future collaboration we enter into in the future, may pose a number of risks, including the following:

 

   

collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

 

- 27 -


Table of Contents
   

collaborators may not perform their obligations as expected;

 

   

collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

 

   

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials 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 products or product candidates 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;

 

   

product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates;

 

   

a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product candidate;

 

   

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development of any product candidates, might cause delays or termination of the research, development or commercialization of such product candidates, might lead to additional responsibilities for us with respect to such product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive;

 

   

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

 

   

collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and

 

   

collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

If our collaborations do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these agreements, our development of our gene therapy platform and product candidates could be delayed and we may need additional resources to develop product candidates and gene therapy platform. All of the risks relating to product development, regulatory approval and commercialization described in this prospectus also apply to the activities of our therapeutic program collaborators, if any.

Our license to Genzyme contains a restriction on our engaging in activities that are the subject of that collaboration. However, as a result of the December 2013 amendment of our agreement with Genzyme, these restrictions no longer apply to the field of treatments for ocular neovascularization disorders, including AMD. In addition, under that collaboration agreement, Genzyme has options, which expire in 2015 and 2017, to license our manufacturing technology as it existed at the time of the license for specified genes implicated in diseases outside our current area of focus. These restrictions, and any similar restrictions contained in future collaborations, may have the effect of preventing us from undertaking development and other efforts that may appear to be attractive to us.

 

- 28 -


Table of Contents

Additionally, subject to its contractual obligations to us, if one of our collaborators is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected.

We may in the future determine to collaborate with pharmaceutical and biotechnology companies for development and potential commercialization of our product candidates. These relationships or those like them may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we could face significant competition in seeking appropriate collaborators and the negotiation process is time-consuming and complex. Our ability to reach a definitive collaboration agreement 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. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because our research and development pipeline may be insufficient, our product candidates may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies such transaction.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, 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 fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our gene therapy platform and our business may be materially and adversely affected.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we rely on third parties to manufacture our viral vectors and our product candidates, and because we collaborate with various organizations and academic institutions on the advancement of our gene therapy platform, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. We also

 

- 29 -


Table of Contents

conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

Risks related to commercialization of our product candidates

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues.

We currently have no sales and marketing organization and have no experience selling and marketing our product candidates. To successfully commercialize any products that may result from our development programs, we will need to develop these capabilities, either on our own or with others. The establishment and development of our own sales force or the establishment of a contract sales force to market any products we may develop will be expensive and time-consuming and could delay any product launch. Moreover, we cannot be certain that we will be able to successfully develop this capability. We may enter into collaborations with other entities to utilize their mature marketing and distribution capabilities, but we may be unable to enter into marketing agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations to recruit, hire, train and retain marketing and sales personnel. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

The biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies and proprietary products, and any product candidates that we successfully develop and commercialize will have to compete with existing therapies and new therapies that may become available in the future. While we believe that our proprietary technology estate and scientific expertise in the gene therapy field provide us with competitive advantages, we face potential competition from many different sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions and governmental agencies and public and private research institutions that may develop potentially competitive products or technologies.

Currently there are no approved products for any of our lead orphan ophthalmology indications of XLRS, ACHM and XLRP. We believe the key competitive factors that will affect the success of our product candidates, if approved, are likely to be their efficacy, safety, convenience of administration and delivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.

We believe a number of companies are working on AAV-based gene therapy technology, including Genzyme and its parent company Sanofi S.A., BioMarin Pharmaceutical Inc., uniQure B.V., Celladon Corp., Audentes Therapeutics, GenSight Biologics, ReGenX Biosciences, LLC, or ReGenX, Avalanche Biotechnologies, Inc., Spark Therapeutics, LLC, or Spark, Voyager Therapeutics, Inc., Dimension Therapeutics, Inc. and Sangamo Biosciences, Inc. We believe that companies developing gene therapies in the field of orphan ophthalmology on which we are currently focused include Genzyme and Spark, whose programs are at the clinical stage, and GenSight, Neurotech Pharmaceuticals, Inc. and ReGenX, as well as two smaller, early-stage

 

- 30 -


Table of Contents

companies, RetroSense Therapeutics, LLC and Eos Neuroscience, Inc., all of whose programs we believe are in the pre-clinical stage. Other companies could also seek to enter this field.

Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and the commercialization of those treatments. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop 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. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product, if approved, could limit our ability to market those products and decrease our ability to generate revenue.

We expect the cost of a single administration of gene therapy products such as those we are developing to be substantial, when and if they achieve regulatory approval. We expect that coverage and reimbursement by governmental and private payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government authorities, private health coverage insurers and other third-party payors. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

 

   

a covered benefit under its health plan;

 

   

safe, effective and medically necessary;

 

   

appropriate for the specific patient;

 

   

cost-effective; and

 

   

neither experimental nor investigational.

Obtaining coverage and reimbursement approval for a product from governmental and private payors is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If coverage and reimbursement are not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

There is significant uncertainty related to third-party coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Currently, no gene therapy products have been approved for coverage and reimbursement by the Centers for Medicare & Medicaid Services, or CMS, the agency responsible for administering the Medicare program, and it is difficult to predict what CMS will decide with respect to coverage and reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products. Moreover, reimbursement agencies in Europe may be more conservative than CMS. For example,

 

- 31 -


Table of Contents

a number of cancer drugs have been approved for reimbursement in the United States and have not been approved for reimbursement in certain European countries. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.

Gene therapy remains a novel technology, with no gene therapy product approved to date in the United States and only one gene therapy product approved to date in Europe. Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. For example, trials using early versions of lentiviral vectors, which integrate with, and thereby alter, the host cell’s DNA, have led to several well-publicized adverse events, including reported cases of leukemia. Although none of our current product candidates utilize lentiviral vectors, our product candidates use a viral delivery system. Adverse events in our clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates.

Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or PPACA, was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The PPACA, among other things, subjects biologic products to potential competition by

 

- 32 -


Table of Contents

lower-cost biosimilars, addresses 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, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, subjects additional drugs to lower pricing under the 340B drug pricing program by adding new entities to the program and establishes a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% 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.

In addition, other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. On August 2, 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 on April 1, 2013. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

The commercial success of any of our product candidates will depend upon its degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Ethical, social and legal concerns about gene therapy and genetic research could result in additional regulations restricting or prohibiting the products and processes we may use. Even with the requisite approvals from the FDA in the United States and other government bodies internationally, the commercial success of our product candidates will depend in part on the medical community’s, patients’, and third-party payors’ acceptance of gene therapy products in general, and our product candidates in particular, as medically necessary, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

 

   

the efficacy and safety of such product candidates as demonstrated in clinical trials;

 

   

the potential and perceived advantages of product candidates over alternative treatments;

 

   

the clinical indications for which the product candidate is approved;

 

   

the safety of product candidates seen in a broader patient group, including its use outside the approved indications;

 

   

the prevalence and severity of any side effects;

 

   

product labeling or product insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in a product’s approved labeling;

 

   

the cost of treatment relative to alternative treatments;

 

   

relative convenience and ease of administration;

 

   

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;

 

   

the timing of market introduction of competitive products;

 

- 33 -


Table of Contents
   

publicity concerning our products or competing products and treatments; and

 

   

sufficient third-party insurance coverage and reimbursement.

Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors. If any of our product candidates is approved but fails to achieve market acceptance among physicians, patients, or health care payors, we will not be able to generate significant revenues from such product, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect that we will be subject to additional risks related to entering into international business relationships, including:

 

   

different regulatory requirements for approval of drugs and biologics in foreign countries;

 

   

the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;

 

   

challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

 

   

unexpected changes in tariffs, trade barriers and regulatory requirements;

 

   

economic weakness, including inflation, or political instability in particular foreign economies and markets;

 

   

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

 

   

foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;

 

   

difficulties staffing and managing foreign operations;

 

   

workforce uncertainty in countries where labor unrest is more common than in the United States;

 

   

potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

 

   

production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

 

   

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.

We may not be successful in our efforts to identify or discover additional product candidates.

The success of our business depends primarily upon our ability to identify, develop and commercialize product candidates based on our gene therapy platform. Although certain of our product candidates are currently in clinical or preclinical development, we may fail to identify other potential product candidates for clinical development for a number of reasons. For example, our research methodology may be unsuccessful in

 

- 34 -


Table of Contents

identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

If any of these events occur, we may be forced to abandon our development efforts with respect to a particular product candidate, which would have a material adverse effect on our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

Risks related to our business operations

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

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. We will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which will require, among other things, that we file with the Securities and Exchange Commission, or the SEC, annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NASDAQ Global Market and other applicable securities rules and regulations impose 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. In particular, we will or may be required to:

 

   

prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

 

   

establish an investor relations function;

 

   

establish new internal policies, such as those relating to disclosure controls and procedures and insider trading;

 

   

expand the roles and duties of our board of directors, our board committees and management;

 

   

institute a more comprehensive financial reporting and disclosure compliance function;

 

   

hire additional financial and accounting personnel and other experienced accounting and finance staff with the expertise to address the complex accounting matters applicable to public companies; and

 

   

establish an internal audit function.

We may not be successful in complying with these obligations, and compliance with these obligations could be time-consuming and expensive. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors. The increased costs will decrease our net income or increase our consolidated net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time

 

- 35 -


Table of Contents

as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting. 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.

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, investors could lose confidence in our financial statements and our company which could have a material adverse effect on our business and our stock price.

In the course of preparing the financial statements that are included in this prospectus, our management has determined that we have material weaknesses in our internal control over financial reporting, which relate to the design and operation of our closing and financial reporting processes and our accounting for debt, equity and convertible instruments. We have concluded that these material weaknesses in our internal control over financial reporting are due to the fact that we do not have the appropriate resources with the appropriate level of experience and technical expertise to oversee our closing and financial reporting processes and to address the accounting and financial reporting requirements related to our issuances of convertible notes, preferred stock warrants, stock options, preferred stock and preferred stock purchase rights.

In order to remediate these material weaknesses, we are taking the following actions:

 

   

we are actively seeking additional accounting and finance staff members, including a permanent chief financial officer to succeed our interim chief financial officer and a senior accounting officer with public company reporting experience, to augment our current staff and to improve the effectiveness of our closing and financial reporting processes; and

 

   

we are formalizing our accounting policies and internal controls documentation and strengthening supervisory reviews by our management.

If we fail to fully remediate these material weaknesses or fail to maintain effective internal controls in the future, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause investors to lose confidence in our financial information or cause our stock price to decline. Our independent registered public accounting firm has not assessed the effectiveness of our internal control over financial reporting and, under the JOBS Act, will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.

If we are successful in executing our business strategy, we will need to expand our managerial, operational, financial and other systems and resources to manage our operations, continue our research and development activities, and, in the longer term, build a sales force and commercial infrastructure to support commercialization

 

- 36 -


Table of Contents

of any of our product candidates that are approved for sale. Future growth would impose significant added responsibilities on members of management. It is possible that our management, finance, development personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively manage our operations, growth and products requires that we continue to develop more robust business processes and improve our systems and procedures in each of these areas and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these tasks on a larger scale and, accordingly, may not achieve our research, development and growth goals.

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

We are highly dependent on our executive officers, the loss of whose services may adversely impact the achievement of our objectives. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives and scientific personnel in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.

In order to induce valuable employees to remain at AGTC, in addition to salary and cash incentives, we have provided stock options that vest over time. The value to employees of stock options that vest over time may be 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.

Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations. We do not maintain “key man” insurance policies on the lives of these individuals or any of our other employees. 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.

Many of the other biotechnology and pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They may also 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 can offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can discover, develop and commercialize product candidates will be limited.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities.

We are exposed to the risk that our employees, CROs, principal investigators, consultants and commercial partners may engage in fraudulent conduct or other illegal activity or may fail to disclosure unauthorized activities to us. Misconduct by these parties could include intentional, reckless and/or negligent failures to comply with:

 

   

the laws and regulations of the FDA and non-U.S. regulators, including those laws requiring the reporting of true, complete and accurate information to such regulatory bodies;

 

- 37 -


Table of Contents
   

manufacturing standards we have established;

 

   

healthcare fraud and abuse laws and regulations in the United States and similar foreign laws; or

 

   

laws requiring the accurate reporting of financial information or data or the disclosure of unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, 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 commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, 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 comply with these laws or regulations. 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.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly, or indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Acts and Physician Payments Sunshine Act and regulations. These laws may impact, among other things, our proposed sales, marketing and educational programs. In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include, but are not limited to:

 

   

the federal Health Care Program Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

 

   

federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent;

 

   

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private);

 

   

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act; Other Modifications to HIPAA, published in January 2013, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, health care clearinghouses and health care providers;

 

- 38 -


Table of Contents
   

federal transparency laws, including the federal Physician Payment Sunshine Act that requires disclosure of payments and other transfers of value provided to physicians and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations;

 

   

the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, and its implementing regulations, which may impact, among other things, reimbursement rates by federal health care programs and commercial insurers; and

 

   

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the PPACA, among other things, amends the intent requirements of the federal Anti-Kickback Statute and the criminal statute governing healthcare fraud. A person or entity can now be found guilty of violating the Anti-Kickback Statute and the federal criminal healthcare fraud statute without actual knowledge of the statute or specific intent to violate it. In addition, the PPACA 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 False Claims Act.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

If the use of our product candidates harms patients, we could be subject to costly and damaging product liability claims.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. For example, we may be sued if any product candidate we develop allegedly causes injury or is found to be otherwise unsuitable during clinical 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, negligence, strict liability, and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

 

   

impairment of our business reputation;

 

   

withdrawal of clinical trial participants;

 

   

initiation of investigations by regulators;

 

- 39 -


Table of Contents
   

costs due to related litigation;

 

   

distraction of management’s attention from our primary business;

 

   

substantial monetary awards to trial participants, patients or other claimants;

 

   

loss of revenue;

 

   

exhaustion of any available insurance and our capital resources;

 

   

the inability to commercialize our product candidates; and

 

   

decreased demand for our product candidates, if approved for commercial sale.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. While we believe our product liability insurance coverage is sufficient in light of our current clinical programs, The amount of the product liability coverage that we carry varies from time to time, depending on a number of factors, the most significant of which are the nature and scope of the clinical trials in which we are engaged and the number of patients being treated with our product candidates in these trials. The amount of our product liability coverage as of September 30, 2013 was $10.0 million. This amount may increase or decrease 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 due to liability and any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the commercial sale of our products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

If we 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 are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, manufacture and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. Although we believe that our procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

 

- 40 -


Table of Contents

We rely on our relationship with a professional employer organization for our human relations function and as a co-employer of our personnel, and if that party failed to perform its responsibilities under that relationship, our relations with our employees could be damaged and we could incur liabilities that could have a material adverse effect on our business.

All of our personnel, including our executive officers, are co-employees of AGTC and a professional employer organization, TriNet HR Corporation, or TriNet. Under the terms of our arrangement, TriNet is the formal employer of all of our personnel, and is responsible for administering all payroll, including tax withholding, and providing health insurance and other benefits for these individuals. We reimburse TriNet for these costs, and pay TriNet an administrative fee for its services. If TriNet fails to comply with applicable laws, or its obligations under this arrangement, our relationship with our employees could be damaged. We could, under certain circumstances, be held liable for a failure by TriNet to appropriately pay, or withhold and remit required taxes from payments to, our employees. In such a case, our potential liability could be significant and could have a material adverse effect on our business.

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

Substantially all of our operations are conducted from our headquarters located near Gainesville, Florida. Hurricanes or other natural disasters could severely disrupt our operations, damage our research facilities or destroy stored research materials that could be difficult to replace, and otherwise have a material adverse effect on our business, results of operations, financial condition and prospects. In addition, despite the implementation of security measures, our internal computer systems and those of our current and any future CROs and other contractors and consultants and collaborators are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. 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 or that otherwise disrupted our operations or the operations of our third-party contract manufacturer, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. For example, the loss of clinical trial data from our clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. If our security measures, disaster recovery and business continuity plans are not adequate in the event of such a breach, serious disaster or similar event, we could incur substantial expenses and the further development and commercialization of our product candidates could be delayed, which could have a material adverse effect on our business.

Interruptions in the supply of product or inventory loss may adversely affect our operating results and financial condition.

Our product candidates are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture and storage of our products, subjects us to production risks. While product batches released for use in clinical trials or for commercialization undergo sample testing, some defects may only be identified following product release. In addition, process deviations or unanticipated effects of approved process changes may result in these intermediate products not complying with stability requirements or specifications. Most of our product candidates must be stored and transported at temperatures within a certain range. If these environmental conditions deviate, our product candidates’ remaining shelf-lives could be impaired or their efficacy and safety could become adversely affected, making them no longer suitable for use. The occurrence or suspected occurrence of production and distribution difficulties can lead to lost inventories, and in some cases product recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and delays of new product launches. Any interruption in the supply of finished products or the loss thereof could hinder our ability to timely distribute our products and satisfy customer

 

- 41 -


Table of Contents

demand. Any unforeseen failure in the storage of the product or loss in supply could delay our clinical trials and, if our product candidates are approved, result in a loss of our market share and negatively affect our revenues and operations.

We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.

Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for product candidates may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

Our ability to use our net operating loss carryforwards may be subject to limitation.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of our net operating loss carryforwards before they expire. The closing of this offering, alone or together with transactions in our stock that have occurred in the past and may occur in the future, may trigger an ownership change pursuant to Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income, if any. Any such limitation, whether as the result of this offering, sales of common stock by our existing stockholders or additional sales of common stock by us after this offering, could potentially result in increased tax liability in future years. We have not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study. However, we believe it is likely that transactions that have occurred in the past, alone or together with the closing of this offering and other transactions that may occur in the future, would trigger an ownership change pursuant to Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income, if any.

Risks related to our intellectual property

If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and product candidates.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too

 

- 42 -


Table of Contents

late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in issued patents that protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Moreover, we may be subject to a third-party preissuance submission of prior art to the United States Patent and Trademark Office, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, 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. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Third parties may initiate legal proceedings alleging claims of intellectual property infringement, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the

 

- 43 -


Table of Contents

United States Patent and Trademark Office and corresponding foreign patent offices. Numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to 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, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, methods for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

We may not be successful in obtaining or maintaining necessary rights to gene therapy product components and processes for our development pipeline through acquisitions and in-licenses.

Presently we have rights to the intellectual property to develop our gene therapy product candidates. Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

For example, we sometimes collaborate with United States and foreign academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such right of first negotiation for intellectual property, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

 

- 44 -


Table of Contents

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. We are a party to intellectual property license agreements with the University of Florida Research Foundation, an affiliate of the University of Florida, Johns Hopkins University, the UAB Research Foundation, an affiliate of The University of Alabama at Birmingham, and MedImmune, Inc., each of which is important to our business, and we expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.

We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. It is possible that we may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

In many cases, patent prosecution of our licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners. Disputes may arise regarding intellectual property subject to a licensing agreement, including:

 

   

the scope of rights granted under the license agreement and other interpretation-related issues;

 

   

the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

   

the sublicensing of patent and other rights under our collaborative development relationships;

 

   

our diligence obligations under the license agreement and what activities satisfy those diligence obligations;

 

   

the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

 

   

the priority of invention of patented technology.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

 

- 45 -


Table of Contents

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

Competitors may infringe our patents or other intellectual property or the patents or other intellectual property of our licensors. In response, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us, alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours or our licensors is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

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 or those of our licensors. 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 defense of 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, alone or with our licensors, misappropriation 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.

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

If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patent and Trademark Office, or made a misleading statement, during prosecution. 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, post grant review, and equivalent proceedings in foreign jurisdictions. Such proceedings could result in the revocation of or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, 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 or unenforceability, we could lose at least part, and perhaps all, of the patent protection on one or more of our product candidates. Such a loss of patent protection could have a material adverse impact on our business.

 

- 46 -


Table of Contents

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact 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.

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

We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. While it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. We could be subject to ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. 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.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative it could have a substantial adverse effect on the price of our common stock. 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. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

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 governmental fees on patents and/or applications will be due to be paid to the United States Patent and Trademark Office and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The United States Patent and Trademark Office and various non-U.S. governmental patent agencies require compliance with a number of

 

- 47 -


Table of Contents

procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many 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 non-compliance 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, potential competitors might be able to enter the market and this circumstance could have a material adverse effect on our business.

Changes in United States 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 therefore obtaining and enforcing biotechnology patents is costly, time-consuming and inherently uncertain.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. The United States Patent and Trademark Office recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

Moreover, recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the United States Congress, the federal courts, and the United States Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

We have not yet sought FDA approval of names for any of our product candidates and failure to secure such approvals could adversely affect our business.

Any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.

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

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those 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,

 

- 48 -


Table of Contents

or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but 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.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. 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 and 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.

Risks related to this offering and ownership of our common stock

There has been no public market for our common stock prior to this offering, and you may not be able to resell our shares at or above the price you paid, or at all.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on the NASDAQ Global Market, but an active trading market for our common stock may never develop or be sustained following this offering. If an active trading market for our common stock does not develop after this offering, the market price and liquidity of our common stock will be materially and adversely affected. You may not be able to sell your shares quickly or at the market price if trading in our common shares is not active. The offering price for our common stock will be determined by negotiations between us and the underwriters and may bear no relationship to the market price for our common stock after this offering. An active trading market for our common stock may not develop and the market price of our common stock may decline below the offering price. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

The market price for our common stock may be volatile, which could contribute to the loss of your investment.

Fluctuations in the price of our common stock could contribute to the loss of all or part of your investment. Prior to this offering, there has not been a public market for our common stock. Accordingly, the initial public offering price for the shares of our common stock may not be indicative of the price that will prevail in the trading market, if any, that develops following this offering. If an active market for our common stock develops and continues, the trading price of our common stock following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our common stock and our common stock may trade at prices significantly below the initial public offering price. In such circumstances the trading price of our common stock may not recover and may experience a further decline.

Factors affecting the trading price of our common stock may include:

 

   

our failure to develop and commercialize our product candidates;

 

- 49 -


Table of Contents
   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

   

changes in the market’s expectations about our operating results;

 

   

adverse results or delays in preclinical studies or clinical trials;

 

   

our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

 

   

adverse regulatory decisions, including failure to receive regulatory approval for any of our product candidates;

 

   

success of competitive products;

 

   

adverse developments concerning our collaborations and our manufacturers;

 

   

inability to obtain adequate product supply for any product candidate for clinical trials or commercial sale or inability to do so at acceptable prices;

 

   

the termination of a collaboration or the inability to establish additional collaborations;

 

   

unanticipated serious safety concerns related to the use of any of our product candidates;

 

   

our ability to effectively manage our growth;

 

   

the size and growth, if any, of the orphan ophthalmology and other targeted markets;

 

   

our operating results failing to meet the expectation of securities analysts or investors in a particular period or failure of securities analysts to publish reports about us or our business;

 

   

changes in financial estimates and recommendations by securities analysts concerning our company, the gene therapy market, or the biotechnology and pharmaceutical industries in general;

 

   

operating and stock price performance of other companies that investors deem comparable to us;

 

   

overall performance of the equity markets;

 

   

announcements by us or our competitors of acquisitions, new product candidates or programs, significant contracts, commercial relationships or capital commitments;

 

   

our ability to successfully market our product candidates;

 

   

changes in laws and regulations affecting our business, including but not limited to clinical trial requirements for approvals;

 

   

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates and gene therapy platform;

 

   

commencement of, or involvement in, litigation involving our company, our general industry, or both;

 

   

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of our common stock available for public sale;

 

   

additions or departures of key scientific or management personnel;

 

   

any major change in our board or management;

 

   

changes in accounting practices;

 

   

ineffectiveness of our internal control over financial reporting;

 

   

sales of substantial amounts of common stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

- 50 -


Table of Contents
   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance. The stock market in general, and the NASDAQ Global Market and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of ours, may not be predictable. A loss of investor confidence in the market for technology or software stocks or the stocks of other companies which investors perceive to be similar to us, the opportunities in the digital simulation market or the stock market in general, could depress our stock price regardless of our business, prospects, financial conditions or results of operations.

If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our common stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock after the closing of this offering, the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.

The concentration of our capital stock ownership with insiders upon the closing of this offering will likely limit your ability to influence corporate matters.

We anticipate that our executive officers, employees, directors, current 5% or greater stockholders, and their respective affiliates will together beneficially own or control, in aggregate, approximately     % of the shares of our outstanding common stock, after giving effect to the conversion of all outstanding preferred stock and assuming no exercise of outstanding options or warrants following the closing of this offering (assuming no exercise of the underwriters’ over-allotment option). As a result, these executive officers, directors and principal stockholders, acting together, will have substantial influence over most matters that require approval by our stockholders, including the election of directors, any merger, consolidation or sale of all or substantially all or of our assets or any other significant corporate transaction. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose such action. These stockholders may delay or prevent a change of control or otherwise discourage a potential acquirer from attempting to obtain control of our company, even if such change of control would benefit our other stockholders. This concentration of stock ownership may adversely affect investors’ perception of our corporate governance or delay, prevent or cause a change in control of our company, any of which could adversely affect the market price of our common stock.

We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds

 

- 51 -


Table of Contents

$700.0 million as of any December 31 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following June 30 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

Sales of a substantial number of shares of our common stock by our existing stockholders in the public market may cause our stock price to decline.

Sales of our common stock in the public market after this offering, or the perception that these sales may occur, could cause the market price of our common stock to decline. Based on our shares of common stock outstanding as of September 30, 2013, upon the closing of this offering, we will have              shares of common stock outstanding, assuming no exercise of the underwriters’ over-allotment option. Of these, only the              shares of our common stock sold in this offering, plus any shares sold upon exercise of the underwriters’ over-allotment option, will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. The remaining shares outstanding after this offering will be available for sale, upon the expiration of the 180-day lock-up period beginning from the date of this prospectus, if applicable, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. Any or all of these shares may be released prior to expiration of the lock-up period at the discretion of the lead underwriter for this offering. After the lock-up agreements expire, 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 volume limitations under Rule 144 under the Securities Act, assuming an initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus). In addition,             shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit 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. To the extent these shares are sold, or if it is perceived that they will be sold, into the market, the market price of our common stock could decline. See “Shares Eligible for Future Sale” for a more detailed description of the restrictions applicable to the sale of shares of our common stock after this offering.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time

 

- 52 -


Table of Contents

to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock, including shares of common stock sold in this offering.

You will experience immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

If you purchase shares of our common stock in this offering, you will experience immediate and substantial dilution, as the initial public offering price of our common stock will be substantially greater than the net tangible book value per share of our common stock. Based on an initial offering price of $         per share, which is the midpoint of the range on the cover page of this prospectus, if you purchase our common stock in this offering, you will suffer immediate and substantial dilution of approximately $         per share. Further, investors purchasing common stock in this offering will contribute approximately     % of the total amount invested by stockholders since our inception, but will own only approximately     % of the shares of common stock outstanding after giving effect to this offering. If the underwriters exercise their over-allotment option, or if outstanding options and warrants to purchase our common stock are exercised, you will experience additional dilution. For a further description of the dilution that you will experience immediately after this offering, see the section entitled “Dilution.”

Our board of directors and management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our board of directors and management will have broad discretion to use the net proceeds from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will be relying on the judgment of our board of directors and management regarding the application of these proceeds. You will not have the opportunity to influence our decisions on how to use the proceeds, and we may not apply the net proceeds of this offering in ways that increase the value of your investment. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. While we have not allocated these estimated net proceeds for any specific purposes, we expect to use the net proceeds from this offering to develop our product candidates and for general corporate purposes, including working capital. We may also use a portion of the proceeds to repay outstanding indebtedness or in acquisitions of businesses, products and technologies that are complementary to our business. Although we have from time to time evaluated possible acquisitions, we currently have no commitments or agreements to make any material acquisition, and we may not make any acquisitions in the future. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

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

We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings to fund our future growth and do not expect to declare or pay any dividend on shares of our common stock in the foreseeable future. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock appreciates and you sell your shares at a price above your cost. The price of our common stock may not appreciate in value or ever exceed the price that you paid for shares of our common stock in this offering.

We could be subject to securities class action litigation.

In the past, 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 companies have

 

- 53 -


Table of Contents

experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions in Delaware law, might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors, even if doing so would benefit our stockholders or remove our current management. Our corporate governance documents include provisions:

 

   

providing for three classes of directors with the term of office of one class expiring each year, commonly referred to as a staggered board;

 

   

authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

 

   

limiting the liability of, and providing indemnification to, our directors and officers;

 

   

eliminating the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

 

   

requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

 

   

controlling the procedures for the conduct and scheduling of board and stockholder meetings;

 

   

limiting the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of directors then in office; and

 

   

providing that directors may be removed by stockholders only for cause.

These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

 

- 54 -


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. In some cases, you can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “plan,” “potential” “predict,” “project” or the negative of those terms or similar words. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. You should read these statements carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other “forward-looking” information. These forward-looking statements include, among other things, statements about:

 

   

the anticipated timing, costs and conduct of our planned clinical trials for our ACHM and XLRS product candidates;

 

   

the anticipated timing, costs and conduct of our planned preclinical studies of our XLRP product candidate;

 

   

our plans to explore potential applications of our gene therapy platform in other indications in orphan ophthalmology;

 

   

our expectations regarding the clinical effectiveness of our product candidates;

 

   

our beliefs regarding the scalability and commercial viability of our HAVE manufacturing method;

 

   

our commercialization, marketing and manufacturing capabilities and strategy;

 

   

our intellectual property position;

 

   

our competitive position;

 

   

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

 

   

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

You should read this prospectus, the documents that we reference in this prospectus and the documents that we have filed 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 what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

- 55 -


Table of Contents

USE OF PROCEEDS

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

A $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease the net proceeds from this offering 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 discounts and commissions.

Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us by $         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 estimated underwriting discounts and commissions.

We expect to use the net proceeds from this offering, together with cash and cash equivalents on hand, to continue the clinical trials of our XLRS and ACHM product candidates beyond the Phase 1/2 stages (which we believe are already adequately funded), expand preclinical studies of our XLRP product candidate, and explore potential applications of our gene therapy platform in other indications in orphan ophthalmology.

Specifically, we intend to apply the net proceeds of this offering as follows:

 

   

approximately $         million to fund a Phase 1/2 clinical trial and, if that is successful, to initiate a pivotal Phase 3 trial of our XLRS product candidate;

 

   

approximately $         million to fund a Phase 1/2 clinical trial and, if that is successful, to initiate a pivotal Phase 3 trial of our ACHM product candidate;

 

   

approximately $         million to fund additional preclinical studies of our XLRP product candidate;

 

   

approximately $         million to explore, through early preclinical studies, potential applications of our gene therapy platform in other indications in orphan ophthalmology; and

 

   

the remainder for working capital and other general corporate purposes.

We may also use a portion of the net proceeds to in-license, acquire or invest in complementary businesses, technologies, products or assets, though we have no present plans to make any such acquisition or investment. Pending the use of the net proceeds from this offering, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities, certificates of deposit or government securities.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. 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 closing of this offering or the amounts that we will actually spend on the uses set forth above. Due to the many variables inherent in the development of gene therapy products at this time, such as the timing of patient enrollment, the timing and results of preclinical animal studies and clinical trials and the timing of regulatory submissions and evolving regulatory requirements, the amount and timing of our actual expenditures will depend upon such variables and we cannot currently predict the stage of development we expect the net proceeds of this offering to achieve for our clinical studies and product candidates.

As a result, we will have broad discretion over the use of the net proceeds from this offering, and investors will be relying on our judgment regarding the application of the net proceeds of this offering. In addition, we might decide to postpone or not pursue certain clinical trials or preclinical activities if the net proceeds from this offering and the other sources of cash are less than expected.

 

- 56 -


Table of Contents

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to finance the growth and development of our business. We do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any future financing instruments, provisions of applicable law and other factors the board deems relevant. See “Risk Factors—Risks related to this offering and ownership of our common stock—We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on the appreciation in the price of our common stock.”

 

- 57 -


Table of Contents

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2013 on:

 

   

An actual basis;

 

   

A pro forma basis, giving effect to the issuance of 58,816,897 shares of our Series B-3 preferred stock for cash proceeds of $10.7 million, which occurred on November 5, 2013, the reclassification of $8,000 of deferred issuance costs related to the Series B-3 preferred stock closing to additional paid in capital, the conversion of all of our preferred stock, including the Series B-3 shares, into 319,203,488 shares of common stock upon the closing of this offering, the reclassification of our Series B purchase right liability to additional paid-in capital and the conversion of all outstanding warrants exercisable for shares of Series A-1, Series A-1A and Series B-1 preferred stock into warrants exercisable for shares of common stock, resulting in the preferred stock warrant liability being reclassified to additional paid-in capital, each upon the closing of this offering; and

 

   

A pro forma as adjusted basis, giving additional effect to the sale of              shares of our common stock offered in this offering, assuming an initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the filing and effectiveness of a restated certificate of incorporation upon the closing of this offering.

The pro forma information below is illustrative only and our capitalization following the closing 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 in conjunction with our financial statements and related notes, “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

 

       As of September 30, 2013  
       Actual      Pro Forma      Pro Forma as
Adjusted
 
       (in thousands, except share
and per share data)
 

Cash and cash equivalents

     $ 7,857       $ 18,579       $                
    

 

 

    

 

 

    

 

 

 

Short-term investments

     $ 13,000       $ 13,000       $     
    

 

 

    

 

 

    

 

 

 

Convertible preferred stock and stockholders’ equity:

          

Convertible preferred stock, $0.001 par value; Series A-1 to
B-3; shares issued and outstanding: 222,843,265 actual; none
pro forma or pro forma as adjusted

       58,104         —           —     
    

 

 

    

 

 

    

 

 

 

Common stock, $0.001 par value; 410,000,000 shares
authorized; shares issued: 3,816,836 actual; 323,020,324
pro forma;              pro forma as adjusted

       4         323      

Additional paid-in capital

       12,273         88,083      

Accumulated deficit

       (55,490      (55,490   
    

 

 

    

 

 

    

 

 

 

Total stockholders’ (deficit) equity

     $ (43,213    $ 32,916       $     
    

 

 

    

 

 

    

 

 

 

Total capitalization

     $ (43,213    $ 32,916       $     
    

 

 

    

 

 

    

 

 

 

A $1.00 increase (decrease) in the assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents 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 estimated underwriting discounts and commissions and

 

- 58 -


Table of Contents

estimated offering expenses payable by us. Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents and total stockholders’ equity (deficit) and total capitalization by $         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 discounts and commissions and estimated offering expenses payable by us.

 

- 59 -


Table of Contents

DILUTION

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

Our pro forma historical net tangible book value (deficit) as of September 30, 2013 was $13.5 million, or $0.05 per share of common stock, taking into account the expected conversion of all shares of our preferred stock outstanding as of that date into 260,386,591 shares of common stock and the conversion of all outstanding warrants exercisable for shares of Series A-1, Series A-1A and Series B-1 preferred stock into warrants exercisable for shares of common stock, resulting in the preferred stock warrant liability being reclassified to additional paid-in capital, each upon closing of this offering. Without giving effect to the conversion of our outstanding preferred stock into common stock and the conversion of our outstanding warrants exercisable for preferred stock into warrants exercisable for common stock, we had a historical net tangible book value (deficit) of $(44.9) million, or $(11.75) per share of common stock, as of September 30, 2013. Historical net tangible book value per share is equal to our total tangible assets, less total liabilities and preferred stock, divided by the number of outstanding shares of our common stock. Neither our historical net tangible book value (deficit) nor our pro forma historical net tangible book value (deficit) as of September 30, 2013 gives effect to our issuance and sale on November 5, 2013 of 58,816,897 shares of Series B-3 preferred stock for proceeds of $10.7 million.

After giving effect to our issuance and sale of              shares of common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book value (deficit) as of September 30, 2013 would have been $         million, or $         per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $         per share. The initial public offering price per share will significantly exceed the pro forma as adjusted net tangible book value per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $         per share. The following table illustrates this per share dilution to the new investors purchasing shares of common stock in this offering without giving effect to the over-allotment option granted to the underwriters:

 

Assumed initial public offering price

     $                        

Historical net tangible book value (deficit) per share

   $ (11.75  

Increase per share attributable to conversion of outstanding preferred stock and preferred stock warrants

   $ 11.80     
  

 

 

   

Pro forma historical net tangible book value (deficit) per share as of September 30, 2013

   $ 0.05     

Increase per share attributable to sale of shares of common stock in this offering

   $       

Pro forma as adjusted historical net tangible book value per share

     $     

Dilution per share to new investors

     $     
    

 

 

 

Each $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease the pro forma net tangible book value (deficit) by $         million, the pro forma net tangible book value (deficit) per share after this offering by $         per share and the dilution in pro forma net tangible book value (deficit) per share to investors in this offering by $         per share, 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 offering expenses payable by us.

Similarly, a one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per

 

- 60 -


Table of Contents

share after this offering by approximately $         and decrease (increase) the dilution per share to investors participating in this offering by approximately $            , assuming the assumed initial public offering price of $         per share remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value (deficit) will increase to $         per share, representing an immediate increase to existing stockholders of $         per share and an immediate dilution of $         per share to new investors. If any shares are issued upon exercise of outstanding options or warrants, you will experience further dilution.

The following table summarizes, on a pro forma as adjusted basis as of September 30, 2013, after giving effect to the issuance of the Series B-3 shares and conversion of all of our outstanding preferred stock into common stock, the differences between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering. The calculation below is based on an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before the deduction of the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 

     Shares Purchased     Total Consideration     Average
Price
Per Share
 
     Number    %     Amount      %    

Existing stockholders

                       $                                         $                    

New investors

             $     
  

 

  

 

 

   

 

 

    

 

 

   

 

 

 

Total

        100   $               $     
  

 

  

 

 

   

 

 

    

 

 

   

 

 

 

The number of shares purchased from us by existing stockholders is based on 323,020,324 shares of our common stock outstanding as of September 30, 2013, which gives effect to the issuance of 58,816,897 shares of our Series B-3 preferred stock, which occurred on November 5, 2013, and to the conversion of all outstanding shares of our preferred stock, including the Series B-3 shares, into 319,203,488 shares of common stock upon the closing of this offering, and excludes:

 

   

2,425,928 shares of common stock issuable upon the exercise of preferred stock warrants outstanding and exercisable as of September 30, 2013, at a weighted average exercise price of $0.26 per share;

 

   

27,404,184 shares of common stock issuable upon the exercise of stock options outstanding under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan as of September 30, 2013, at a weighted average exercise price of $0.09 per share;

 

   

2,221,300 shares of common stock available for future issuance under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan as of September 30, 2013; and

 

   

an additional              shares of our common stock that will be made available for future issuance under our equity compensation plans upon the closing of this offering.

If the underwriters exercise their option to purchase additional shares from us in full, the number of shares held by new investors will increase to             , or     % of the total number of shares of common stock outstanding after this offering and the percentage of shares held by existing stockholders will decrease to     % of the total shares outstanding.

 

- 61 -


Table of Contents

SELECTED FINANCIAL DATA

The following selected financial data should be read together with our financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. Our selected statement of operations data for the fiscal years ended June 30, 2012 and 2013 and our selected balance sheet data as of June 30, 2012 and 2013 are derived from our audited financial statements included elsewhere in this prospectus. Our selected statement of operations data for the three months ended September 30, 2012 and 2013 and our selected balance sheet data as of September 30, 2013 have been derived from our unaudited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any future period, and our interim results are not necessarily indicative of our results for the entire year or any future period. The selected financial data in this section are not intended to replace our financial statements and the related notes.

 

    Fiscal Year Ended
June 30,
    Three Months Ended
September 30,
 
        2012             2013             2012             2013      
   

(in thousands except per share data)

 

Statement of Operations Data:

       

Revenue:

       

Grant revenue

  $ 718      $ 439      $  177      $ 191   

Sponsored research revenue

    364        503        82        67   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    1,082        942        259        258   
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

       

Research and development

    2,354        3,133        539        1,443   

General and administrative

    787        1,403        280        781   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    3,141        4,536        819        2,224   
 

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (2,059     (3,594     (560     (1,966
 

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

       

Interest income

    —          10        —          7   

Interest expense

    (69     (191     (44     —     

Fair value adjustments to warrant liabilities (1)

    204        (8     —          (140

Fair value adjustments to Series B purchase rights (1)

    —          (1,207     —          (4,965
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

    135        (1,396     (44     (5,098
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (1,924   $ (4,990   $ (604   $ (7,064
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted (2)

  $ (0.50   $ (1.31   $ (0.16   $ (1.85

Weighted-average shares outstanding, basic and diluted (2)

    3,817        3,817        3,817        3,817   

Pro forma net loss per share, basic and diluted (unaudited) (2)

    $ (0.03     $ (0.04

Weighted-average pro forma shares outstanding, basic and diluted (unaudited) (2)

      145,105          192,329   

 

     As of June 30,     As of September 30,  
     2012     2013     2013  
    

(in thousands)

 

Balance Sheet Data:

      

Cash and cash equivalents

   $ 774      $ 8,893      $  7,857   

Short-term investments

   $ —        $ 14,000      $  13,000   

Working capital

   $ (399   $ 20,051      $ 13,162   

Total assets

   $ 2,824      $ 25,490      $ 23,722   

Current liabilities

   $ 1,494      $ 3,460      $ 8,581   

Total stockholders’ (deficit) equity

   $ (31,290   $ (36,183   $  (43,213

 

(1) See note 6 of the notes to financial statements appearing elsewhere in this prospectus for a description of the fair value adjustments to our warrant liabilities and Series B purchase rights.
(2) See note 2 of the notes to financial statements appearing elsewhere in this prospectus for a description of the method used to calculate basic and diluted net loss per share and pro forma basic and diluted net loss per share.

 

- 62 -


Table of Contents

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 our financial statements and related notes appearing in this prospectus. Some of the information contained in this discussion and analysis 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. 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. See “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biotechnology company that uses our proprietary gene therapy platform to develop products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology. Our lead product candidates, which are each in the preclinical stage, are treatments for X-linked retinoschisis, or XLRS, achromatopsia, or ACHM, and X-linked retinitis pigmentosa, or XLRP. These rare diseases of the eye are caused by mutations in single genes, significantly affect visual function and currently lack effective medical treatments. For our XLRS product candidate, we expect to file an IND and initiate Phase 1/2 clinical trials in the United States in late 2014 with initial clinical data expected in mid-2015. For our ACHM product candidate, we expect to file an IND and initiate Phase 1/2 clinical trials in the United States in early 2015, with clinical data expected in late 2015. We have also begun preclinical studies for our product candidate addressing XLRP, a disease characterized by progressive degeneration of the retina, leading to total blindness in adult men. In the longer term, we will seek opportunities to take advantage of the adaptability of our gene therapy platform to address a range of genetic diseases, both within and beyond our initial focus area of orphan ophthalmology.

Since our inception in 1999, we have devoted substantially all of our resources to our development efforts relating to our proof-of-concept programs in ophthalmology and alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease, including activities to manufacture product in compliance with good manufacturing practices, preparing to conduct and conducting clinical trials of our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the private placement of preferred stock, common stock, convertible notes and warrants to purchase preferred stock. We have also received grant funding of $10.7 million since our inception, either independently or with our collaborators. Most recently we and the University of Florida, or UF, were jointly awarded an $8.3 million dollar grant from the National Eye Institute, or NEI, of the National Institutes of Health, or NIH, to support development of our ACHM product candidate. As a sub-awardee, we expect to receive $4.0 million over the next five years under this grant.

We have incurred losses from operations in each year since inception. Our net losses were $1.9 million and $5.0 million for the fiscal years ended June 30, 2012 and 2013, respectively. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

 

   

conduct preclinical studies and clinical trials for our XLRS, ACHM and XLRP product candidates;

 

   

continue our research and development efforts, including exploration through early preclinical studies of potential applications of our gene therapy platform in other indications in orphan ophthalmology;

 

   

manufacture clinical trial materials and develop large-scale manufacturing capabilities;

 

- 63 -


Table of Contents
   

seek regulatory approval for our product candidates;

 

   

further develop our gene therapy platform;

 

   

add personnel to support our product development and commercialization efforts; and

 

   

operate as a public company.

We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and which we believe is subject to significant uncertainty. We expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to enable us to advance planned preclinical studies and clinical trials for our lead product candidates for at least the next 24 months. In order to complete the process of obtaining regulatory approval for our lead product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding. Also, our current 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. However, we may 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 products.

We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Our ability to generate revenue from product sales will depend on a number of factors, including, among others, obtaining and maintaining adequate coverage and reimbursement from third-party payors for our product candidates and for gene therapy as a viable treatment option. Even if we are able to generate revenues from the sale of our products, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Financial operations overview

Revenue

Our ability to generate product revenue and become profitable depends upon our ability to successfully commercialize products. To date, we have not generated any revenues from the sales of products. In the two fiscal years ended June 30, 2012 and 2013, all our revenues were derived from grants. Our grant revenue is primarily generated through research and development grant programs offered by federal, state, and local governments and agencies, including the United States Food and Drug Administration, or FDA, and by patient advocacy groups such as the Foundation Fighting Blindness, or FFB, and the Alpha-1 Foundation. Grant revenue is recognized when there is reasonable assurance that the grant will be received and we have complied with the terms of the grant. Prior to fiscal year 2012, we also derived revenue from collaboration and license fees received under our agreement with Genzyme Corporation, or Genzyme. We currently do not expect to derive substantial additional revenue from our agreement with Genzyme.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

 

   

employee-related expenses, including salaries, benefits, travel and share-based compensation expense;

 

- 64 -


Table of Contents
   

expenses incurred under agreements with academic research centers, contract research organizations, or CROs, and investigative sites that conduct our clinical trials;

 

   

the cost of acquiring, developing, and manufacturing clinical trial materials; and

 

   

facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

 

   

the scope, rate of progress, and expense of our ongoing as well as any additional clinical trials and other research and development activities;

 

   

the countries in which trials are conducted;

 

   

future clinical trial results;

 

   

uncertainties in clinical trial enrollment rates or drop-out or discontinuation rates of patients;

 

   

potential additional safety monitoring or other studies requested by regulatory agencies;

 

   

significant and changing government regulation; and

 

   

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through June 30, 2013, we have incurred approximately $46.4 million in research and development expenses. Our research and development expenses, categorized by product candidate or program, in fiscal years 2012 and 2013 were as follows:

 

     Fiscal year ended
June 30,
 

Product candidate or program

   2012      2013  
     (in thousands)  

XLRS

   $ 633       $ 929   

ACHM

     151         685   

XLRP

     —           —     

LCA2

     265         312   

Other orphan ophthalmology indications

     —           70   

General research and process development

     711         746   

AAT deficiency

     594         391   
  

 

 

    

 

 

 

Total

   $ 2,354       $ 3,133   
  

 

 

    

 

 

 

 

- 65 -


Table of Contents

We plan to increase our research and development expenses for the foreseeable future as we continue the development of our XLRS, ACHM and XLRP product candidates and explore potential applications of our gene therapy platform in other indications in orphan ophthalmology. Our current planned research and development activities include the following:

 

   

we expect to file an IND and initiate in late 2014 Phase 1/2 clinical trials in the United States to examine the feasibility, safety and efficacy of our XLRS product candidate;

 

   

we expect to file an IND and initiate in early 2015 Phase 1/2 clinical trials in the United States to examine the feasibility, safety and efficacy of our ACHM product candidate;

 

   

we are currently designing preclinical studies to further evaluate the ability of an AAV vector to delay disease progression in animal models of XLRP. If these studies are successful, we will conduct additional preclinical studies required for submission of an IND to the FDA; and

 

   

we will continue to manufacture clinical trial materials in support of our clinical trials.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation and travel expenses for our employees in executive, operational, finance and human resource functions. Other general and administrative expenses include facility-related costs and professional fees for directors, accounting and legal services and expenses associated with obtaining and maintaining patents.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of our product candidates. We also anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with NASDAQ listing and Securities and Exchange Commission requirements, director and officer insurance premiums, and investor relations costs associated with being a public company. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

Other income (expense), net

Other income and expense consists primarily of interest earned on cash and cash equivalents and short-term investments, interest incurred on our bridge and bank loans, loss on disposal of property and equipment and re-measurement gain or loss associated with the change in the fair value of our Series B purchase rights liability and our preferred stock warrant liability.

We use the Black-Scholes option pricing model to estimate the fair value of our Series B purchase rights liability and preferred stock warrant liability. We base the estimates in the Black-Scholes option pricing model, in part, on subjective assumptions, including stock price volatility, risk-free interest rate, dividend yield, and the fair value of the preferred stock underlying the purchase rights and the warrants. The re-measurement gain or loss associated with the changes in the fair value of our Series B purchase rights liability and preferred stock warrant liability in each reporting period is recognized as a component of other income (expense), net.

Critical accounting policies and significant judgments and estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related

 

- 66 -


Table of Contents

to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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

Revenue recognition

We have generated revenue primarily through sponsored research arrangements with nonprofit organizations for the development and commercialization of product candidates and revenues from federal research and development grant programs. We recognize revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our balance sheets. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified as current liabilities. We recognize revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. We record these reimbursements as revenue and not as a reduction of research and development expenses, as we have the risks and rewards as the principal in the research and development activities.

We evaluate the terms of sponsored research agreement grants and federal grants to assess our obligations and if our obligations are satisfied by the passage of time, revenue is recognized on a straight-line basis. In situations where the performance of our obligations has been satisfied when the grant is received, revenue is recognized upon receipt of the grant. Certain grants contain refund provisions. We review those refund provisions to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, the grant is recognized as revenue. If the probability of repayment is determined to be more than remote, we record the grant as a deferred revenue liability, until such time that the grant requirements have been satisfied.

Research and development costs and expenses

Research and development costs are charged to expense as incurred. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. When outside contracts for research products or testing require advance payments, they are recorded on the balance sheet as a prepaid item and expensed when the service is provided or reaches a specific milestone outlined in the contract.

Share-based compensation

We account for our share-based compensation in accordance with ASC 718, Compensation—Stock Compensation . ASC 718 establishes accounting for share-based awards exchanged for employee services. Under the fair value recognition provisions of ASC 718, share based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service/vesting period. Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the use of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility.

 

- 67 -


Table of Contents

We estimate the grant date fair value of stock options and the related compensation expense using the Black-Scholes option valuation model. This option valuation model requires the input of subjective assumptions including: (1) estimated period of time outstanding, or expected term, of the options granted, (2) volatility, (3) risk-free interest rate and (4) expected dividend yield. Because share-based compensation expense is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeiture rates differ from those estimates. We have estimated expected forfeitures of stock options based on our historical turnover rate and used these rates in developing a future forfeiture rate. If our actual forfeiture rate varies from our estimates, additional adjustments to compensation expense may be required in future periods. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment. As a result, if facts change and we use different assumptions, our share-based compensation expense could be materially different in the future.

Exercise price and fair value of common stock

All options have been granted at exercise prices determined by our board of directors to be not less than the fair value of the underlying shares on the date of grant. The fair value of the shares of common stock that underlie the stock options we have granted has historically been estimated by our board of directors based upon information available to it at the time of grant, as further discussed below.

Information pertaining to the Black-Scholes valuation of common stock options granted to employees during fiscal years 2012 and 2013 and the three months ended September 30, 2013 is as follows:

 

    Fiscal Year Ended June 30,     Three Months Ended September 30,  
    2012     2013               2012                          2013             

Options granted (number of shares)

            137,712            6,757,509                        —          13,010,320       

Weighted-average exercise price

  $ 0.10          $ 0.01            —          0.14       

Weighted-average grant date fair value of common stock options

  $ 0.05          $ 0.01            —          0.14       

Assumptions:

       

Expected volatility

    65.02%         63.23%         —          85.00%    

Expected term in years

    6.25            6.25            —          6.25       

Risk-free interest rate

    1.39%         1.37% to 1.40%         —          2.69%    

Expected dividend yield

    0.00%         0.00%         —          0.0%    

The dividend yield is based upon the assumption that we will not declare a dividend over the life of the options. Since adopting ASC 718, we have been unable to use historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. We have therefore utilized the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to estimate on a formula basis the expected term of our stock options considered to have “plain vanilla” characteristics. The risk-free interest rate is based on the U.S. Treasury yield curve on the date of the grant. We compute volatility under the “calculated value method” of ASC 718 by utilizing the average of a peer group comprised of publicly-traded companies and expect to continue to do so until we have adequate historical data regarding the volatility of our traded stock price. The peer group was determined based upon companies considered to be direct competition or having been presented by independent parties as a “comparable” company based upon market sector. In determining a comparable, we have excluded “large-cap” entities. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the statement of operations for the years ended June 30, 2012 and 2013 and the three months ended September 30, 2012 and 2013 does not record tax related effects on stock-based compensation given our historical and anticipated operating losses and offsetting changes in its valuation allowance that fully reserves against potential deferred tax assets.

 

- 68 -


Table of Contents

Stock option grants during fiscal years 2012 and 2013

The following table presents the grant dates, number of underlying shares and related exercise prices of all stock options granted to employees between July 1, 2011 and September 30, 2013, along with the fair value per share utilized to calculate share-based compensation expense for each grant:

 

Date of grant

   Number of shares      Exercise
price per  share
     Common stock fair
value per share
on grant date
 

August 25, 2011

     140,000       $ 0.10       $ 0.10   

November 2, 2011

     137,712         0.10         0.10   

January 6, 2013

     6,722,510         0.01         0.01   

April 19, 2013

     35,000         0.01         0.01   

September 18, 2013

     13,010,320       $ 0.14       $ 0.14   

Share-based compensation totaled $24,445 and $25,237 for fiscal years 2012 and 2013, and $0 and $16,003 for the three months ended September 30, 2012 and 2013, respectively. We expect the amount of our share-based compensation expense for stock options granted to employees and non-employees to increase in future periods due to increases in headcount and, potentially, to increases in the value of our common stock.

The intrinsic value of all vested and unvested options outstanding at September 30, 2013 was $                , representing the difference between the aggregate value of the shares subject to such options, assuming a value per share equal to the midpoint of the price range on the cover page of this prospectus, and the aggregate exercise price of the such options, which have a weighted average exercise price equal to $0.09 per share.

Significant factors used in determining the fair value of our common stock

The fair value of the shares of common stock that underlie the stock options we have granted has historically been determined by our board of directors based upon information available to it at the time of grant. The board of directors considered numerous objective and subjective factors in the assessment of fair value, including reviews of our business and financial condition, the conditions of the industry in which we operate and the markets that we serve and general economic, market and United States and global capital market conditions, the lack of marketability of our common stock, the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, the preferences and privileges of the preferred stock over the rights of the common stock, the status of the clinical trials and preclinical studies relating to our product candidates and third-party valuations of our common stock. The board has generally considered the most persuasive evidence of fair value to be the prices at which our securities were sold in actual arms’ length transactions.

Background: awards prior to fiscal year 2012

On six occasions in fiscal years 2004 through 2010, we issued shares of our preferred stock to venture capital investors. Our most recent preferred stock financing before fiscal year 2012 was on February 23, 2010, at which time we issued shares of our Series A-1 preferred stock for $0.9658 per share. On November 4, 2010, we issued stock options for 1,000 shares of our common stock at an exercise price equal to $0.10 per share, or approximately 10% of the purchase price of the Series A-1 preferred stock issued in February 2010, which our board determined to be not less than the fair value of our common stock. These were our last option grants prior to fiscal year 2012.

In estimating the fair value of our common stock as of November 4, 2010 and determining that this 10-to-1 ratio between the arms’ length price paid for our Series A-1 preferred stock and the estimated fair value of our common stock was reasonable, we took into account the early status of the clinical and preclinical studies relating to our product candidates, the lack of marketability of our common stock, the preferences and privileges of the preferred stock over the rights of the common stock, the lack of voting control on the part of the holders of

 

- 69 -


Table of Contents

the common stock and our assessment that there was a low likelihood of achieving a liquidity event that would result in the receipt of value by the holders of common stock underlying the stock options in the near term.

We also considered a retrospective third-party valuation of our common stock, dated as of June 30, 2010. In conducting its valuation, the valuation firm determined that the market approach was appropriate for a valuation of our equity, given the then-current stage of our development and the nature of our company. In applying the market approach, the valuation firm estimated our enterprise value on a marketable, control basis, based upon the $0.9658 per share price paid for the Series A-1 preferred stock that we issued on February 23, 2010. After subtracting the liquidation preferences of our preferred stock, the valuation firm determined the equity value attributable to our common stock and, after applying a marketability discount of 40% and a control discount of 20%, concluded that the fair value of our common stock as of June 30, 2010 was $0.10 per share.

Stock option grants on August 25, 2011

In the first option award in fiscal year 2012, on August 25, 2011, our board awarded options for 140,000 shares of common stock at an exercise price of $0.10 per share, which it determined to be not less than the fair value of our common stock.

In estimating the fair value of our common stock as of August 25, 2011, we took into account the lack of marketability of our common stock, the preferences and privileges of the preferred stock over the rights of the common stock, the lack of voting control on the part of the holders of the common stock and our assessment that there was a low likelihood of achieving a liquidity event for the shares of common stock underlying the stock options in the near term. We also considered developments in the preclinical and clinical trials of our product candidates, including the fact that we had been awarded a $1.5 million grant from the Foundation Fighting Blindness to fund animal studies on our XLRS program, which was a positive development, but also noted that we had not yet received data from the pending clinical trial of our most advanced proof-of-concept product candidate for the treatment of AAT deficiency.

We also considered a retrospective third-party valuation of our common stock, dated as of June 30, 2011. In conducting its valuation, the valuation firm determined that the market approach was appropriate for a valuation of our equity, given the then-current stage of our development and the nature of our company. In applying the market approach, the valuation firm estimated our enterprise value on a marketable, control basis, based upon the most recent arms’ length transaction, namely the $0.9658 per share price paid for the Series A-1 preferred stock that we issued on February 23, 2010. After subtracting the liquidation preferences of our preferred stock, the valuation firm determined the equity value attributable to our common stock and, after applying a marketability discount of 40% and a control discount of 20%, concluded that the fair value of our common stock as of June 30, 2010 was $0.10 per share.

Balancing these factors, we considered that there was no reason to increase or decrease our estimate of the fair value of our common stock from the previous estimate of $0.10 per share.

Stock option grants on November 2, 2011

On November 2, 2011, our board awarded options for 137,712 shares of common stock at an exercise price of $0.10 per share, which it determined to be not less than the fair value of our common stock.

In estimating the fair value of our common stock as of November 2, 2011, we primarily considered that in November we received data from the clinical trials of our AAT deficiency product candidate, which was our most advanced program. The data were encouraging, in that they provided evidence of safety, dose response and sustained expression. However, in these trials the protein expression did not reach therapeutic levels. As a result, we concluded that additional development and clinical trials would be necessary for this product, and that it would be advisable for us to seek a partner with whom to share the cost of this effort.

 

- 70 -


Table of Contents

Balancing these factors, we considered that there was no reason to increase or decrease our estimate of the fair value of our common stock from the previous estimate of $0.10 per share.

Stock option grants on January 6, 2013

On January 6, 2013, our board awarded options for 6,722,510 shares of common stock at an exercise price of $0.01 per share, which it determined to be not less than the fair value of our common stock.

The principal factor influencing our estimate of the fair value of our common stock as of January 6, 2013 was the fact that in November 2012, we entered into definitive agreements with respect to a $37.5 million Series B preferred stock financing and sold 66,147,709 shares of our Series B-1 preferred stock at a price of $0.1297 per share. The Series B-1 investment, which was led by a new investor, reflected a valuation of our company that was 87% lower than that reflected in the most recent Series A-1 financing in 2010.

We believe that the primary factors that influenced this lower valuation were the failure of our AAT deficiency product candidate to achieve serum AAT expression levels of 11 µM or more in its clinical trials and we had not identified a partner to help fund continued development of our AAT deficiency program; the fact that our next most advanced product candidate, for the treatment of LCA2, while generating encouraging clinical data, addressed a disease with a small population estimated at only 600 patients in the United States and Europe; the fact that the commercial terms on which we had licensed our wet AMD product candidate to Genzyme are such that we now do not expect to receive substantial revenue from the wet AMD program; and the fact that our lead ophthalmology programs in XLRS and ACHM were still in an early and uncertain preclinical stage of development.

In connection with our Series B preferred stock financing, we obtained a contemporaneous, independent third-party valuation of our common stock, as of November 30, 2012, from the same firm that had previously performed annual valuations of our common stock. In conducting its valuation, the valuation firm again determined that the market approach was appropriate for a valuation of our equity, given the then-current stage of our development and the nature of our company. In applying the market approach, the valuation firm estimated our enterprise value on a marketable, control basis, based upon the most recent arms’ length transaction, namely the $0.1297 per share price paid for the Series B preferred stock that we issued in November 2012. After subtracting the liquidation preferences of our preferred stock, the valuation firm determined the equity value attributable to our common stock was zero.

In estimating the fair value of our common stock, we recognized, as did the independent valuation firm, that any sale or other exit scenario at a valuation less than the accumulated liquidation preference (other than an initial public offering that resulted in mandatory conversion to common stock of our outstanding preferred stock), would result in the receipt by common stockholders of no consideration. In January 2013, conditions in the United States economy remained uncertain and the investment climate for biotechnology companies in general was not favorable, with investment in biotech companies in the United States, Europe and Canada declining in 2012 compared to 2011. We also considered that our business development efforts had not identified any strategic partner or collaborator for our programs other than the wet AMD program licensed to Genzyme. The initial public offering market in the United States was weak, no gene therapy company had ever reached the public markets, and we did not consider an initial public offering by our company to be a realistic option in the foreseeable future. We therefore considered the likelihood of any near term exit scenario at a valuation that would result in receipt of consideration by our common stockholders to be extremely low.

However, our board also did not regard as reasonable the independent valuation firm’s assignment of zero value to our common stock. After considering the preferences and privileges of the preferred stock over the rights of the common stock and other factors bearing upon the relative values of our preferred stock and our common stock, we determined that a reasonable estimate of the fair value of our common stock at January 6, 2013 was $0.01 per share. This represented approximately 8% of the $0.1297 price of the Series B preferred stock we issued in November 2012, generally consistent with the discount we applied in determining the fair value of our common stock in relation to our previous preferred stock issuances.

 

- 71 -


Table of Contents

Stock option grants on April 19, 2013

On April 19, 2013, our board of directors awarded options for 35,000 shares of common stock at an exercise price of $0.01 per share, which it determined to be not less than the fair value of our common stock.

In estimating the fair value of our common stock in on April 19, 2013, we considered the positive development that in March 2013 we received initial funding under a $0.3 million grant from the Alpha-1 Foundation to support our clinical trials of our product candidate addressing AAT deficiency. In March 2013, we also obtained primate data demonstrating the ability to deliver our product candidate addressing XLRS by intravitreous injection, satisfying a milestone that resulted in the funding of a second tranche of our Series B financing, at a price equal to $0.1485 per share. However, after taking into account the uncertain investment climate for gene therapy companies and what we still considered to be the very low likelihood of any near term exit scenario at a valuation that would result in receipt of consideration by our common stockholders, we concluded that there was no reason to increase or decrease our estimate of the fair value of our common stock from our previous estimate of $0.01 per share as of January 6, 2013.

Stock option grants on September 18, 2013

On September 18, 2013, our board of directors authorized the grant of options for 13,010,320 shares of common stock at an exercise price of $0.14 per share, which it determined to be not less than the fair value of our common stock on that date. Share-based compensation expense attributable to these awards will be accounted for in our statement of operations for the three months ended September 30, 2013.

By the time of these September 18, 2013 awards, conditions in the securities markets and the prospects for our industry in general, and our company in particular, had changed dramatically. A growing body of clinical data providing evidence of efficacy and safety of gene therapy in a variety of diseases, improvements in vector design and manufacturing processes by us and others and the establishment of regulatory guidelines for the development and approval of gene therapy products had led to increased investment from the biopharmaceutical industry. In November 2012, the first gene therapy treatment to be approved by any regulatory authority in the Western world had been approved by the European Commission, and in July 2013 the developer of the product announced that it had entered into a collaboration to commercialize the product. We also regarded the recent preclinical data demonstrating the feasibility of intravitreal delivery of AAV vectors in primates to be an important confirmation of the potential of our gene therapy approach in ophthalmic disease.

Meanwhile, the number of IPOs completed in the United States in the second calendar quarter of 2013 almost doubled compared to the first calendar quarter of 2013. More relevant to us, beginning in the second calendar quarter of 2013 and particularly in the third and fourth calendar quarters of 2013, the volume of initial public offerings by biotechnology companies accelerated significantly. Even more importantly, for the first time, these included offerings by companies in the early stages of developing treatments in various disease areas, including one based on gene therapy. As a result of these developments, we believed that investors had developed significant interest in the area of gene therapy.

Further, in May 2013, we and the University of Florida were jointly awarded an $8.3 million dollar grant from the NEI to support development of our ACHM product, of which we expect to receive approximately $4.0 million over the next five years. During the summer of 2013, we continued to make progress to complete the design and construction of vectors for our ACHM product candidate and in August 2013, we commenced preclinical animal studies of that product. We also made a number of key hires, including that of our chief business officer in September 2013.

At a board meeting in August 2013, our board of directors and management reviewed recent developments in the IPO market for early-stage gene therapy companies and for the first time began to consider conducting an underwritten public offering of our common stock. We began interviewing investment banks, and by early September 2013, we had selected underwriters for a proposed initial public offering. The organizational meeting for the offering contemplated by this prospectus occurred on September 12, 2013.

 

- 72 -


Table of Contents

In connection with establishing the exercise price for the September 18, 2013 option awards and estimating the fair value of our common stock as of September 18, 2013, we obtained a contemporaneous third-party valuation by an independent valuation firm other than that which had previously performed valuations of our common stock. This valuation, dated as of September 18, 2013, was conducted in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , or the Practice Aid, utilizing the probability weighted expected return method, or PWERM.

Using the PWERM method, the value of an enterprise’s common stock is estimated based upon an analysis of future values for the company assuming various possible future liquidity events. Share value is based upon the probability-weighted present value of expected future net cash flows, considering each of the possible future events, as well as the rights and preferences of each share class.

As part of this valuation, we considered various scenarios involving the consummation of an initial public offering and our remaining a private company. We utilized the following probability-weighted scenarios:

 

Scenario

   Probability  

IPO by first calendar quarter of 2014

     40 %

IPO by second calendar quarter 2014

     10 %

Remain private through late 2015

     50 %

In assigning probabilities to the two IPO scenarios and to the “remain private” scenario, we considered the uncertainties affecting the public securities markets and the risk that we would be unable to successfully complete an initial public offering. We also considered the fact that as a result of our Series B financing in November 2012 and committed grants, we believe we have funding sufficient to enable us to complete planned preclinical studies and Phase 1/2 clinical trials for our lead product candidates, and therefore do not need to raise capital to reach a value inflection point. We believed that these factors made it less likely that we would complete a public offering, particularly if market conditions were unfavorable, and more likely that we would remain independent as a private company.

We used the market approach, in addition to considering the preliminary valuation indications that we received from various investment banking groups, to estimate our future exit values in connection with an assumed initial public offering of our common stock occurring in the first quarter of 2014, or IPO scenario 1, and the second quarter of 2014, or IPO scenario 2. In making this estimate, we considered the current stage of development of our various product candidates, analysis of pre-money valuations in recent IPOs by other companies of similar size at similar stages of clinical development, the strength of the current market for initial public offerings in the biotechnology industry and the preliminary valuations provided to us by various investment banking groups with which we met in August 2013.

In considering the remain private scenario, we applied the option-pricing model, or OPM, back-solve method to solve for the equity value and corresponding value of common stock based on the $0.1485 price per share of common stock issuable upon the conversion of Series B-2 preferred stock sold in April 2013. The OPM pricing method treats preferred and common stock as call options on the enterprise’s value, with exercise prices based on the liquidation and conversion preferences of the preferred stock, and based on the common equity per-share values equal to outstanding option and warrant exercise prices. The option pricing method relies on a number of inputs, including the expected time to a liquidity event, the risk free rate, volatility and expected dividend yield.

 

- 73 -


Table of Contents

We utilized the following assumptions as inputs in the option-pricing method:

 

Assumption

   Value  

Expected time to liquidity

     2.25 years   

Risk-free interest rate

     0.36%  

Volatility

     60.0%   

Expected dividend yield

     0.0%  

We assumed an expected time to a liquidity event of approximately 2.25 years, which equates to a liquidity event occurring at December 31, 2015. In arriving at this estimate, we considered our cash position and burn rate, the stage of clinical development of our product candidates and upcoming clinical milestones. We selected a risk free rate equal to the yield on the U.S. Treasury bond, stripped principal, with a maturity date approximating the expected liquidity date. Based on an expected liquidity date of December 31, 2015, we utilized a risk-free interest rate of 0.36%. We estimated volatility equal to 60.0%, which approximates the third quartile of the re-levered volatilities from a group of guideline companies that we considered similar to us in size and diversification. Because we have never declared a dividend on our common stock and do not expect to do so in the foreseeable future, we utilized an assumed 0.0% dividend yield.

After applying the probability weightings described above, we determined the probability-weighted marketable value of the common stock based on the three scenarios to equal $0.18 per share on a marketable minority interest basis.

We then applied a discount for lack of marketability, or DLOM, of our common stock. We utilized the Black-Scholes standard put option model and the average-strike put option pricing model to estimate the DLOM. Based upon these methods, we considered an appropriate DLOM to be 20%. Taking this into account, we determined the fair value of our common stock to be $0.14 per share as of September 18, 2013.

Warrant liability

As of June 30, 2012 and 2013 and September 30, 2013, we had warrants outstanding to purchase shares of our Series A-1, Series A-1A and Series B-1 preferred stock. Because our Series A-1, Series A-1A and Series B-1 preferred stock are subject to redemption under circumstances outside of our control, the outstanding shares of these series of preferred stock are presented as temporary equity. Consequently, the warrants to purchase shares of Series A-1, Series A-1A and Series B-1 preferred stock are accounted for as liabilities and adjusted to fair value at the end of each reporting period. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option pricing model. The estimates in Black-Scholes option pricing model are based, in part, on subjective assumptions, including stock price volatility, term of the warrants, risk free interest rate, dividend yield, and fair value of the preferred stock underlying the warrants. Such assumptions could differ materially in the future. The gain or loss associated with the change in the fair value of the preferred stock warrant liability from the prior period is recognized as a component of other (expense) income, net.

Series B purchase rights

In November 2012, we entered into a Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement, or Series B Purchase Agreement, which authorized the sale of up to 290,781,972 shares of convertible preferred stock in three separate tranches of Series B-1, Series B-2 and Series B-3 preferred stock, respectively. Simultaneously with the execution of the Series B Purchase Agreement, we issued and sold an aggregate of 66,147,709 shares of Series B-1 preferred stock at a price per share of $0.1297. The Series B Purchase Agreement provided that the holders of the Series B-1 shares, or Series B holders, were also entitled to purchase up to an aggregate of 140,542,178 shares of Series B-2 preferred stock for an aggregate purchase price equal to $18.2 million, or second tranche, and up to an aggregate of 82,670,167 shares of Series B-3 preferred stock for an aggregate purchase price equal to $10.7 million, or third tranche. The price per share and number of shares to be issued in exchange for such amount was to be determined separately for each tranche by reference to which, if any, of three milestones specified in the agreement had been satisfied by us.

 

- 74 -


Table of Contents

The purchase rights were legally separable and exercisable apart from the Series B-1 shares and, because representatives of the Series B holders hold a majority of the seats on the board of directors, the decision to complete the second and third tranche was deemed to be outside our control. We therefore recorded, at the time of entry into the Series B Purchase Agreement, a Series B purchase rights liability of $1.7 million for the fair value of our obligation to sell the Series B-2 and Series B-3 preferred stock in the second and third tranche. The Series B purchase rights liability was valued separately for each series using the Black-Scholes option-pricing method to assign a value to the purchase right relating to that series under each of the possible applicable valuation scenarios, depending on which milestones were met, with each scenario being assigned an estimated probability as of the valuation date. The aggregate of these probability-weighted valuations was assigned as the value of the purchase right for each tranche. The initial fair value of the Series B purchase rights liability was estimated to be $0.6 million for the second tranche and $1.1 million for the third tranche. The total value allocated to the Series B purchase rights reduced the amount allocated to the carrying value of the Series B-1 preferred stock on our balance sheet.

The significant assumptions used as inputs in the Black-Scholes valuation were as follows:

 

Assumption

   Year Ended June 30, 2013      Three Months Ended September 30,  
                  2012            2013  
Exercise price      $0.1297 to $0.1823         —           $0.1485 to $0.1823   
Years to maturity      0.37 to 1.87         —           1.00   
Risk-free interest rate      0.04% to 0.25%         —           0.10%   
Volatility      40.0% to 60.0%         —           85.0%   

The most significant and judgmental inputs driving the fair value of our Series B purchase rights are the assumptions regarding the fair value of the underlying preferred shares and the volatility factor. With all other inputs constant, an increase or decrease in the assumed fair value of the preferred shares would result in a higher or lower estimate of the fair value of the Series B purchase rights, respectively, although there would not be a direct correlation. Similarly, an increase or decrease in the assumed volatility factor would result in a higher or lower estimate of the fair value of the Series B purchase rights, respectively.

In April 2013, following the satisfaction by us of the first milestone, the Series B holders exercised their rights with respect to the second tranche and purchased an aggregate of 122,749,639 shares of Series B-2 preferred stock at a price per share of $0.1485, for gross cash proceeds of $18.2 million. During fiscal year 2013, we recorded a change in value of the Series B purchase rights liability of $1.2 million to other expense and the $0.8 million balance of the value allocated to the Series B-2 purchase rights liability immediately prior to the closing of the second tranche was recorded as proceeds from the issuance of the Series B-2 preferred stock.

During the three months ended September 30, 2013, we recorded a change in value of the Series B purchase rights liability of $5.0 million to other expense.

On November 5, 2013, the holders of our Series B preferred stock purchased an aggregate of 58,816,897 shares of our Series B-3 preferred stock, as a result of which, we expect to report that the fair value of the Series B purchase rights liability outstanding immediately before this closing will be recorded as additional proceeds of this issuance of the Series B-3 preferred stock.

Income taxes

We recognize deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. At June 30, 2013, we had net operating losses of approximately $46.9 million that may be applied against future taxable income and expire in various years from 2022 to 2033. At June 30, 2013, we also had research and development tax credits of approximately $0.9 million that may provide future tax benefits and expire from 2027 to 2042.

 

- 75 -


Table of Contents

We periodically evaluate the positive and negative evidence bearing upon the realizability of our deferred tax assets. Based on our history of operating losses, we have concluded that it is more likely than not that the benefit of our deferred tax assets will not be realized. Therefore, any tax benefits to be realized in future years as a result of the utilization of our net operating loss carry forwards as of June 30, 2013, computed based on statutory federal and state rates, are completely offset by valuation allowances.

Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in our ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of our net operating loss carryforwards before they expire. We have not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study. However, we believe it is likely that transactions that have occurred in the past, alone or together with the closing of this offering and other transactions that may occur in the future, would trigger an ownership change pursuant to Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset our taxable income, if any.

For all years through June 30, 2013, we generated research credits but we have not conducted a study to document the qualified activities. When completed, this study may result in an adjustment to our research and development credit carry forwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position for these two years. A full valuation allowance has been provided against our research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carry forwards and the valuation allowance.

Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2012 and 2013 and at September 30, 2013, we had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in our statements of operations.

Internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management’s authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Furthermore, our controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control, and misstatements due to error or fraud may occur and not be detected on a timely basis.

Our management has determined that we have material weaknesses in our internal control over financial reporting which relate to the design and operation of our closing and financial reporting processes and our accounting for debt, equity and convertible instruments. We have concluded that these material weaknesses in our internal control over financial reporting are due to the fact that we do not have the appropriate resources with the appropriate level of experience and technical expertise to oversee our closing and financial reporting

 

- 76 -


Table of Contents

processes and to address the accounting and financial reporting requirements related to our issuances of convertible notes, preferred stock warrants, stock options, preferred stock and preferred stock purchase rights.

In order to remediate these material weaknesses, we are taking the following actions:

 

   

we are actively seeking additional accounting and finance staff members, including a permanent chief financial officer to succeed our interim chief financial officer and a senior accounting officer with public company reporting experience, to augment our current staff and to improve the effectiveness of our closing and financial reporting processes; and

 

   

we are formalizing our accounting policies and internal controls documentation and strengthening supervisory reviews by our management.

Notwithstanding the material weaknesses that existed as of June 30, 2012 and 2013, our management has concluded that the consolidated financial statements included elsewhere in this prospectus present fairly, in all material respects, our financial position, results of operation and cash flows in conformity with U.S. generally accepted accounting principles.

If we fail to fully remediate these material weaknesses or fail to maintain effective internal controls in the future, it could result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, which could cause investors to lose confidence in our financial information or cause our stock price to decline. Our independent registered public accounting firm has not assessed the effectiveness of our internal control over financial reporting and, under the Jumpstart our Business Startups Act of 2012, or the JOBS Act, will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

Emerging growth company status

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Results of operations

Comparison of the fiscal years ended June 30, 2012 and 2013

Revenue

 

    

Fiscal year ended June 30,

     Increase
(Decrease)
    %  Increase
(Decrease)
 
     2012          2013           
     (dollars in thousands)  

Grant revenue

   $ 718       $ 439       $     (279     (39)%   

Sponsored research revenue

     364         503         139        38%   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 1,082       $ 942       $     (140     (13)%   
  

 

 

    

 

 

    

 

 

   

 

 

 

Grant revenue decreased by $0.3 million from $0.7 million to $0.4 million from fiscal year 2012 to fiscal year 2013. The decrease was primarily the result of the timing of the release of funding under our FDA orphan grants relating to our LCA2 and AAT deficiency product candidates. Sponsored research revenue increased by $0.1 million from $0.4 million to $0.5 million from fiscal year 2012 to fiscal year 2013. The increase was primarily the result of increased activity under our sponsored research arrangement with FFB related to the development of our XLRS product candidate.

 

- 77 -


Table of Contents

Research and development expense

 

    

Fiscal year ended June 30,

     Increase
(Decrease)
     %  Increase
(Decrease)
 
         2012              2013            
     (dollars in thousands)  

Research and development expense

   $ 2,354       $ 3,133       $ 779         33

Research and development expense increased by $0.8 million from $2.4 million for fiscal 2012 to $3.1 million for fiscal 2013. The increase was the result of increased activity relating to our XLRS and ACHM product candidates, including increased facilities costs relating to new laboratory expansion, increased personnel costs relating to new hires and the acquisition of related laboratory supplies.

General and administrative expense

 

     Fiscal year ended June 30,      Increase
(Decrease)
     %  Increase
(Decrease)
 
         2012              2013            
     (dollars in thousands)  

General and administrative expense

   $ 787       $ 1,403       $ 616         78

General and administrative expense increased by $0.6 million from $0.8 million to $1.4 million for fiscal year 2012 to fiscal year 2013. The increase was primarily the result of increased overhead and personnel costs.

Other income (expense), net

Other income (expense), net decreased from income of $0.1 million in fiscal year 2012 to expense of $(1.4) million in fiscal year 2013, due to the following factors. Interest expense increased by 177% from $69,000 for fiscal year 2012 to $0.2 million for fiscal year 2013, primarily a result of the recognition of unamortized debt discount on our May 2012 convertible notes as interest expense in connection with the conversion of the notes to shares of Series B-1 preferred stock during fiscal year 2013. This increase in expense was offset by an increase in interest income from zero in fiscal year 2012 to $10,000 for fiscal year 2013, as the result of interest payments on the proceeds from our sale of shares of Series B-1 and Series B-2 preferred stock in fiscal 2013. Other expense also increased by the $1.2 million fair value adjustments to our Series B purchase rights and our warrant liabilities that are described in note 11 to our financial statements appearing elsewhere in this prospectus.

Comparison of the three months ended September 30, 2012 and 2013

Revenue

 

     Three months ended September 30,      Increase
(Decrease)
    % Increase
(Decrease)
 
             2012                      2013               
     (dollars in thousands)  

Grant revenue

   $ 177       $ 191       $ 14        8

Sponsored research revenue

   $ 82       $ 67       $ (15     (18 )% 

Grant revenue for the three months ended September 30, 2013 increased by $14,000 to $0.2 million from $0.2 million for the three months ended September 30, 2013. The change was primarily the result of our completion of grant-funded projects relating to our AAT deficiency and LCA2 product candidates and the inception of new grant-funded projects related to our ACHM product candidate. Sponsored research revenue decreased by $15,000 from $82,000 to $67,000 from the three months ended September 30, 2012 to the three months ended September 30, 2013. The decrease was primarily the result of decreased activity under our sponsored research arrangement with FFB related to the development of our XLRS product candidate, as compared to the prior period.

 

- 78 -


Table of Contents

Research and development expense

 

     Three months ended September 30,      Increase
(Decrease)
     % Increase
(Decrease)
 
             2012                      2013                
     (dollars in thousands)  

Research and development expense

   $ 539       $ 1,443       $ 904         168

Research and development expense increased by $0.9 million from $0.5 million for the three months ended September 30, 2012 to $1.4 million for the three months ended September 30, 2013. The increase was the result of increased activity relating to our XLRS and ACHM product candidates, including increased facilities costs relating to new laboratory expansion, increased personnel costs relating to new hires and the acquisition of related laboratory supplies.

General and administrative expense

 

     Three months ended September 30,      Increase
(Decrease)
     % Increase
(Decrease)
 
             2012                      2013                
     (dollars in thousands)  

General and administrative expense

   $ 280       $ 781       $ 501         179

General and administrative expense increased by $0.5 million from $0.3 million for the three months ended September 30, 2012 to $0.8 million for the three months ended September 30, 2013. The increase was the result of increased personnel costs relating to new hires, as well as increased legal, accounting and other costs relating to the preparations for our initial public offering.

Other income (expense), net

Other income (expense), net decreased from expense of $(44,000) for the three months ended September 30, 2012 to expense of $(5.1) million for the three months ended September 30, 2013, due to the following factors: Interest income increased from $0 to $7,000, as a result of interest payments on the proceeds from our sale of shares of Series B-1 and Series B-2 preferred stock in fiscal 2013. Interest expense decreased from $(44,000) to $0, as a result of our repayment of our outstanding bank credit facility. Other expense increased by the $5.1 million fair value adjustments to our Series B purchase rights and our warrant liabilities that are described in the footnotes to our financial statements for the three months ended September 30, 2013 appearing elsewhere in this prospectus.

Liquidity and capital resources

We have incurred cumulative losses and negative cash flows from operations since our inception in 1999, and as of September 30, 2013, we had an accumulated deficit of $55.4 million. It will be several years, if ever, before we have a product candidate ready for commercialization, and we anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.

In August 2012, we amended our existing term loan facility with Square 1 Bank to provide for up to an additional $0.5 million of available funding. We borrowed the full amount in September 2012. The loan bore interest at 9% per annum through December 2012 and 7% per annum thereafter. We were required to make monthly payments of interest only through December 2012. Thereafter the loan was to be repaid through 24 equal monthly installments of principal and accrued interest. In April 2013, we repaid all outstanding principal and accrued interest and terminated the loan facility.

 

- 79 -


Table of Contents

In connection with the funding of the loan, we issued to Square 1 Bank a warrant to purchase 276,968 shares of our Series B-1 preferred stock at an exercise price of $0.1297 per share. The warrants may be exercised at any time until the seventh anniversary of their date of issuance.

As of September 30, 2013, we had cash and cash equivalents and short-term investments of $20.9 million. We received an additional $10.7 million of cash proceeds from the sale of our Series B-3 shares on November 5, 2013. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts and money market mutual funds consisting of U.S. government-backed securities. Our short-term investments consist of certificates of deposits with maturity within 91 and 360 days of the date of purchase.

Cash flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below:

 

    

Fiscal year ended June 30,

    Three months ended September 30,  
         2012             2013             2012             2013      
    

(in thousands)

 
           (unaudited)  

Net cash provided by (used in):

        

Operating activities

   $ (1,372   $ (2,777   $ (335   $ (1,957

Investing activities

     (108     (14,481   $ (84   $ 921   

Financing activities

     427        25,377      $ 454      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

   $ (1,053   $ 8,119      $ 35      $ (1,036
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating activities. For the three months ended September 30, 2012 and 2013, net cash used in operating activities was $0.3 million and $2.0 million, respectively. Net cash used in operating activities was $1.4 million for fiscal year 2012 and $2.8 million for fiscal year 2013. The use of net cash in all periods primarily resulted from our net losses and changes in our working capital accounts.

Investing activities. Net cash used in investing activities for the three months ended September 30, 2012 was $0.1 million and consisted primarily of $0.1 million of costs related to the acquisition and maintenance of intellectual property. Net cash provided by investing activities for the three months ended September 30, 2013 was $0.9 million and consisted $5.0 million in proceeds received upon the maturity of short-term investments, offset by the purchase of $4.0 million of short-term investments and $0.1 million of costs related to the acquisition and maintenance of our intellectual property.

Net cash used in investing activities for fiscal year 2012 was $0.1 million and consisted primarily of $0.1 million of costs related to the acquisition and maintenance of intellectual property and $8,000 for equipment purchases . Net cash used in investing activities for fiscal year 2013 was $14.5 million and consisted primarily of the purchase of $14.0 million of short-term investments with a portion of the proceeds from our sale of shares of Series B-1 and Series B-2 preferred stock, $0.4 million for the purchase of equipment to support our continued research and development activities and $0.2 million of costs related to the acquisition and maintenance of our intellectual property .

Financing activities. Net cash provided by financing activities for the three months ended September 30, 2012 was $0.5 million and consisted primarily of the proceeds of debt financing, net of repayments. There was no net cash provided by financing activities for the three months ended September 30, 2013.

 

- 80 -


Table of Contents

Net cash provided by financing activities for fiscal year 2012 was $0.4 million and consisted primarily of the proceeds of debt financing, net of repayments. Net cash provided by financing activities for fiscal year 2013 was $25.4 million and consisted primarily of the proceeds from the issuance of our Series B-1 and Series B-2 preferred stock of $25.7 million offset by a net repayment of debt of $0.4 million.

Operating capital requirements

To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Upon the closing of this offering, we expect to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We expect that the net proceeds from this offering and our existing cash and cash equivalents will be sufficient to enable us to complete planned preclinical and clinical trials for our lead product candidates through at least the next 24 months. In order to complete the process of obtaining regulatory approval for our lead product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

 

   

the timing and costs our planned clinical trials for our XLRS and ACHM product candidates;

 

   

the timing and costs of our planned preclinical studies of our XLRP product candidate;

 

   

the initiation, progress, timing, costs and results of preclinical studies relating to potential applications of our gene therapy platform in other indications in orphan ophthalmology;

 

   

our success in scaling our HAVE manufacturing method;

 

   

the number and characteristics of product candidates that we pursue;

 

   

the outcome, timing and costs of seeking regulatory approvals;

 

   

subject to receipt of marketing approval, revenue received from commercial sales of our product candidates;

 

   

the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;

 

   

the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

 

   

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and

 

   

the extent to which we in-license or acquire other products and technologies.

 

- 81 -


Table of Contents

Contractual obligations and commitments

The following table summarizes our contractual obligations at June 30, 2013.

 

     Total      Less
than 1
Year
     1 to 3
Years
     3 to 5
Years
     More
than  5
Years
 
     (in thousands)  

Operating lease obligations (1)

   $ 104       $ 81       $ 23       $       $   

 

(1) We lease office and laboratory space in Alachua, Florida under noncancelable operating leases that expire on December 31, 2014.

Contingent contractual obligations. We also have obligations arising under our license agreements to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing of a Biologics License Application, or BLA, approval by the FDA or product launch). We have not included these obligations on our balance sheet or in the table above because the achievement and timing of these milestones is not fixed and determinable. These obligations include:

 

   

Under each of our various licenses with the University of Florida Research Foundation, or UFRF, covering the AAV construct containing the AAT gene and the method to treat AAT deficiency using this construct, a small cone cell specific promoter, and the use of engineered capsids and under our joint license with UFRF and Johns Hopkins University covering a particular HSV construct and various compositions thereof, we will be required to make payments based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property. The royalty is subject to reduction, subject to a minimum floor, for any third-party payments required to be made. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income. We are required to make annual maintenance payments under these licenses, which payments are creditable against royalty payments on a year-by-year basis.

 

   

Under our license agreement with the UAB Research Foundation pursuant to which we license a patent covering the use of HSV helpers to produce AAV vectors, we will be required to make payments based upon development and regulatory milestones for any products covered by the in-licensed intellectual property. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property. The royalty is subject to reduction, subject to a minimum floor, for any third-party payments required to be made. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income. We are required to make annual maintenance payments under this license, which payments are creditable against royalty payments on a year-by-year basis.

If any of our product candidates that utilize technology licensed under these agreements reached commercialization, we will be obligated to make royalty payments ranging from 0.5% to 4.0% of our net sales of the applicable product. We are responsible for a portion of the costs related to the preparation, filing, issuance, prosecution and maintenance of the patents covered by the license agreements. In fiscal years 2012 and 2013, we paid annual royalty and license maintenance payments in the aggregate amount of $41,000 and $61,000, respectively.

 

- 82 -


Table of Contents

Based on the anticipated development timeline for our current product candidates described elsewhere in this prospectus, see “Our Business—Overview,” we estimate that the maximum aggregate amount of milestone payments that we will be required to make pursuant to these license agreements as follows during fiscal years 2014, 2015, 2016, and 2017 and beyond is as follows:

 

Fiscal Year

   Aggregate Milestone
Payments
 

2014

   $ 90,000 (1) 

2015

   $ 231,000 (2) 

2016

   $ —     

2017 and beyond

   $         4,927,000   

 

(1) Consists of payments to MedImmune and the UAB Research Foundation in connection with the achievement of regulatory milestones related to our ACHM product candidate. Our license agreement with MedImmune will expire on February 4, 2014 and we do not expect that any additional milestone payments will become due under that agreement.
(2) Consists of payments to UFRF in connection with the achievement of regulatory milestones related to our ACHM product candidate and payments to UFRF and Johns Hopkins University in connection with the achievement of regulatory milestones related to our XLRS product candidate.

We enter into contracts in the normal course of business with CROs for preclinical research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

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 Securities and Exchange Commission.

Quantitative and qualitative disclosures about market risks

We are exposed to market risk related to changes in interest rates. As of June 30, 2012 and 2013 and September 30, 2013, we had cash and cash equivalents and short-term investments of $0.8 million, $22.9 million and $20.9 million, respectively, primarily held in bank accounts and certificates of deposit. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

 

- 83 -


Table of Contents

OUR BUSINESS

Overview

We are a clinical-stage biotechnology company developing gene therapy products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology. We believe our proprietary gene therapy platform and our expertise in viral vector selection and design, delivery and manufacturing will facilitate the rapid clinical advancement and regulatory approval of our product candidates and enhance their commercial and therapeutic potential.

Our lead product candidates are treatments for X-linked retinoschisis, or XLRS, achromatopsia, or ACHM, and X-linked retinitis pigmentosa, or XLRP. These orphan diseases of the eye are caused by mutations in single genes, significantly affect visual function and currently lack effective medical treatments. XLRS is characterized by abnormal splitting of the layers of the retina, resulting in poor visual acuity in young boys, which can progress to legal blindness in adult men. For our XLRS product candidate, we expect to file an Investigational New Drug Application, or IND, with the United States Food and Drug Administration, or FDA, and initiate Phase 1/2 clinical trials in the United States in late 2014, with initial clinical data expected in mid-2015. ACHM is characterized by the absence of cone photoreceptor function, resulting in extremely poor visual acuity, light sensitivity, day blindness and complete loss of color discrimination. For our ACHM product candidate, we expect to file an IND and initiate Phase 1/2 clinical trials in the United States in early 2015, with clinical data expected in late 2015. We have also begun preclinical studies for our product candidate addressing XLRP, a disease characterized by progressive degeneration of the retina, which can lead to total blindness in adult men.

Our gene therapy platform is based on viral vectors that utilize a modified version of the non-replicating adeno-associated virus, or AAV, to deliver a functional copy of a gene to the patient’s own cells through a variety of delivery methods, and we have obtained preliminary indications of safety and efficacy in clinical trials. These vectors deliver the functional genetic material to the nucleus of the cell, providing safe, sustained expression of the therapeutic protein to treat the disease without modifying the existing DNA of the patient.

We have developed extensive internal expertise in viral vector selection and design, delivery and manufacturing that is supported by a broad intellectual property estate. Our proprietary AAV vector manufacturing process is both reproducible and scalable. We have assembled an experienced management team and a world-class group of scientific advisors, and we have strong collaborative relationships with key opinion leaders in the field of gene therapy. Combining these attributes, we have built a gene therapy platform that we believe will provide patients with treatments that may have life-long clinical benefits, potentially based on a one-time therapeutic administration.

We and our scientific collaborators have generated human proof-of-concept data that we believe provide preliminary evidence of the safety and efficacy of our gene therapy approach through preclinical studies and clinical trials in two other eye diseases: Leber congenital amaurosis (type 2) caused by mutations in the RPE65 gene, or LCA2, a form of early onset retinal degeneration, and the wet form of age-related macular degeneration, or wet AMD, an eye disease affecting a large patient population.

Our strategy is to leverage the capabilities of our gene therapy platform to address orphan diseases in ophthalmology where there is significant unmet medical need. The orphan eye diseases we are targeting are well-understood with highly predictive animal models and clearly defined clinical endpoints, which we believe will facilitate clinical development and regulatory approval of our product candidates. The prevalence of these diseases is large by orphan standards, but small enough to permit clinical trials on a manageable scale and to provide markets that we believe can be served using a small, targeted commercial infrastructure. We believe that our focus on orphan diseases in ophthalmology provides an attractive business opportunity and positions us to drive the advancement of gene therapy technology.

 

- 84 -


Table of Contents

Our AAV vectors can be used to introduce functional genes into many different cell types by a variety of delivery methods and can carry genes of up to 4,000 base pairs in length, a payload capacity sufficient to accommodate more than 90% of the individual genes in the human genome. We have developed a proprietary manufacturing process that we believe will enable our vectors to be manufactured reliably on a commercial scale. Our gene therapy platform therefore has the potential to provide treatments for many other diseases outside of our current focus on orphan ophthalmology, including those with large dosing requirements or in larger markets. We have already conducted preclinical proof-of-concept studies and Phase 1 and Phase 2 clinical trials of a treatment for alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease. We expect to explore other therapeutic areas selectively, either alone or through partnerships.

The chart below summarizes our current gene therapy programs:

 

LOGO

Why focus on orphan ophthalmology?

Many chronically debilitating diseases for which there are currently no effective treatments have patient populations too small to attract the interest of large commercial entities. We believe that such orphan diseases can provide us with an attractive business opportunity. We are concentrating initially on several underserved diseases that are prevalent by orphan disease standards but small enough to allow for clinical trials on a manageable scale and to provide markets that we believe we can serve using a small, targeted commercial infrastructure.

 

- 85 -


Table of Contents

We have focused on orphan ophthalmology because we believe there is a significant unmet medical need in eye diseases. A number of major pharmaceutical companies are working on eye diseases with large patient populations such as glaucoma and AMD, but we are not aware of any major pharmaceutical or biotechnology companies that are actively developing products to address genetic causes of blindness.

The eye diseases we are targeting are also of interest to us due to a number of factors that, in combination, have enabled us to screen and more accurately predict the potential safety and efficacy of products at an early stage of development:

 

   

Well-understood disease mechanisms. Because sight is the most important sense to humans—many people fear blindness even more than premature death—even very rare diseases that cause vision loss have been studied extensively and are well-understood down to the molecular mechanism of action.

 

   

Monogenic diseases. We are initially pursuing eye diseases where the genetic abnormality is known and is caused by mutations in a single gene, known as monogenic diseases. We therefore know exactly what gene sequence to insert into the patient’s cells, thus mitigating the uncertainty of disease biology.

 

   

Highly predictive animal models. For many eye diseases there are highly predictive animal models in which the disease is caused by the same underlying genetic defect as in humans and has similar clinical outcomes.

 

   

Local delivery of therapeutic agent. Direct delivery of a therapeutic agent to the cells affected by the disease, via methods already widely used in ophthalmology, allows us to use lower doses, with reduced risk of unintended effects.

 

   

Short time to clinical data. In certain eye diseases such as XLRS and ACHM, we expect to obtain meaningful clinical data within three to six months of a one-time administration of the product candidate to a patient, which we believe will facilitate the rapid clinical development of our product candidates.

Ophthalmology is also attractive to us as a clinical-stage company because treatments for diseases affecting vision have clearly defined, objective clinical endpoints with validated measurement tools that are accepted by the FDA. Other orphan drug companies have spent considerable time and resources working with the FDA to identify acceptable clinical endpoints and develop measurement tools in sometimes ill-defined diseases. In ophthalmology the four accepted endpoints—visual acuity, visual fields, contrast sensitivity and color vision—are well-understood, and the FDA consistently applies them and provides guidance on how much improvement is required to be clinically relevant. We believe these clearly defined endpoints will help accelerate the process of clinical development and regulatory approval for our ophthalmic products.

Finally, through our internal research work and in collaboration with partners, we have obtained preliminary safety data in clinical trials with the two major delivery routes used in ophthalmology: intravitreal and subretinal injection. In clinical trials conducted by our licensee Genzyme, up to 34 patients with wet AMD were treated by intravitreal injection of an AAV vector (see “Business—Strategic collaborations—Our license to Genzyme”), and in trials conducted by us and others more than 50 patients with LCA2 have been treated with subretinal injections of AAV vectors, in both cases without reports of serious adverse events attributed to the vector, and with promising indications of efficacy for LCA2 patients.

Our strategy

Our objective is to become the world leader in developing and commercializing gene therapy treatments for severe inherited orphan diseases in ophthalmology, for which there are no currently available treatments, and to thereby provide a better life for patients with these diseases. Our strategy to accomplish this goal is to:

 

   

Develop and commercialize drugs in orphan ophthalmology . Our lead product candidates are treatments for the severe orphan eye diseases XLRS and ACHM, for which we expect to initiate Phase 1/2 trials in late 2014 and early 2015, respectively. We are also pursuing early preclinical research

 

- 86 -


Table of Contents
 

in XLRP. Given the severity of these diseases and the current lack of treatment options, an alternative that corrects the underlying genetic defects with a one-time therapeutic administration would provide superior long-term value for patients, their families and the healthcare system more broadly.

 

   

Continue our leadership position in orphan ophthalmology . We have developed significant experience in the orphan ophthalmology space through our work on XLRS, ACHM, XLRP and LCA2. We have strong relationships with key opinion leaders in the field and with leading patient advocacy groups. We have received grants aggregating $9.0 million from the Foundation Fighting Blindness, or FFB, the National Institutes of Health, or NIH, the National Eye Institute, or NEI, and the FDA. Our scientific advisory board is comprised of leaders in the fields of ophthalmology and genetics, such as William W. Hauswirth, Ph.D., the Rybaczki-Bullard Professor of Ophthalmology and Molecular Genetics at the University of Florida College of Medicine, who is also one of our scientific founders. We will continue to partner with the world’s experts in each eye disease category that we target and build a professional team of employees, advisors and collaborators with industry-leading experience in the discovery, development, manufacturing and commercialization of gene therapy technologies to treat severe genetic diseases in orphan ophthalmology. We believe that by leveraging our team’s combined expertise, we will facilitate the rapid clinical advancement and regulatory approval of our product candidates.

 

   

Extend our expertise in AAV vector selection and design, delivery and manufacturing . We believe that our understanding of our target indications and our robust internal expertise in viral vector selection and design, physical vector delivery, vector manufacturing, clinical trial design and clinical trial conduct are significant competitive advantages. We intend to continue to devote substantial resources to developing the science underlying successful AAV vector design and delivery, as well as to expanding the capabilities of our reproducible, scalable manufacturing process. We believe these investments will facilitate the rapid advancement of our products through regulatory approval and enhance the commercial and therapeutic potential of our gene therapy platform.

 

   

Pursue orphan indications with high unmet medical need and greater probability of clinical, regulatory and commercial success . We focus on diseases for which the underlying genetic defect is well-characterized and can be addressed by correcting or inserting a single gene, for which predictive animal models exist and for which clinical endpoints are objective and have been validated by the FDA. We believe that our focus on these types of indications will enable us to obtain data more rapidly and accelerate the process of clinical trial and regulatory approval of our products. Given the relatively low prevalence of the orphan diseases we are pursuing and the strong key opinion leader communities and patient advocacy groups around them, we also believe we will be able to serve these markets independently with a small, targeted commercial infrastructure.

 

   

Develop and partner selectively to expand the scope of our pipeline and the utilization of our gene therapy platform. The adaptability of our platform also presents an opportunity for us to selectively form collaborative alliances to expand our capabilities and product offerings into a range of genetic diseases and potentially to accelerate the development and commercialization of gene therapy products more broadly. One such alliance led to the preclinical development and eventual license to Genzyme Corporation, or Genzyme, of a product candidate for wet AMD. We are also continuing clinical trials of our treatment for the inherited orphan lung disease AAT deficiency. We continue to evaluate similar opportunities to extend the commercial application of our gene therapy platform.

Gene therapy background

Genes enable production of proteins that perform a vast array of functions within all living organisms. Many diseases have a genetic aspect whereby a mutated gene is passed down from generation to generation. Mutated genes can cause production of abnormal proteins, which can cause disease.

 

- 87 -


Table of Contents

Gene therapy involves the introduction of a functional copy of the gene into a patient’s own cells using a delivery system most commonly based on a viral vector to treat the genetic defect. Gene therapy has the potential to change the way these patients are treated, by correcting the underlying genetic defect that is the cause of their disease rather than offering treatments that only address symptoms. We believe that by correcting the underlying genetic defect, gene therapy can provide transformative disease modifying effects—potentially with life-long clinical benefits based on a one-time therapeutic administration.

The promise of gene therapy has evolved over the last decade, with a growing body of clinical data that we believe has provided evidence of efficacy and safety in a variety of disease areas, improvements in vector design and manufacturing processes by us and others and the establishment of regulatory guidelines for the development and approval of gene therapy products. These advances have led to increased investment from the biopharmaceutical industry and supported the emergence of gene therapy as an important therapeutic modality for patients with significant unmet medical needs.

Our gene therapy platform

Our approach to gene therapy product development is conceptually straightforward. We design an AAV vector that will carry the functional gene necessary to express the desired protein, produce the vector using our proprietary production methods, and then deliver the product directly to the appropriate cells in a patient by a suitable physical delivery method. Although the concept of gene transfer is simple, the process of developing and manufacturing AAV vectors capable of delivering the genetic material safely into a patient’s own cells is highly technical and demands significant expertise, experience and know-how.

Our gene therapy platform is built on our core competencies in three key areas:

 

   

vector selection and design;

 

   

vector manufacturing; and

 

   

vector delivery.

Our vector selection and design process

AAV vectors. The success of a gene therapy platform is highly dependent on the vector selected. Our platform is based on the use of a modified version of the non-replicating adeno-associated virus to deliver the correct DNA directly to the nucleus of the cells affected by the disease. We believe that AAV vectors are particularly well-suited for treating our target diseases and have advantages over other viral vectors, such as adenovirus, herpes virus and lentivirus. These advantages include:

 

   

Simplicity —AAV is a small, simple non-enveloped virus with only two native genes. This makes the virus straightforward to work with from a vector engineering standpoint.

 

   

Stability —AAV is extremely stable: it is resistant to degradation by shear, solvents and enzymes, facilitating purification and final formulation. AAV stability could also enable development of a freeze-dried formulation, should this become necessary for larger markets where shipping and distribution of the current frozen formulation would be challenging.

 

   

Sustained expression —Unlike vectors based on other viruses, our AAV vectors are capable of inserting the functional gene into the patient’s cells as an extra-chromosomal episome, which is a stable, circular form of DNA in the nucleus of cells. Inserting the functional gene as an episome supports long-term production of the protein, leading to sustained therapeutic effect, without altering the patient’s existing DNA. Sustained expression is a powerful advantage of using AAV as a vector: a one-time therapeutic administration of a functional gene into a cell can potentially support protein production for the life of the cell, which, in the cell types we are currently focused on treating, may approximate the duration of the patient’s lifetime.

 

- 88 -


Table of Contents
   

Safety —We believe AAV vectors are the safest for use in human gene therapy. In contrast, clinical trials using other vectors, such as lentivirus, adenovirus and herpes virus, have reported serious adverse events. The safety advantages of AAV vectors include the following:

 

   

AAV elicits a low immune response, reducing the risk of adverse inflammatory reactions. In contrast, trials with adenoviral vectors have reported severe inflammatory reactions.

 

   

AAV vectors, while they provide sustained expression, do not alter the patient’s existing DNA, and safety is therefore improved over vectors that alter the patient’s DNA. Trials using early versions of lentiviral vectors, which insert genes directly into, and thereby alter, the patients’ DNA, resulted in several well-publicized adverse events, including reported cases of leukemia.

 

   

AAV has never been linked to human disease, unlike most other viruses used as gene delivery vectors such as adenovirus, herpes virus and lentivirus.

 

   

AAV vectors have no viral genes remaining, eliminating the possibility that any viral genes will cause an adverse event.

AAV vectors have been used in more than 100 human clinical trials, by us and others, with no serious adverse events traced to the use of AAV as the gene delivery vector. In our direct experience with human clinical trials for LCA2, AAT deficiency and wet AMD, over 100 patients were treated using AAV vectors, with no serious adverse events attributed to the vector. In a Phase 2 trial of our AAT deficiency product candidate, patients were treated with doses more than 1,000-fold higher than those planned for use in any of our ophthalmic indications, with no serious adverse events reported.

 

   

Carrying capacity —AAV vectors have the capacity to carry therapeutic gene sequences up to 4,000 base pairs in length into a patient’s cell. As more than 90% of human genes have coding sequences less than 3,000 base pairs in length, we expect to be able to pursue a wide variety of indications with our AAV vectors.

Vector design . After the selection of the vector type, there are many other critical factors to be considered when designing a gene therapy product. These include selecting the appropriate:

 

   

therapeutic gene,

 

   

promoter and related gene regulatory elements,

 

   

AAV sequences needed to signal replication and packaging, and

 

   

AAV capsid (the protein shell) in which these elements are packaged.

 

LOGO

 

- 89 -


Table of Contents

The first step in vector design is to identify the therapeutic protein that we want the patient’s own cells to produce, and then insert the gene that encodes that protein into an AAV vector. Production of the protein requires a promoter, which is a genetic element to drive expression. Certain promoters function well only in certain cell types, whereas other promoters function well in almost any cell type. We make our selection by comparing different promoters in the specific type of cells that are affected in each disease target, ideally in an animal whose physiology is close to that of humans, to find the promoter that best enables production of therapeutic levels of protein in that cell type.

After the promoter and gene of interest are selected, we insert these elements between AAV viral sequences that are needed for replication and packaging of the vector into the AAV capsid. There are hundreds of variations of AAV capsids with different efficiencies in their ability to bind to and enter varying cell types. We select the capsid for a specific product candidate after comparing different capsids in the type of cells that are affected by the targeted disease.

One of our key capabilities is our depth of understanding of the complex interplay between the clinical disease, the cells in the patient’s body that need treatment, the selection of a capsid and a promoter, the design of the gene construct and the physical administration method . We have spent years conducting research on the best combinations of these elements with the aim of developing safe and effective gene therapy treatments.

Vector manufacturing: our HAVE method

We have developed a proprietary, high-yield vector manufacturing process using scalable technologies for herpes-assisted vector expansion, which we refer to as our HAVE manufacturing method. While the HAVE manufacturing method uses the herpes virus as a helper in the first step of a four-step AAV vector manufacturing process, there is no herpes virus in the final product. Our HAVE manufacturing method addresses problems of low productivity and low efficacy that have historically plagued efforts to manufacture AAV vectors and enables us to produce vectors with improved potency, efficiency and safety over processes previously used by us and others. It also enables us to produce a more purified and concentrated end product, as evidenced by an approximately 25- to 30-fold reduction in non-infectious viral contaminants as compared to vectors used in previous clinical trials.

Our manufacturing process has been reviewed by both the FDA and the European Medicines Agency, or EMA, and has been authorized for production of product candidates for use in clinical trials in the United States and Europe. Our manufacturing process is also reproducible and scalable. It has been transferred successfully to Genzyme and to SAFC Pharma, our contract manufacturing organization, where it is used in manufacturing clinical materials pursuant to the FDA’s current good manufacturing practices, or GMP, requirements.

We and SAFC Pharma have successfully produced the necessary material for the clinical trials we have conducted to date, and have more than enough manufacturing capacity to meet the requirements of our planned future trials. We are currently investing in the development of mid- to large-scale manufacturing processes with a view towards supporting our product candidates, if approved, at commercial scale.

We hold or have licensed 80 issued and 28 pending patents covering our manufacturing technology. We believe that our core competency and intellectual property estate in vector manufacturing differentiate us competitively and provide a key element of our gene therapy platform.

Vector delivery

Our gene therapy platform allows for vector delivery by a variety of methods, and we select the method that is most beneficial for the disease we are targeting. The method used depends on the type of cells we are targeting for treatment.

 

- 90 -


Table of Contents

In ophthalmology, the product candidate can best be delivered to cells in the eye by intravitreal or subretinal injection.

Intravitreal injection into the vitreous humor, which is the clear gel that fills the space between the lens and the retina of the eye, is best for delivering the product candidate to the retinal neurons in the inner retina (the portion of the retina closest to the lens), to photoreceptors located in the fovea (the very center of the macula, which is the central part of the retina that is required for fine visual acuity), and other cells in the lateral portions of the eye. This routine procedure can be carried out in an ophthalmologist’s office.

 

LOGO

Subretinal injection between the photoreceptors in the outer retina and the retinal pigment epithelium just beyond the retina are best for delivering the product candidate to the outer retina, farthest from the lens, where the AAV vector can readily enter photoreceptor cells and retinal pigment epithelium cells. This is a short, outpatient surgical procedure that is frequently performed by retinal surgeons.

 

LOGO

We expect to use intravitreal injection as the method of delivery for our XLRS product candidate, and we plan to evaluate both subretinal injection and intravitreal injection as methods of delivery for our ACHM and XLRP product candidates.

For other indications, such as the orphan lung disease AAT deficiency, where secretion of a therapeutic protein into the bloodstream is the goal, we plan to administer the product candidate to muscle cells. There are large numbers of muscle cells in the body, providing the ability to produce a large amount of protein for systemic circulation. This can be accomplished by several methods, including:

 

   

intramuscular injection , in which the product candidate is directly injected into muscle cells, and

 

   

vascular delivery, in which the product candidate is administered to the muscle cells of an entire leg, using infusion methods similar to those currently employed in cardiac catheterization, oncology and

 

- 91 -


Table of Contents
 

anesthesiology. In preclinical animal studies of our product candidate for AAT deficiency, using a vascular delivery method was shown to achieve much higher serum levels and lower immune responses compared to direct intramuscular injection.

These methods of administration of our product candidates are well-established for the safe and effective delivery of other drugs and protein products. AAV vectors can be delivered by these and other methods to a wide array of other cells, such as heart muscle cells in certain cardiac diseases or directly into the brain in certain neurologic diseases.

Our approach can potentially arrest, correct or treat a disease with a one-time therapeutic administration, as many of the cells to which the product candidate is delivered will survive for the life of the patient and treatment of those cells thereby has the potential to deliver life-long effects. For example, cells in the retina, important in XLRS and ACHM, mature shortly after birth and in the absence of disease exist unchanged for the life of the patient. Once treated with our gene therapy products, these cells have the potential to express the therapeutic protein for the remaining life of the cell. This approach potentially provides significant value to patients, families, providers and payors.

Our product programs

Our lead programs address XLRS and ACHM, which are orphan diseases of the eye that are caused by mutations in single genes, significantly affect visual function starting at birth and currently lack effective medical treatments. We are also pursuing early stage preclinical research in treating other orphan eye diseases, such as XLRP.

We initially developed our gene therapy platform and obtained evidence of its safety and efficacy in proof-of-concept programs involving two other eye diseases: LCA2 and wet AMD. In 2010, we licensed our wet AMD technology to Genzyme. Genzyme recently informed us that it no longer intends to use our manufacturing technology to produce the AAV vector being used for the wet AMD product. We currently do not expect to independently commercialize our LCA2 proof-of-concept program.

We are also developing a product candidate for treatment of the inherited orphan lung disease AAT deficiency for which we have conducted preclinical proof-of-concept studies and Phase 1 and Phase 2 clinical trials. We believe our AAT deficiency program provides proof of concept for the use of our gene therapy platform in indications outside our focus area of orphan ophthalmology.

Our proof-of-concept programs in ophthalmology

The programs highlighted below, while not the principal focus of our current efforts, are critical to those efforts in that they establish initial evidence of safety and potential efficacy of our gene therapy approach in preclinical studies and clinical trials. These programs enabled us to develop significant experience working with clinical trial design and conduct, clinical investigators and regulatory agencies and in vector design, delivery and manufacturing. They also demonstrate that our manufacturing platform has been successfully vetted by regulatory agencies and partners and has been able to produce clinical material for multiple trials.

Leber congenital amaurosis

Leber congenital amaurosis, or LCA, is a form of early onset, inherited retinal degeneration caused by mutations in any one of 16 genes involved in retinal function and leads to blindness at birth or in early childhood or adolescence. Studies by Dr. Edward Stone published in the American Journal of Ophthalmology (2007) indicate the overall prevalence of LCA is one in 81,000 people, which implies there are about 3,700 cases of LCA in the United States and about 6,200 cases of LCA in Europe.

One form of LCA, referred to as LCA2, is caused by mutations in the RPE65 gene. RPE65 protein is an enzyme that is critical for normal phototransduction, the process whereby a light signal is converted to an electrical signal transmitted to the brain. A review paper by den Hollander, published in Progress in Retinal and

 

- 92 -


Table of Contents

Eye Research (2008), reported that mutations in the RPE65 gene are responsible for about 6% of all cases of LCA, from which we estimate that there are approximately 600 LCA2 patients in the United States and Europe, combined.

In preclinical studies, our LCA2 product candidate was evaluated for efficacy in mouse and dog models of LCA2 caused by mutations in the RPE65 gene. Restoration of visual function in mice and dogs was demonstrated by behavioral testing and electroretinogram, or ERG, testing, which measures electrical signaling in different cells of the retina.

The figure below shows ERG responses to flashes of light of increasing intensity, from dim (-2.6 log units) to very bright (2.8 log units) in a normal animal (left) or in a dog with RPE65 mutations before treatment and at three months and one, two and three years after a one-time therapeutic subretinal injection of our LCA2 product candidate. After treatment, the ERG responses of treated dogs recovered to nearly normal levels within three months and remained there for the three-year duration of the study. Though not illustrated below, follow-up ERG testing has shown that the improvement in ERG responses has been sustained in these animals for 10 years after treatment.

 

LOGO

Based on data from Acland et al., Molecular Therapy (2005)

Our LCA2 product candidate was also evaluated in single-dose toxicology studies in dogs and monkeys, with no systemic toxicity after subretinal injection. The ocular changes that were observed were consistent with the expected effects of subretinal surgery, were not vector dose-dependent and resolved during the three-month study.

We have made the following progress in clinical development of our LCA2 program:

 

   

our product candidate was granted an orphan drug designation by the FDA for the treatment of LCA2 caused by RPE65 mutations;

 

   

we received a $1.1 million grant from the FDA to conduct a Phase 1/2 clinical trial;

 

   

the NIH Recombinant DNA Advisory Committee, or the NIH RAC, reviewed our draft protocols for the Phase 1/2 clinical trial and its recommendations were incorporated into the final protocol and informed consent documents;

 

   

we had a type B pre-IND meeting with the FDA in 2008, during which the FDA provided guidance on the manufacturing, nonclinical and clinical development of our LCA2 product candidate; and

 

   

we submitted an IND in 2008 and have completed enrollment of a Phase 1/2 clinical trial in 12 patients affected by LCA2. Long-term follow-up is ongoing.

Results of our Phase 1/2 trial and other studies with the same or similar AAV vectors have demonstrated improvement in one or more measurements of visual function in almost all human patients tested and there has been no evidence of safety issues.

 

- 93 -


Table of Contents

The figure below shows a “hill of vision” map of the retina for both eyes of a patient one year after receiving a subretinal injection of our LCA2 product candidate in one eye. The map represents the sensitivity of cone photoreceptors to light stimulation, from black (minimal sensitivity) to white (moderate sensitivity). Before treatment, both eyes had a “hill of vision” restricted to the fovea. One year after treatment, the treated eye had a new “hill of vision” with dramatically increased cone photoreceptor sensitivity in the area of the retina where the subretinal injection was administered. In fact, light sensitivity is now greater in the treated area than in the fovea of this patient.

 

LOGO

Based on data from Cideciyan et al., New England Journal of Medicine (2009)

The figure below shows visual fields of a human patient before (left) or two years after (right) one-time therapeutic treatment with our LCA2 product candidate in the left eye. The scotoma, or blind spot, illustrated by the dark spot in the middle of the eye, that was present before treatment disappeared after treatment of the left eye:

 

LOGO

Based on unpublished data from AGTC Phase 1/2 clinical trial

We expect to receive additional two-year follow-up data from these studies in late 2014. At the present time we do not plan to conduct additional clinical trials with this product candidate, as we believe the small number of persons affected by the RPE65 form of LCA2, which we estimate at approximately 600 in the United States and Europe combined, are being adequately served by ongoing and planned clinical trials conducted by multiple academic research centers in the United States and several European countries.

Wet age-related macular degeneration

Age-related macular degeneration, or AMD, is a retinal disease that usually affects older adults and results in a loss of vision in the center of the visual field (the macula). It is a major cause of blindness and visual impairment in older adults and occurs in “dry” and neovascular, or “wet,” forms. In the wet form, abnormal growth of blood vessels in the retina is stimulated by a protein called vascular endothelial growth factor, or VEGF. The abnormal blood vessel growth, or neovascularization, causes vision loss due to blood and protein

 

- 94 -


Table of Contents

leakage below the macula. A paper by Friedman et al. published in Archives of Ophthalmology (2004) estimated the total number of persons with wet AMD in the United States is about 1,200,000, from which we estimate there are about 3,200,000 persons with wet AMD in the United States and Europe combined.

If left untreated, bleeding, leaking and scarring from these blood vessels eventually cause irreversible damage to the photoreceptors and rapid vision loss. Treatment through intravitreal injection with drugs that inhibit VEGF can cause regression of the abnormal blood vessels and improve vision when injected directly into the vitreous humor of the eye. However, the injections must be repeated monthly or bimonthly. The approach to treatment of wet AMD that we licensed to Genzyme used an AAV vector to insert into the patient’s own retinal cells a gene, called sFLT01, that encodes an engineered version of the receptor to which VEGF binds, and these cells then provide sustained production of the VEGF-inhibiting sFLT01 protein.

In preclinical studies, the wet AMD product candidate was evaluated in animal models of retinal neovascular diseases, used for testing products that inhibit VEGF, and for safety in rats and nonhuman primates. After intravitreal injection of the wet AMD product candidate, long-term expression of the engineered sFLT01 protein was demonstrated in both mice and monkeys. In the monkey disease model, the wet AMD product candidate resolved the neovascularization, with efficacy results similar to those shown for currently marketed anti-VEGF agents.

The figure below shows retinal photographs in a monkey that received an intravitreal injection of the wet AMD product candidate in one eye and later received nine laser-induced neovascular lesions in each eye followed by injection of a dye used to determine the amount of leakage from retinal blood vessels. The figure shows the marked reduction in leakage, indicated by white patches around a central dark spot, from the lesions in the treated eye (left) compared to the untreated eye (right).

 

LOGO

Based on data from Lukason et al., Molecular Therapy (2011)

In 2010, we announced the exclusive license of the jointly developed program in wet AMD to Genzyme. The following progress has been made in clinical development of the wet AMD product candidate:

 

   

we had a type B pre-IND meeting with the FDA during which meeting the FDA provided guidance on the manufacturing, nonclinical and clinical development of the wet AMD product candidate;

 

   

the NIH RAC reviewed draft protocols for the Phase 1 clinical trial and its recommendations were incorporated into the final protocol and informed consent; and

 

   

Genzyme submitted an IND and is conducting a Phase 1 clinical trial under this IND. The trial began in 2010, is fully enrolled, and is scheduled to complete the 1-year follow-up evaluations for the last patient in July 2014.

 

- 95 -


Table of Contents

Genzyme recently informed us that it no longer intends to use our HSV-based manufacturing technology to produce the AAV vector being used for the wet AMD product. Genzyme will be responsible for all future clinical trials and commercialization of its wet AMD product candidate.

Our proof-of-concept programs beyond ophthalmology

In one of our first proof-of-concept programs, we developed a product candidate for the treatment of AAT deficiency, which is an inherited orphan lung disease. We are continuing clinical trials of a vascular method for delivering our AAT deficiency product candidate to muscle cells, and expect to submit an amendment to our existing IND to allow us to conduct a Phase 2b clinical trial in early 2015. For more information about this program, see “—Proof-of-concept programs beyond ophthalmology; our Alpha-1 antitrypsin deficiency product candidate.”

Our lead programs

X-linked retinoschisis

XLRS is an inherited retinal disease caused by mutations in the RS1 gene, which is located on the X chromosome and encodes the retinoschisin, or RS1, protein. Retinoschisin is expressed and secreted primarily from photoreceptor cells and binds strongly and specifically to the surface of photoreceptor and bipolar cells in the retina. Mutated forms of retinoschisin are unable to bind properly, resulting in schisis, or splitting of the nerve fiber layers of the retina, primarily in the macula. The disease begins early in childhood, and affected boys typically have best-corrected visual acuity of 20/60 to 20/120 at initial diagnosis. Complications such as retinal hemorrhage or retinal detachment occur in up to 40% of patients, especially in older patients. According to Molecular Genetics of Inherited Eye Diseases (1988), the incidence rate for XLRS is between one in 5,000 and one in 20,000 males. Using an incidence rate of 1 in 11,500 and assuming half the population is male, we estimate that there are about 13,000 persons in the United States and about 22,000 persons in Europe with XLRS, or 35,000 persons in the United States and Europe combined.

The diagnosis of XLRS is made based on clinical findings and results of imaging studies and ERG. Clinical findings include reduced visual acuity and a characteristic spoke-wheel appearance of the macula when viewed by an ophthalmoscope, which is the instrument commonly used by ophthalmologists and optometrists to view the retina. Images obtained by optical coherence tomography, or OCT, a method of viewing layers of the eye somewhat like a sonogram, show spaces between the layers of the retina within the macula and fovea in most school-age boys with XLRS. These spaces mean that electrical signals cannot move from the photoreceptors to other retinal neurons and on to the brain, resulting in poor vision. When this is measured by ERG testing it can be detected by a markedly abnormal ERG response.

 

- 96 -


Table of Contents

The figure below shows an OCT image from a normal individual (top) and from a patient with XLRS (bottom). The black spaces indicated by the arrows in the bottom portion of the figure demonstrate splitting of the layers of the retina leaving spaces that interfere with the movement of electrical signals.

 

LOGO

There is currently no approved treatment for XLRS. Management of disease manifestations includes low vision aids such as large-print textbooks, preferential seating in the front of the classroom and use of handouts with high contrast. Surgery may be required to address complications of vitreous hemorrhage or full-thickness retinal detachment. Anecdotal reports suggest that topical carbonic anhydrase inhibitors may provide some reduction in the degree of schisis detected by OCT and improvement in visual acuity in some but not all patients, but the absence of controlled clinical trials makes interpretation of these reports difficult. In addition, treatment with carbonic anhydrase inhibitors does not address the fundamental genetic defect in persons affected by XLRS. Neither carbonic anhydrase inhibitors nor any other medicinal products have been approved by regulatory agencies for treatment of XLRS.

Our XLRS product candidate

Our gene therapy approach involves using an AAV vector to insert a functional copy of the RS1 gene into the patient’s retinal cells, thereby inducing those cells to produce the normal retinoschisin protein. Our XLRS product candidate contains the RS1 gene and a promoter that has been shown to work well in primate retinal cells, and is packaged in an AAV capsid that is able to efficiently enter cells in the inner layers of the retina after intravitreal injection.

After the vector containing a functional copy of the RS1 gene enters a retinal cell, the gene is processed by normal biochemical processes into a stable DNA episome in the nucleus of the cell. This stable form of the gene allows production of the normal retinoschisin protein which is then secreted from the retinal cells and binds to the surfaces of photoreceptor and bipolar cells in the retina, pulling them together and eliminating any splitting between the layers of the cells. Upon light stimulation of the photoreceptor cells, the presence of the retinoschisin allows normal transmission of electrical signals from the photoreceptor cells to the bipolar cells and then to other retinal neurons that transmit the signals to the visual cortex in the brain. Production of normal retinoschisin continues as long as the episome persists in the cell, which may be for many years or even life-long, thereby providing long-term potential benefit after a one-time therapeutic administration.

Preclinical proof of concept for our XLRS product candidate

In mouse models of XLRS, our gene therapy approach restores to normal the abnormal ERG characteristic that is present in XLRS. Mouse models of XLRS have been developed by deactivating, or knocking out, the RS1 gene in mice. These “knockout” mice have clinical features similar to humans with XLRS, including reduced visual acuity, schisis cavities detected by OCT, and a markedly abnormal ERG response.

 

- 97 -


Table of Contents

The figure below shows staining for retinoschisin (top row) and for nuclei in retinal cells (bottom row) in a normal mouse (left), a RS1 knockout mouse in the absence of treatment (middle) and a RS1 knockout mouse treated with an AAV-RS1 vector (right). The knockout mouse retina has no expression of retinoschisin and has splitting and disorganization of the layers of the retina, indicated by the arrowheads in the middle panel of the nuclear staining. After treatment, RS1 staining is present in a normal fashion and the nuclear staining shows restoration of the organization of the cell layers in the retina (right).

 

LOGO

Based on data from Min et al. Molecular Therapy (2005)

Treatment by injection of an AAV vector expressing either mouse or human RS1 in these knockout mice improved visual function as measured by increased ERG b-wave responses.

 

- 98 -


Table of Contents

The figure below shows improved ERG responses in RS1 knockout mice at various times after treatment with an AAV-RS1 vector compared to ERG responses in untreated control RS1 knockout mice. The figure shows a progressive decrease in the ERG response in the untreated mice but a slower decrease and eventual increase in the ERG response in the treated mice.

 

LOGO

Based on data from Min et al. Molecular Therapy (2005)

We have concluded that intravitreal injection is the preferred route of administration for an AAV-RS1 vector. We therefore evaluated intravitreal injection of an AAV vector expressing a marker protein packaged in several different AAV capsids in monkeys and demonstrated that a vector packaged in an engineered capsid was able to target expression to the macula, which is the primary area in which retinoschisis occurs.

The figure below shows expression of a marker protein (white areas) in the macula, fovea and nerve fibers of a monkey retina after intravitreal injection of a vector contained in the engineered capsid. We believe that intravitreal injection of a vector containing the RS1 gene in the same engineered capsid would show expression of retinoschisin in the same areas.

 

LOGO

Based on AGTC animal study data

We are currently conducting additional preclinical studies of our XLRS product candidate that are required for submission of an IND to the FDA. These studies include single-dose toxicology studies in mice and

 

- 99 -


Table of Contents

nonhuman primates, the design of which is based on specific guidance from the FDA’s Office of Cellular, Tissue and Gene Therapy received in early 2013. These studies will evaluate the safety and distribution of the AAV-RS1 vector in animals after the product candidate is delivered by intravitreal injection.

Planned clinical development of our XLRS product candidate

We are currently conducting a natural history study in persons affected by XLRS. This study will document the progression of the disease in the absence of treatment, and its results will provide important information about the best methods for measuring visual function in these patients and will guide us in the design of subsequent clinical trials in which our product candidate will be tested for safety and efficacy. The study is being conducted at three clinical sites that specialize in inherited retinal diseases: the Casey Eye Institute in Portland, Oregon, the Retina Foundation of the Southwest in Dallas, Texas, and the Kellogg Eye Center in Ann Arbor, Michigan.

In late 2014, we plan to submit an IND and to initiate a Phase 1/2 clinical trial of our XLRS product candidate in up to 15 patients affected by XLRS. Results of this trial, which we expect to receive in mid-2015, will guide us in finalizing the design of a pivotal Phase 3 clinical trial. In the planned pivotal Phase 3 trial, up to 40 patients will be enrolled and evaluated for changes in visual function over a 12-month period. If successful, we believe the results of this second trial could support submission of a Biologics License Application, or BLA, to the FDA in the United States and a Marketing Authorization Application, or MAA, to the EMA in Europe for our XLRS product candidate.

Congenital achromatopsia

ACHM is an inherited retinal disease characterized by the lack of cone photoreceptor function. Cone photoreceptors are concentrated in the macula and the fovea. ACHM is present from birth and throughout life. Individuals with this condition have no cone photoreceptor function, markedly reduced visual acuity, photophobia, or light sensitivity, and complete loss of color discrimination. Their only functioning photoreceptors are rod photoreceptors, which respond to low intensity light conditions and mediate night vision but cannot achieve fine visual acuity. Best-corrected visual acuity in persons affected by ACHM, even under subdued light conditions, is usually about 20/200, a level at which people are considered legally blind. They also experience extreme light sensitivity resulting in even worse visual acuity under normal daylight conditions, or day blindness.

ACHM can be caused by mutations in any of at least five genes that are required for normal cone photoreceptor function. The most common causes are mutations in the CNGB3 gene (about half of all cases) or CNGA3 gene (about one-fourth of all cases). These genes encode the CNGB3 and CNGA3 proteins, which combine to form a channel in the photoreceptor membrane that is required for phototransduction, the process whereby a light signal is converted to an electrical signal that is then transmitted to the brain. According to Retinal Dystrophies and Degenerations (1988), the incidence rate for ACHM is approximately one in 30,000 people, and we therefore estimate that there are about 10,000 people in the United States and about 17,000 people in Europe with ACHM. Of these, about half, or a total of 13,500 in the United States and Europe combined, have the form of the disease caused by mutations in the CNGB3 gene.

There is currently no specific treatment for ACHM. Symptoms are managed by the use of dark lenses to reduce discomfort from ambient light, and low vision aids such as high-powered magnifiers for reading. Children with ACHM are provided preferential seating in the front of classrooms to benefit maximally from their magnifying devices.

Our ACHM product candidate

Our gene therapy approach to treatment of ACHM involves using an AAV vector to insert a functional copy of the CNGB3 gene into the patient’s own photoreceptor cells. Our ACHM product candidate contains the

 

- 100 -


Table of Contents

CNGB3 gene and a promoter that has been shown in animal models to work well in cone photoreceptors and is packaged into an AAV capsid that is able to efficiently enter cone photoreceptors. We have also recently completed a study in non-human primates that identified a promoter, the PR1.7 promoter, that we believe works well in primate cone receptors. We are designing our product candidate to be delivered either by intravitreal or subretinal injection.

After our ACHM product candidate containing the functional CNGB3 gene enters a photoreceptor cell, the gene is processed by normal biochemical processes into a stable DNA episome in the nucleus of the cell. The stable form of the gene allows production of the normal CNGB3 protein, which combines with the normal CNGA3 protein already being produced in the cell, to form a channel in the photoreceptor membrane that is required for phototransduction. Restoration of phototransduction enables cone photoreceptors to convert light entering the eye into an electrical signal that is transmitted to other retinal neurons and then to the visual cortex in the brain. Production of normal CNGB3 protein continues as long as the episome persists in the cell, which may be for many years or even life-long, thereby providing long-term potential benefit after a one-time therapeutic administration.

Preclinical proof of concept for our ACHM product candidate

In mouse and dog models of ACHM, our product candidate was able to restore photoreceptor function, improve visual acuity and mitigate photophobia and day blindness.

ACHM occurs in two breeds of dogs, Alaskan malamutes and German shorthaired pointers, due to mutations in the CNGB3 gene that either produce an abnormal protein or completely prevent production of the protein. Both breeds have clinical characteristics similar to human ACHM patients, with day blindness and absence of retinal cone function as measured by ERG. Treatment by subretinal injection of an AAV vector expressing human CNGB3 restored cone function in dogs with either mutation. Cone-specific ERG responses were undetectable in these dogs before treatment but were clearly detected after treatment. Day blindness was demonstrated before treatment by testing the ability of the dogs to navigate a maze under progressively brighter conditions. Before treatment, it took the ACHM dogs progressively longer to navigate the maze as the ambient light increased from dim light to normal room lighting and even longer with normal outdoor daytime lighting. After treatment, the day blindness was substantially eliminated, and the treated ACHM dogs were able to navigate the maze under bright light conditions at almost the same speed as normal dogs.

 

- 101 -


Table of Contents

The figure below shows the average time taken to navigate a maze as the ambient light intensity was increased for three groups of dogs: normal dogs, dogs with ACHM that were untreated and dogs with ACHM that were treated with our ACHM product candidate. The figure shows that under low light conductions (0.2 lux, equivalent to the light conditions on a moonlit night), when vision is normally mediated only by rod photoreceptors, all three groups navigated the maze rapidly. As the light intensity was progressively increased (to 646 lux, equivalent to the light conditions in a business office), and vision became mediated by cone photoreceptors, the untreated ACHM dogs took progressively longer to navigate the maze, as they bumped into walls in the maze and had to advance by trial and error. In contrast, as the light intensity was progressively increased, the time taken to navigate the maze did not change for normal dogs and increased only slightly for the treated ACHM dogs.

 

LOGO

Based on Komaromy et al. Human Molecular Genetics (2010)

Untreated ACHM dogs also demonstrated photophobia and day blindness when outdoors in daylight, which severely limited their ability to interact with people and objects in their environment. After treatment there was a dramatic improvement in this important clinical manifestation of ACHM. The restored function persisted for more than 2.5 years (the longest duration tested).

In addition, a mouse model of ACHM was developed by knocking out the CNGB3 gene in mice. These knockout mice have markedly impaired cone photoreceptor function, as measured by ERG and visual acuity testing. Treatment by subretinal injection of an AAV vector expressing human CNGB3 in the knockout mice improved cone-specific ERG responses to nearly normal levels and improved visual acuity, as measured by their ability to follow a rotating pattern of vertical stripes of varying thickness.

We are conducting additional preclinical studies required for submission of an IND to the FDA. This will include single-dose toxicology studies in mice and nonhuman primates, the design of which will be based on guidance from the FDA’s Office of Cellular, Tissue and Gene Therapy in the form of a pre-pre IND meeting planned for mid-2014. These studies will evaluate the safety and distribution of our ACHM product candidate after delivery by both subretinal and intravitreal injection.

Planned clinical development of our ACHM product candidate

We are currently conducting a natural history study in persons affected by ACHM caused by CNGB3 mutations. Results of this study will provide important information about the best methods for measuring visual function in these patients and will guide us in the design of subsequent clinical trials in which our product

 

- 102 -


Table of Contents

candidate will be tested for safety and efficacy. This study is being conducted at five clinical sites that specialize in inherited retinal diseases: the Bascom Palmer Eye Institute in Miami, Florida, the Casey Eye Institute in Portland, Oregon, the Chicago Lighthouse in Chicago, Illinois, the Medical College of Wisconsin in Madison, Wisconsin and the University of Florida in Gainesville, Florida.

After completing the ongoing preclinical studies required for submission of an IND to the FDA, we plan in early 2015 to submit an IND and to initiate a Phase 1/2 clinical trial of our ACHM product candidate in up to 30 persons affected by ACHM caused by mutations in the CNGB3 gene. We will first test the safety and efficacy of the less invasive delivery method, intravitreal injection, and then move to subretinal delivery, if required. Results of this trial, which we expect to receive in late 2015, will guide us in finalizing the design of a pivotal Phase 3 clinical trial. In the planned pivotal Phase 3 trial, up to 40 patients will be enrolled and evaluated for changes in visual function over a 12-month period following treatment. If successful, we believe the results of this pivotal Phase 3 trial could support our submission of a BLA to the FDA and of an MAA to the EMA for our ACHM product candidate.

Additional opportunities in ACHM

There are several other genes in which mutations are known to cause ACHM, with signs and symptoms that are the same as in ACHM caused by CNGB3 mutations. AAV vectors expressing these genes would be additional potential product candidates for treatment of ACHM caused by mutations in these genes, and we believe they would have the potential for rapid regulatory approval, if our product candidate for ACHM caused by CNGB3 mutations were already approved.

X-linked retinitis pigmentosa

Retinitis pigmentosa is an inherited retinal dystrophy with progressive loss of vision. It is commonly first observed in young men who notice problems with vision under low light conditions, or night blindness, followed by a restriction of peripheral visual fields, or tunnel vision, leading to poor central vision and eventual total blindness.

The incidence rate for retinitis pigmentosa is about one in 4,000 people, according to Retinitis Pigmentosa (1988) , and we estimate that there are about 75,000 people in the United States and 125,000 people in Europe with retinitis pigmentosa, or 200,000 people in the United States and Europe combined. According to a paper by Dr. Marianne Haim published in Acta Ophthalmologica (1992), about 10% of cases of retinitis pigmentosa are caused by mutations in a gene on the X chromosome and are referred to as X-linked retinitis pigmentosa, or XLRP, from which we therefore estimate that there are about 20,000 persons with XLRP in the United States and Europe combined.

A preclinical study in a dog model of XLRP caused by mutations in the RPGR gene demonstrated a delay in the rate of disease progression in eyes that received a subretinal injection of an AAV vector expressing RPGR. We are currently designing preclinical studies to further evaluate the ability of our XLRP product candidate to delay disease progression in animal models of XLRP. If these studies are successful, we will conduct additional preclinical studies required for submission of an IND to the FDA. These studies will include single-dose toxicology studies in animals that will evaluate the safety and distribution within the animals after our XLRP product candidate is delivered by both subretinal and intravitreal injection.

Other opportunities in ophthalmology

We believe our current gene therapy platform will enable us to develop and test new AAV vectors that carry different gene sequences for other inherited diseases in ophthalmology, reducing the need for early research work. In this way, we anticipate being able to move products rapidly through preclinical studies and into clinical development. We also believe that there are large market ophthalmology diseases where AAV vectors may provide benefit, such as wet AMD.

 

- 103 -


Table of Contents

Blue cone monochromacy and X-linked color blindness

Humans have three types of cone photoreceptors, termed L, M and S cones, which are responsive to light of long (red), medium (green) or short (blue) wavelength. The coordinated function of the three types of cone photoreceptors provides the ability to perceive the full range of colors in the visual spectrum.

Blue cone monochromacy, or BCM, is an inherited retinal disease characterized by lack of functional L and M cone photoreceptors but generally normal function of S cone photoreceptors. BCM is caused by mutations in the part of the X chromosome, termed the locus control region, which controls expression of the L and M opsin genes. In humans, the fovea contains only L and M cones and no S cones. The clinical manifestations are very similar to persons affected by ACHM, with markedly reduced best corrected visual acuity (about 20/200) and photophobia, but with incomplete loss of color discrimination.

Color vision deficiency, commonly called color blindness, is the inability or decreased ability to perceive the full spectrum of color differences. The condition is usually X-linked, due to mutations in the L or M opsin gene, resulting in either a missing or abnormal L or M opsin protein. These individuals are said to have red-green color blindness and they cannot see pure red colors, which instead appear black, while purple cannot be distinguished from blue and all orange-yellow-green shades appear as yellow. Individuals with color vision deficiency are not blind; their best-corrected visual acuity is usually normal (20/20).

According to a review article by Dr. Matthew Simunovic published in the journal Eye (2010), X-linked color blindness affects a large number of individuals, as many as 8% of men and 0.5% of women, but BCM is a rare disease, with an incidence rate of approximately one in 100,000 males, from which we estimate that there are about 1,500 persons in the United States and about 2,500 persons in Europe with BCM.

There are currently no specific treatments for BCM or X-linked color blindness.

We are currently designing preclinical studies to evaluate the ability of our gene therapy approach to correct the visual abnormalities in animal models of BCM. We are also designing studies in which people with X-linked color blindness will be asked to complete a questionnaire to determine the impact of their color vision deficiency on their lives and whether they would be interested in having their color vision deficiency treated if an AAV gene therapy product were available. Results of these studies will help us to determine whether to conduct clinical trials of product candidates for these conditions.

Optogenetics

There are a variety of progressive retinal diseases that ultimately result in advanced retinal degeneration and blindness, including retinitis pigmentosa, AMD and diabetic retinopathy. We and others are developing products to treat these diseases before they progress to blindness, but many patients will have advanced retinal degeneration despite treatment with available therapies.

One approach to treatment of advanced retinal degeneration, in which photoreceptors are no longer functional and able to process new genetic information delivered by gene therapy, is to bypass the photoreceptors and deliver a light-sensitive protein to neurons in the retina. One such light-sensitive protein is channelrhodopsin 2, or ChR2, a protein that controls photosynthesis in green algae. When ChR2 is inserted into a neuron and the neuron is stimulated by light, the neuron is activated and is able to transmit a signal to the visual cortex. This technique is referred to as optogenetics—the combination of techniques from optics and genetics to control individual neuron activity in living tissue. We are working with others who hold key gene intellectual property in the optogenetics field to develop an AAV vector for treatment of advanced retinal degeneration.

Proof-of-concept programs beyond ophthalmology; our Alpha-1 antitrypsin deficiency product candidate

We also plan to pursue gene therapy programs that target muscle cells via direct intramuscular injections or vascular delivery, to leverage the unique properties of AAV vectors. For example, in one of our first proof-of-

 

- 104 -


Table of Contents

concept programs, we have developed a product candidate for the treatment of AAT deficiency, which is characterized by reduced serum levels of AAT protein and increased risk of developing emphysema and liver disease. AAT normally functions to prevent lung tissue damage.

AAT deficiency is implicated in 2.7% of all deaths due to obstructive pulmonary disease among persons in the 35-44 year-old age group, and emphysema is the most common cause of death in AAT-deficient patients, accounting for about 72% of cases. According to the National Institutes of Health Genetics Home Reference, the incidence rate for AAT deficiency is between one in 1,500 and one in 3,500 people of European ancestry, and an article by de Serres and Blanco in Therapeutic Advances in Respiratory Disease (2013) estimates that there are approximately 44,000 people in North America and 74,000 people in Northern and Central Europe with the most severe form of AAT deficiency, or about 118,000 people in the United States and Europe combined.

Prevention of lung disease in AAT deficiency is well-understood, since the presence of serum AAT levels of 11 µM or higher is considered to be an indicator of protection from tissue damage. AAT augmentation therapy, consisting of intravenous infusions of AAT protein purified from plasma obtained from healthy human donors, can achieve effective serum levels of AAT. However, the annual cost of augmentation therapy can be more than $100,000 per year, administered by weekly intravenous infusions over the lifetime of the patient.

Our alternative, gene therapy approach involves using an AAV vector to insert a functional copy of the normal AAT gene into the patient’s muscle cells. In preclinical studies, our AAT deficiency product candidate was evaluated in single-dose toxicology studies in mice and rabbits. These studies demonstrated that vector administration was not associated with clinical signs of toxicity and there were no adverse effects on hematology or serum chemistry parameters or gross pathology findings. We plan to perform an additional toxicology study in monkeys to evaluate administration of our AAT deficiency product candidate to muscle cells by a vascular route of delivery that in animals was able to achieve much higher serum levels compared to direct intramuscular delivery.

We have had extensive dialogue with the FDA, the EMA and other regulatory authorities and advisory bodies concerning the clinical advancement of our AAT deficiency product candidate. We have made the following progress in the clinical development of our AAT deficiency product candidate:

 

   

our AAT deficiency product candidate was granted an orphan drug designation by the FDA and by the EMA for the treatment of AAT deficiency;

 

   

we received a $1.1 million grant to conduct the Phase 2 trial from the FDA;

 

   

we had a type B pre-IND meeting with the FDA in 2004, during which the FDA provided guidance on the manufacturing, nonclinical and clinical development of our AAT deficiency product candidate;

 

   

the NIH RAC reviewed our draft protocols for the Phase 1 and Phase 2 clinical trials and its recommendations were incorporated into the final protocol and informed consent documents;

 

   

we submitted our IND in 2005 and have conducted two clinical trials under this IND and no safety issues attributed to the vector have been seen;

 

   

we received Scientific Advice from the EMA’s Committee for Medicinal Products for Human Use, or CHMP, in 2010 related to the manufacturing, nonclinical and clinical development of our AAT deficiency product candidate; and

 

   

we have had several type C meetings with the FDA focused on the manufacturing, nonclinical and clinical development of our AAT deficiency product candidate, most recently in June 2013.

Our AAT deficiency product candidate has been evaluated in two clinical trials in 18 patients with AAT deficiency. Both trials were designed to evaluate the product candidate’s safety and ability to achieve sustained expression of normal AAT protein in the serum. In these trials, there were no serious adverse events attributed to

 

- 105 -


Table of Contents

administration of our product candidate. One patient developed bacterial epididymitis and one patient developed diverticulitis, each of which events was considered unrelated to our product candidate. In a Phase 2a trial, concentrations of normal AAT increased linearly in direct proportion to the dose and these AAT levels were sustained for more than two years.

The figure below left shows serum concentrations of normal AAT in subjects who received different doses of the AAT deficiency vector. There was a linear relationship between the increase in serum AAT concentration and the increase in vector dose. The figure below right shows average serum concentration of AAT over time in the group that received the highest vector dose. Serum AAT concentration increased within 30 days and remained significantly above baseline levels for more than two years.

 

LOGO

The figure on the left is based on data published by Flotte et al. Human Gene Therapy (2011). The figure on the right is based on AGTC human clinical trial data.

Although we observed sustained expression of AAT for more than two years, the serum AAT concentrations were lower than the target of 11 µM that is necessary for adequate protection of the lungs. However, we have established that in animals, delivering AAV vectors to muscle cells using a vascular method can achieve much higher serum levels than when the vector is delivered by direct injection into muscles. We are currently conducting additional nonclinical studies of this new method for delivering our AAT deficiency product candidate to muscle cells, and will submit an amendment to our existing IND to allow us to initiate a Phase 2b trial in early 2015 in which our AAT deficiency product candidate will be administered in up to six patients with AAT deficiency using the vascular delivery method.

As we further develop this program, we will investigate the opportunity to expand to other indications where high levels of circulating proteins are important.

Manufacturing

Until recently, there has been a lack of manufacturing infrastructure to enable the production of gene therapies in a reliable and reproducible manner at a commercially viable scale. The historical challenges for gene therapy manufacturing relate to the difficulty of developing constructs that provide the necessary helper functions, and in having systems that provide adequate yield, scalability and potency. We have made significant investments in developing improved manufacturing processes, which include the following:

 

   

We have developed proprietary AAV vector manufacturing processes and techniques that produce a more purified and concentrated product candidate, as evidenced by the approximately 25- to 30-fold reduction in non-infectious viral contaminants as compared to vectors used in many previous clinical trials.

 

- 106 -


Table of Contents
   

We do not need a specially cloned and isolated cell line for each of our disease targets; we instead use specially engineered replication-incompetent herpes simplex helpers, or HSV helpers, which are stable and straightforward to clone.

 

   

We have developed approximately 30 assays to accurately characterize our process and the AAV vectors we produce.

 

   

We have developed a purification system applicable to multiple AAV capsids.

 

   

We are investing in the development of mid- to large-scale manufacturing processes to enable the manufacture of our product candidates at commercial scale.

We believe these improvements and our continued investment in our manufacturing platform will enable us to develop best-in-class, next generation gene therapy products.

Our viral vector production platform for AAV-based gene therapeutics, which we call the herpes-assisted vector expansion, or HAVE method, offers significant benefits in comparison with the methods used by others to manufacture AAV vectors, as summarized in the following table.

 

AAV production method

  Straightforward
cloning
  High efficiency   High yield   Scalable
Transfection   Yes   No   No   No
Baculovirus   No   No   Yes   Yes
Adenovirus   No   Yes   Yes   Yes
Our HAVE method   Yes   Yes   Yes   Yes

The four key steps involved in our proprietary HAVE manufacturing method are as follows:

 

   

First, the therapeutic gene and the appropriate AAV capsid genes are inserted into individual HSV helpers, and these helpers are individually grown in a complementing cell line called V27. The complementing cell line is required to provide critical functions that allow the replication-incompetent HSV helpers to grow; the same cell line is used to produce HSV helpers for all disease targets. This step occurs in disposable culture vessels of increasing size, up to and including disposable stirred tank bioreactors. The HSV helpers are harvested, minimally processed and concentrated to prepare them for use in producing our AAV vectors. These HSV helpers can be stored frozen for years before use.

 

   

Next, the two HSV helpers are used together to infect a cell line called sBHK, allowing for packaging of the therapeutic gene into the AAV capsid and to produce our AAV vectors. The sBHK cell line does not provide the critical functions that would allow for growth of the HSV helpers, which provides an added layer of safety. The same sBHK cell line is used to produce AAV vectors for all disease targets. This step occurs in disposable culture vessels of increasing size depending on the amount of AAV vector that is required. The AAV vector is recovered by using a detergent solution to break open the sBHK cells and release the AAV vectors. This step also destroys any residual HSV helpers that were used to infect the sBHK cells.

 

   

The third step is to purify the harvested AAV vector using two chromatography columns. The exact method used to column-purify our AAV vectors varies depending on the AAV capsid used in the product candidate; we have developed purification methods for multiple AAV capsids. We have shown in formal clearance studies that the combination of detergent treatment and two chromatography columns can remove up to 10 14 (100 trillion) units of HSV. This step also helps to eliminate any remaining parts, such as proteins or DNA, of the HSV helpers and sBHK production cells.

 

   

The final step is to formulate, filter and fill the AAV vector in appropriate containers for use in animal or human studies. This filled AAV vector drug product can be stored frozen for years before use.

 

- 107 -


Table of Contents

HAVE Production of our AAV Vectors for Gene Therapy

 

LOGO

The HAVE method is inherently flexible, allowing the manufacture of a wide range of AAV vectors without the need to modify the manufacturing steps used to produce the HSV helpers or AAV vectors. We have already demonstrated our manufacturing knowledge through multiple successful production batches of both HSV helpers and AAV vectors at SAFC Pharma, our contract manufacturing organization, under current good manufacturing practices, or GMP.

Research is already underway to meet our future manufacturing needs. Projects include scale-up to larger batch production for use in our AAT deficiency program, continued modifications of the purification step to accommodate new AAV capsids, complete removal of animal-derived products from the V27 cell growth step, and formulations that allow for higher AAV vector concentrations.

Strategic collaborations

We have forged strategic alliances with a leading pharmaceutical partner and with academic laboratories where both parties contribute expertise to enable the discovery and development of potential gene therapy product candidates. To access the substantial funding and other resources required to develop and commercialize gene therapy products, we intend to seek other opportunities to form strategic alliances with collaborators who can augment our industry-leading gene therapy expertise.

Our license to Genzyme

In 2004, we entered into a collaboration agreement with Genzyme to develop a recombinant AAV product to treat wet AMD. Our agreement originally provided that the parties would share responsibility for planning, budgeting, workload, decision-making, costs and future revenues. The parties had joint ownership of any intellectual property that arose as a direct result of the work done for the partnership. In collaboration with Genzyme, early product development work, production of materials for animal studies, development of several manufacturing and clinical assays, completion of IND-enabling toxicology and biodistribution studies, technology transfer of our HSV-based manufacturing process to Genzyme, production of the AAV vector under GMP for the Phase 1 human clinical trial, and drafting of the IND were conducted.

 

- 108 -


Table of Contents

In early 2010, as the product candidate was moving into human clinical trials required for wet AMD, we renegotiated our agreement to take the form of a license of our HSV-based manufacturing technology and interest in the wet AMD program to Genzyme. The license provides for modest late-stage milestone payments to us and royalties on sales, as well as forgiveness of our share of development costs from mid-2006 to the date the license was signed. Genzyme is responsible for all further development and commercialization of the wet AMD product candidate. We maintain non-exclusive rights to jointly developed technology. Genzyme also has options, expiring in 2015 and 2017, to license our manufacturing technology, as it existed at the time of the license, for specified genes associated with diseases outside our current area of focus. Genzyme recently informed us that it no longer intends to use our HSV-based manufacturing technology to produce the AAV vector being used for the wet AMD product. Our license agreement with Genzyme was further amended in December 2013 to reflect this fact and, among other things, to terminate our exclusive license to Genzyme for use of our HSV-based manufacturing technology in wet AMD except as to specified pending research activities, and to eliminate restrictions on our activities in the field of treatments for ocular neovascularization disorders, including AMD.

We currently do not expect to derive substantial revenue from our license to Genzyme, but a successful outcome of the clinical trials for which Genzyme is responsible would contribute significantly to the perception and prospects of our gene therapy platform.

Our relationship with the University of Florida

All of our scientific founders spent part of their careers at the University of Florida, or UF, and three are still UF faculty members. Since our inception we have licensed significant technology from and funded research at multiple labs at UF. Pursuant to five agreements, we have licensed three U.S. patents and multiple pending applications covering inventions made at UF. UF has multiple capabilities in genetic cloning, gene therapy manufacturing, animal model development and facilities for both small and large animal testing, and in certain instances we have benefited from the ability to conduct important research at UF without having to expand in-house facilities and personnel. We interact frequently with all members of the Powell Gene Therapy Center at UF and have an excellent working relationship with the UF Office of Technology Licensing.

Most recently we and UF were jointly awarded an $8.3 million dollar grant from the NEI to support development of our ACHM product candidate, with Dr. William Hauswirth, one of our scientific founders and Professor and holder of the Rybaczki-Bullard Chair in the Department of Ophthalmology at UF, as principal investigator. As a sub-awardee, we expect to receive $4.0 million over the next five years under this grant.

Our relationships with patient advocacy groups and academic centers

We have long believed that when developing products to treat orphan indications it is important to form strong relationships with patient advocacy groups, and we have done this successfully with both the Foundation Fighting Blindness, or FFB, and the Alpha-1 Foundation. Both organizations are well known for their advocacy of patients’ interests in obtaining diagnosis, developing treatments and providing for reimbursement. Both actively support research into treatment, and we have received three research grants totaling $1.6 million from the FFB and one grant of $0.3 million from the Alpha-1 Foundation. More importantly, both organizations have been instrumental in assisting us in forming ties with disease experts, recruiting patients into clinical trials and helping us to understand the needs, wants and concerns of patients.

We also have formed strong relationships with key academic centers across the United States that have core competencies in gene therapy, orphan ophthalmology and AAT deficiency. These centers conduct sponsored research, act as advisors and collaborate with us on grant proposals. We have received grant funding aggregating to $10.7 million since our inception, either independently or with our collaborators. This funding provides peer-reviewed scientific validation of our programs and has facilitated critical early stage research for our leading product candidates.

 

- 109 -


Table of Contents

Intellectual property

We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade secrets relating to our proprietary technology platform and on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene therapy that may be important for the development of our business. We additionally rely on regulatory protection afforded through orphan drug designations, data exclusivity, market exclusivity, and patent term extensions where available.

Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.

We have developed or in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to the development and commercialization of gene therapy products. Our proprietary intellectual property, including patent and non-patent intellectual property, is generally directed to, for example, certain genes, methods of transferring genetic material into cells, processes to manufacture our AAV-based product candidates and other proprietary technologies and processes related to our lead product candidates.

As of the date of this prospectus, our patent portfolio includes approximately 53 patents and patent applications that we own and approximately 55 patents and patent applications that we have licensed. More specifically, we own five U.S. patents, five pending U.S. applications, 27 foreign patents and 16 foreign patent applications. We have licensed 22 U.S. patents, four pending U.S. applications, 26 foreign patents and three pending foreign patent applications.

Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our gene therapy product candidates and AAV manufacturing process. Our owned and licensed patent portfolio includes patents and patent applications directed to our AAT deficiency, XLRS and ACHM programs, as well as our foundational AAV platform. See also “—License agreements.”

In addition to the above, we have established expertise and development capabilities focused in the areas of preclinical research and development, manufacturing and manufacturing process scale-up, quality control, quality assurance, regulatory affairs and clinical trial design and implementation. We believe that our focus and expertise will help us develop products based on our proprietary intellectual property and to expand our intellectual property.

The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from the date of filing the non-provisional application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States Patent and Trademark Office in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed patent.

The term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration of a U.S. patent as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond

 

- 110 -


Table of Contents

the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent per approved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a new drug application, or NDA, we expect to apply for patent term extensions for patents covering our product candidates and their methods of use.

We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our patents and patent applications.

Manufacturing . We own or in-license 34 patents and patent applications that cover methods to manufacture AAV vectors. More specifically, we have 7 U.S. patents and patent applications and 27 foreign patents and patent applications covering manufacturing methods. There are still patents pending in this group. The longest lived and most significant manufacturing patent is expected to expire in 2025.

Small Cone Promoters. We own or in-license 13 patent applications that cover small cone promoters and uses thereof. Of these 13 patent applications, four are U.S. patent applications and nine are foreign patent applications. There are still patents pending in this group. As these patent applications have been filed recently, no issued patents exist covering small cone promoters. A patent issuing from this group could have an expiration date of 2033.

The following table summarizes our material owned and in-licensed patents and patent applications that are practiced in the manufacture and use of our product candidates:

 

Description of Patent or Patent Application

  

Product Candidate

Use of HSV as Vector (1)

   All of our product candidates

High Titer Recombinant AAV Production (2)

   All of our product candidates

Recombinant Herpes Viruses for Preparing Recombinant Adeno-Associated Viruses (3)

   All of our product candidates

Production Of AAV Using Cells In Suspension (4)

   All of our product candidates

Use of HSV to Produce rAAV (5)

   All of our product candidates

Use of HSV Variants to Produce AAV (6)

   All of our product candidates

Tyrosine Modifications of AAV Capsids (7)

   All of our product candidates

CNGB3 Gene (8)

   Our ACHM product candidate

Expression Cassettes for Achromatopsia (9)

   Our ACHM product candidate

Small Cone Promoter (10)

   Our ACHM product candidate

Composition and Methods to Treat Alpha 1 (11)

   Our AAT deficiency product candidate

Delivery of AAV to Muscle and Blood (12)

   Our AAT deficiency product candidate

Pseudotypes and Other AAV Compositions (13)

   Our AAT deficiency product candidate

 

(1) Includes one issued United States patent, which is expected to expire in February 2014.

 

- 111 -


Table of Contents
(2) Includes one issued patent in the United States which is expected to expire in 2022 and issued foreign patents which are expected to expire in 2023 in Australia, New Zealand, Austria, Switzerland, Germany, Spain, France, the United Kingdom, Ireland, Italy, Luxembourg, Monaco, and The Netherlands, and pending patent applications in the United States and Canada.
(3) Includes issued patents, each of which is expected to expire in 2018, in Canada, France, Germany, Israel, Italy, the United Kingdom, and the United States, and one pending patent application in Japan.
(4) Includes pending patent applications in the United States, Australia, Canada and the European Patent Office.
(5) Includes issued patents, each of which is expected to expire in 2019, in Australia, New Zealand and the United States.
(6) Includes one issued United States patent, which is expected to expire in 2025.
(7) Includes one issued United States patent, which is expected to expire in 2029, and three pending United States patent applications.
(8) Includes two issued United States patents, one expected to expire in 2021 and the other expected to expire in 2022, and one issued patent in each of the following jurisdictions, all of which are expected to expire in 2021: Australia, Canada, Denmark, France and the United Kingdom. Also includes two pending patent applications in Japan.
(9) Includes three pending patent applications in the United States and one pending patent application in each of Australia, Canada, China, India, Japan, New Zealand, and the European Patent Office.
(10) Includes one pending multijurisdictional patent application filed pursuant to the Patent Cooperation Treaty.
(11) Includes issued patents, each of which is expected to expire in 2019, in Belgium, Ireland, Monaco, Greece, Cyprus, Switzerland, Germany, Denmark, Spain, Finland, Italy, Luxembourg, New Zealand, Portugal, Sweden, Netherland, Hong Kong, the United States, Canada, Great Britain, Austria, France and the European Patent Office.
(12) Includes 11 issued United States patents and 1 issued Canadian patent, each of which is expected to expire in 2016, and one pending patent application in each of the United States and Canada.
(13) Includes four issued United States patents, three of which are expected to expire in 2019 and one of which is expected to expire in 2021.

License agreements

We have rights to use and exploit multiple issued and pending patents under licenses from other entities. We consider the commercial terms of these licenses, which provide for modest milestone and royalty payments, and their provisions regarding diligence, insurance, indemnification and other similar matters, to be reasonable and customary for our industry.

Information about our principal licenses is set forth below. The aggregate amount of all cash up-front payments that we have made pursuant to the license agreements described below is $0.2 million, all of which is included in our historical results of operations.

University of Florida. We currently have five license agreements with the University of Florida Research Foundation, or UFRF, an affiliate of UF:

 

   

A license from UFRF signed in September 2001 relates to the AAV construct containing the AAT gene and the method to treat AAT deficiency using this construct. We have an exclusive license in all fields of use.

Under the terms of this license, we made cash and stock-based up-front payments to UFRF and are required to make payments ranging from the mid-five figures to the low-six figures based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. Assuming that we meet each of the specified development, regulatory and commercial milestones not more than once for each product, which we expect will be the case, the maximum aggregate milestone payments payable under this license with respect to any individual product that we commercialize will be $0.3 million. We will also be required to pay a royalty on net sale

 

- 112 -


Table of Contents

of products covered by the in-licensed intellectual property in the mid-single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income in the low-double digits. We are required to make annual maintenance payments in the low four figures under this license, which payments are creditable against royalty payments on a year-by-year basis.

This license will terminate upon the expiration of all of the patents subject to the license. Additionally, UFRF may terminate this license upon certain breaches by us of the terms of the license and we may terminate the license at any time by submitting written notice to UFRF.

The longest-lived patent covered by this license is expected to expire in 2019.

 

   

A joint license from UFRF and Johns Hopkins University, or JHU, signed in October 2003 relates to a particular HSV construct and various compositions thereof. We have an exclusive license in all fields of use.

Under the terms of this license, we made cash and stock-based up-front payments to UFRF and JHU and are required to make payments ranging from the mid-five figures to the low-six figures based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. Assuming that we meet each of the specified development, regulatory and commercial milestones not more than once for each product, which we expect will be the case, the maximum aggregate milestone payments payable under this license with respect to any individual product that we commercialize will be $0.5 million. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property in the mid-single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income in the low-double digits. We are required to make annual maintenance payments in the low four figures under this license, which payments are creditable against royalty payments on a year-by-year basis.

This license will terminate upon the earlier to occur of the expiration of all of the patents subject to the license and the date on which royalty payments, once commenced, cease for more than three calendar quarters. Additionally, UFRF and JHU may terminate this license upon certain breaches by us of the terms of the license and we may terminate the license at any time by submitting written notice to UFRF.

The longest-lived patent covered by this license is expected to expire in 2018.

 

   

A license from UFRF signed in September 2012 relates to the use of a small cone cell specific promoter. We have an exclusive license in the field of ophthalmology. Currently this patent would be most useful for ACHM but could be important to treating any ophthalmic disease that involves cone cells.

Under the terms of this license, we made a cash up-front payment to UFRF and are required to make payments ranging from the mid-five figures to the low-six figures based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. Assuming that we meet each of the specified development, regulatory and commercial milestones not more than once for each product, which we expect will be the case, the maximum aggregate milestone payments payable under this license with respect to any individual product that we commercialize will be $0.6 million. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property in the mid-single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income in the low-double digits. We are required to make annual maintenance payments in the mid four figures under this license, which payments are creditable against royalty payments on a year-by-year basis.

 

- 113 -


Table of Contents

This license will continue until the expiration of all of the patents subject to the license, provided or, if later, a date specified in the agreement of the first commercial sale of product or process covered by the license. Additionally, UFRF may terminate this license upon certain breaches by us of the terms of the license and we may terminate the license at any time by submitting written notice to UFRF.

There are patent applications pending under this license.

 

   

Two licenses from UFRF, signed in September and November 2012, respectively, relate to the use of engineered AAV capsids. We have an exclusive license to the patents covered by the November 2012 license in the fields of ACHM, XLRS and XLRP and a semi-exclusive license in all other fields of orphan ophthalmology. We have a non-exclusive license in all fields of use with respect to the patents covered by the September 2012 license. Currently these patents are most useful for ACHM, XLRS and XLRP but could be important for treating a wide variety of diseases as the mutant capsids have been shown to be able to enter cells more effectively than standard AAV capsids.

Under the terms of these licenses, we made cash up-front payments to UFRF and are required to make payments ranging from the mid-five figures to the low-six figures based upon development, regulatory and commercial milestones for any products covered by the in-licensed intellectual property. Assuming that we meet each of the specified development, regulatory and commercial milestones not more than once for each product, which we expect will be the case, the maximum aggregate milestone payments payable under these licenses with respect to any individual product that we commercialize will be $0.6 million. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property in the mid-single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under these agreements, and we will be required to pay a percentage of such license income in the low-double digits. We are required to make annual maintenance payments in the mid four figures under these licenses, which payments are creditable against royalty payments on a year-by-year basis.

These licenses will continue until the expiration of all of the patents subject to the licenses, provided or, if later, a date specified in the license. Additionally, UFRF may terminate this license upon certain breaches by us of the terms of the licenses and we may terminate the licenses at any time by submitting written notice to UFRF.

The longest-lived patent covered by these licenses is expected to expire in 2029. There are also patent applications pending under these licenses.

University of Alabama at Birmingham. A license agreement from the UAB Research Foundation affiliated with The University of Alabama at Birmingham signed in 2006, relates to one U.S. patent with claims covering the use of HSV helpers to produce AAV vectors. The patent is expected to expire in 2025. We have a non-exclusive license in the field of human gene therapy using AAV vectors.

Under the terms of this license, we made a cash up-front payment to the UAB Research Foundation, and we will be required to make payments ranging from the mid-five figures to the mid-seven figures based upon development and regulatory milestones for any products covered by the in-licensed intellectual property. Assuming that we meet each of these development and regulatory milestones not more than once for each product, which we expect will be the case, the maximum aggregate milestone payments payable under this license with respect to any individual product that we commercialize will be $4.7 million. We will also be required to pay a royalty on net sale of products covered by the in-licensed intellectual property in the low-single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. We have the right to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income in the low-double digits. We are required to make annual maintenance payments in the mid-four figures to mid-five figures under this license, which payments are creditable against royalty payments on a year-by-year basis.

 

- 114 -


Table of Contents

This license will terminate upon the expiration of all of the patents subject to the license. Additionally, the UAB Research Foundation may terminate this license upon certain breaches by us of the terms of the license and we may terminate the license at any time by submitting written notice to the UAB Research Foundation.

MedImmune. A license agreement with MedImmune signed in 2005 relates to three U.S. patents, two of which have expired. The third patent in this license will expire on February 4, 2014. These patents have claims covering the use of any HSV or HSV to make proteins and relate to our AAV manufacturing process. We have an exclusive license to these patents for the purpose of manufacturing AAV vectors for use in the treatment of humans in the United States.

Under the terms of this license, we made a cash up-front payment to MedImmune, and during its term we would be required to make payments ranging from the mid five-figures to the low six-figures based upon development and regulatory milestones for any products covered by the in-licensed intellectual property. We would also have been required to pay a royalty on net sale of products covered by the in-licensed intellectual property in the low-single digits. We currently do not expect that any such milestone or royalty payments will become due prior to the expiration of the license.

This license will terminate with respect to any product or process on the date the research, development, manufacture, use, import, export, offer for sale or sale of such product or process would infringe a patent covered by the license. When the final patent covered by this license expires on February 4, 2014, this license will terminate.

MedImmune Ventures, an affiliate of MedImmune, beneficially owns 15.3% of our outstanding common stock and Sam Wu, a member of our board of directors, is a managing director of MedImmune Ventures.

Competition

The biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies and proprietary products, and any product candidates that we successfully develop and commercialize will have to compete with existing therapies and new therapies that may become available in the future. While we believe that our proprietary technology estate and scientific expertise in the gene therapy field provide us with competitive advantages, we face potential competition from many different sources, including larger and better-funded pharmaceutical, specialty pharmaceutical and biotechnology companies, as well as from academic institutions and governmental agencies and public and private research institutions that may develop potentially competitive products or technologies.

Currently there are no approved products for any of our lead orphan ophthalmology indications of XLRS, ACHM and XLRP. We believe the key competitive factors that will affect the success of our product candidates, if approved, are likely to be their efficacy, safety, convenience of administration and delivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.

Many of our potential competitors, alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and the commercialization of those treatments. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop 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. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

 

- 115 -


Table of Contents

Government regulation

Biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act, and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving biological products. Before clinical testing of biological products may begin, we must submit an IND which must go into effect, and each clinical trial protocol for a gene therapy product candidate is reviewed by the FDA and, in some instances, the NIH, through its Recombinant DNA Advisory Committee, or RAC. FDA approval of a BLA also must be obtained before marketing of biological products. 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 and we may not be able to obtain the required regulatory approvals.

Within the FDA, the Center for Biologics Evaluation and Research, or CBER, regulates gene therapy products. The CBER works closely with the NIH and its RAC, which makes recommendations to the NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societal issues related to proposed and ongoing gene therapy protocols. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols. The FDA also has published guidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observing subjects involved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturing and control information in gene therapy INDs.

Ethical, social and legal concerns about gene therapy, genetic testing and genetic research have led to the enactment of legislation such as the Genetic Information Nondiscrimination Act of 2008 and could result in additional regulations restricting or prohibiting the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products. New government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the impact of such changes, if any, may be.

Recent developments in regulation of gene therapy

Although the FDA has not yet approved any human gene therapy product for sale, it has provided guidance for the development of gene therapy products. For example, the FDA has established the Office of Cellular, Tissue and Gene Therapies, or OCTGT, within CBER, to consolidate the review of gene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee, or CTGTAC, to advise CBER on its reviews. In addition, the FDA has issued a growing body of clinical guidelines, chemical, manufacturing and control, or CMC, guidelines and other guidelines, all of which are intended to facilitate industry’s development of gene therapy products.

In 2012, the EMA approved a gene therapy product called Glybera, which is the first gene therapy product approved by regulatory authorities anywhere in the Western world.

United States biological products development process

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

 

   

completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLP, requirements and applicable requirements for the humane use of laboratory animals or other applicable regulations;

 

   

submission to the FDA of an IND, which must become effective before human clinical trials may begin;

 

- 116 -


Table of Contents
   

performance of adequate and well-controlled human clinical trials according to the FDA’s regulations commonly referred to as good clinical practices, or GCP, requirements and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product candidate for its intended use;

 

   

submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantive evidence of safety, purity, and potency from results of nonclinical testing and clinical trials;

 

   

satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product candidate is produced to assess compliance with GMP requirements, to assure that the facilities, methods and controls are adequate to preserve the biological product candidate’s identity, strength, quality and purity;

 

   

potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and

 

   

FDA review and approval, or licensure, of the BLA prior to any commercial marketing or sale of the product candidate in the United States.

Before testing any biological product candidate, including a gene therapy product candidate, in humans, the product candidate enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP requirements.

Where a gene therapy trial is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to the submission of an IND to the FDA, a protocol and related documentation is submitted to and the trial is registered with the NIH Office of Biotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA, however many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. The NIH is responsible for convening the RAC, a federal advisory committee, which discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly public meetings. The OBA will notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA web site and may be accessed by the public.

The clinical trial sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a 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 trial can begin. With gene therapy protocols, if the FDA allows the IND to proceed, and the RAC decides that full public review of the protocol is warranted but did not take place before the IND review is complete, the FDA will request at the completion of its IND review that sponsors delay initiation of the protocol until after completion of the RAC review process. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trials.

Clinical trials involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial

 

- 117 -


Table of Contents

sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial 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 trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Clinical trials also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

   

Phase 1 . The biological product candidate is initially introduced into healthy human subjects and tested for safety. In the case of some product candidates for severe or life-threatening diseases, especially when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

 

   

Phase 2 . The biological product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.

 

   

Phase 3 . Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product candidate and provide an adequate basis for product labeling.

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of five years of annual examinations followed by 10 years of annual queries, either in person or by questionnaire, of trial subjects.

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical truaks investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other trials, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial 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 trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product candidate has been associated with unexpected serious harm to patients.

 

- 118 -


Table of Contents

Human gene therapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions, there can be no assurance as to the length of the trial period, the number of patients the FDA will require to be enrolled in the trials in order to establish the safety, efficacy, purity and potency of human gene therapy products, or that the data generated in these trials will be acceptable to the FDA to support marketing approval. The NIH and the FDA have a publicly accessible database, the Genetic Modification Clinical Research Information System, which includes information on gene transfer trials and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these trials. Over the last several years the FDA has issued helpful guidance on development of gene therapy products and shown a willingness to work closely with developers, especially with those working in orphan disease areas.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics of the biological product candidate as well as finalize a process for manufacturing the product candidate in commercial quantities in accordance with GMP requirements. To help reduce the risk of the introduction of adventitious agents with the use of biological products, the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.

United States review and approval processes

After the completion of clinical trials of a biological product candidate, FDA approval of a BLA must be obtained before commercial marketing of the biological product candidate. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product candidate, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product candidate is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any biological product candidate for an indication for which orphan designation has been granted. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA 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 for fiscal year 2014, effective October 1, 2013, the user fee for an application requiring clinical data, such as a BLA, is $2,169,100. PDUFA also imposes an annual product fee for biologics ($104,060) and an annual establishment fee ($526,500) on facilities used to manufacture prescription biologics. 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. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the product candidate also includes a non-orphan indication.

Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product candidate is safe and potent, or effective, for its intended use, and has an

 

- 119 -


Table of Contents

acceptable purity profile, and whether the product candidate is being manufactured in accordance with GMP regulations to assure and preserve the product candidate’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological products that 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. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product candidate. A REMS may be imposed to ensure safe use of the drug, and 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. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.

Before approving a BLA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate unless it determines that the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of the product candidate within required specifications. Additionally, before approving a BLA, the FDA may inspect one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure GMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.

Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product candidate receives regulatory 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 candidate. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.

One of the performance goals agreed to by the FDA under the PDUFA is to review 90% of standard BLAs in 10 months and 90% of priority BLAs in six months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product candidate 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

 

- 120 -


Table of Contents

which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this type of disease or condition will be recovered from sales of the product candidate. Orphan product designation must be requested before submitting an NDA or BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product candidate 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 product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphan drug status in the European Union has similar, but not identical, 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 and biological products that meet certain criteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a Fast Track product candidate at any time during the clinical development of the product candidate. Unique to a Fast Track product candidate, the FDA may consider for review sections of the marketing application on a rolling basis before the complete application 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 candidate submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product candidate is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or 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 or biological product candidate designated for priority review in an effort to facilitate the review, and aims to review such applications within six months as opposed to ten months for standard review. Additionally, a product candidate may be eligible for accelerated approval. Drug or biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug or biological product candidate receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

 

- 121 -


Table of Contents

Lastly, under the provisions of the new Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can request designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that 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 clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval and receive the same benefits as drugs with Fast Track designation. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.

Fast Track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.

Post-approval requirements

Maintaining compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to GMP requirements. We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the GMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological products include reporting of GMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product may also be subject to official lot release. In this case, as part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.

We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. 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 or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products 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

 

- 122 -


Table of Contents

compliance with GMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain GMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

United States patent term restoration and marketing exclusivity

Depending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, 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 Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The United States Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for one or more of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.

A biological product can obtain pediatric 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 study in accordance with an FDA-issued “Written Request” for such a study.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize duplicative testing. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structure of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.

A reference biologic is granted twelve years of exclusivity from the time of first licensure of the reference product. On April 10, 2013, President Obama released his proposed budget for fiscal year 2014 and proposed to cut this twelve-year period of exclusivity down to seven years. He also proposed to prohibit additional periods of exclusivity for brand biologics due to minor changes in product formulations, a practice often referred to as “evergreening.” The first biologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologics submitting under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) 18 months

 

- 123 -


Table of Contents

after approval if there is no legal challenge, (iii) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has been submitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.

Pharmaceutical Coverage, Pricing and 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 federal, state, and foreign government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products, drugs and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls, restrictions on coverage and 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 product candidates or a decision by a third-party payor not to cover our product candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition.

Other Healthcare Laws

Although we currently do not have any products on the market, if our product candidates are approved and we begin commercialization, we may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician sunshine laws and regulations. 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, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Facilities

Our corporate headquarters are located in Alachua, Florida. Our current leased facility encompasses approximately 4,935 square feet of office and laboratory space. The lease for the laboratory facility expires on December 31, 2014, subject to our option to renew for up to one additional three-year term. The lease for the office facility expires on December 31, 2014. We are currently reviewing options to re-locate the office space within the same corporate campus as the existing laboratory space or to potentially relocate both spaces into a concurrent building starting in January 2015, and believe that suitable space will be available on commercially reasonable terms.

Employees

As of September 30, 2013, we had 14 full-time employees, 12 of whom have Ph.D., M.D. or other post-graduate degrees. Of these full-time employees, eight are engaged in research and development activities and six are engaged in finance, legal, human resources, facilities and general management.

All of our personnel are co-employees of AGTC and a professional human resource service organization, TriNet HR Corporation, or TriNet. Under our agreement with TriNet, TriNet is a co-employer of our personnel, and is responsible for administering all payroll functions, including tax withholding, and providing health insurance and other benefits for these individuals. We reimburse TriNet for these costs and pay TriNet an administrative fee for its services. We are responsible for, and control, all aspects of the hiring, retention, compensation, management and supervision of our personnel. We consider the terms of our contract with TriNet to be reasonable and customary and believe this arrangement provides substantial benefit to us, in the form of lower costs for employee benefits and reduced administrative burden on us.

 

- 124 -


Table of Contents

We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our relations with our employees to be good.

Legal proceedings

We are not currently a party to any material legal proceedings. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, any such future litigation could have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

 

- 125 -


Table of Contents

MANAGEMENT

Executive Officers, Directors and Key Employees

Our executive officers, directors and key employees, their current positions and their ages as of September 30, 2013 are set forth below:

 

Name

  

Age

    

Position(s)

Susan B. Washer

     52       President, chief executive officer and director

Jeffrey D. Chulay, M.D.

     67       Vice president and chief medical officer

Daniel Menichella

     54       Vice president and chief business officer

John N. Spencer, Jr.

     73      

Interim chief financial officer

David R. Knop, Ph.D.

    
40
  
  

Director, process development

Scott Koenig, M.D., Ph.D.

     61       Chairman of the board of directors

Jill Carroll (1) (2)

     38       Director

Ed Hurwitz (1) (2)

     49       Director

Arnold L. Oronsky, Ph.D. (2)

     74       Director

James Rosen (1)

     44       Director

Sam Wu, M.D., Ph.D. (2)

     47       Director

 

(1) Member of the audit committee.
(2) Member of the compensation committee.

Susan B. Washer has served as our president and chief executive officer since March 2002 and as a member of our board of directors since November 2003. Prior to becoming our president and chief executive officer, Ms. Washer served as our chief operating officer from October 2001 to March 2002. From August 1996 to October 2001, Ms. Washer was president and chief executive officer of Scenic Productions Inc., a specialty construction firm providing sculpting, painting and construction services to the entertainment industry. From June 1994 to August 1996, Ms. Washer served as the Founding Executive Director and then Business Advisor for the North Florida Technology Innovation Center, a public-private organization financing and providing services to entrepreneurial companies licensing technology from Florida universities. From October 1983 to June 1994, Ms. Washer served in various research and pharmaceutical management positions with Abbott Laboratories and Eli Lilly and Company. Ms. Washer received a B.S. in biochemistry from Michigan State University and an M.B.A. from the University of Florida. We believe that Ms. Washer’s education and professional background in science and business management, her years of experience in the pharmaceutical and biotechnology industries, her service as a senior executive of entrepreneurial companies and her extensive knowledge of our company and its business qualify her to serve as a member of our board of directors.

Jeffrey D. Chulay, M.D. has served as our vice president and chief medical officer since July 2007. Dr. Chulay came to the company from AlphaVax, Inc., a privately-held biopharmaceutical company, where he served as senior vice president of medical and regulatory affairs and chief medical officer from 2004 to 2007 and medical director from 2001 to 2004. Prior to AlphaVax, Inc., Dr. Chulay served as principal clinical program head of HIV and opportunistic infections clinical development for GlaxoWellcome Inc. from 1994 to 2001, and in various positions at the United States Army Medical Research Institute of Infectious Diseases, including chief of the virology division from 1992 to 1994, chief of the department of pathogenesis and immunology in 1992, chief of the department of intracellular pathogens from 1991 to 1992 and research investigator in the virology division from 1989 to 1991. Dr. Chulay earned a medical degree from Northwestern University Medical School and a diploma in tropical medicine and hygiene from the London School of Hygiene and Tropical Medicine. Dr. Chulay served his residency at Cleveland Metropolitan General Hospital and was a fellow in Infectious Disease at the Walter Reed Army Institute of Research. He is the author of more than 100 peer-reviewed publications.

 

- 126 -


Table of Contents

Daniel Menichella has served as our vice president and chief business officer since September 2013. From November 2011 to May 2013, he served as the chief business officer for Zyngenia, Inc., a biotherapeutics company. From October 2007 to September 2011, Mr. Menichella served as the senior vice president for corporate business development and strategy for Talecris Biotherapeutics, Inc., a producer of plasma-derived protein therapies. Prior to joining Talecris, Mr. Menichella served in various corporate business development and alliance management roles for the chemical and pharmaceutical company Merck KGaA, as the president and senior vice president of global corporate development for MorphoSys AG, a biotechnology company focused on human antibodies, and as the vice president, business development and national accounts for Novartis Animal Health, US Inc. Mr. Menichella has served on the board of directors of Paloma Pharmaceuticals, Inc. since August 2013. Mr. Menichella received a B.A. from Harvard University and an M.B.A. from the University of North Carolina at Chapel Hill.

John N. Spencer, Jr. has served as our interim chief financial officer since November 2013. Mr. Spencer is a certified public accountant and was a partner of Ernst & Young LLP where he spent more than 38 years prior to his retirement in 2000. Mr. Spencer serves on the boards of directors and is the chairman of the audit committees of MRI Interventions, Inc., a medical device company, and Geovax Labs, Inc., a biotechnology company, where he is also the chairman of the nominating and governance committee. He also served as a director and the chairman of the audit committee of Firstwave Technologies, Inc., a provider of customer relationship management products, from November 2003 until April 2009. Mr. Spencer serves as a consultant to various companies primarily relating to financial accounting and reporting matters. Mr. Spencer received a B.S. from Syracuse University and an M.B.A. from Babson College. He also attended the Harvard Business School Advanced Management Program.

David R. Knop, Ph.D. joined us in March 2002, immediately after completing his doctoral research in chemical engineering at Michigan State University where he also earned his B.S. in chemical engineering. Since that time, Dr. Knop has served in a number of positions with us relating to our HAVE manufacturing method, including as our associate director, process development from February 2006 to June 2009 and our director, process development since June 2009.

Scott Koenig, M.D., Ph.D. has served as the chairman of our board of directors since April 2004. Dr. Koenig is the president, chief executive officer and a director of MacroGenics, Inc., a biopharmaceutical company, a role which he has held since September 2001. Prior to joining MacroGenics, Dr. Koenig served as senior vice president of research at MedImmune, Inc., a biopharmaceuticals company. From 1984 to 1990, he worked in the Laboratory of Immunoregulation at the National Institute of Allergy and Infectious Diseases (NIAID) at the National Institutes of Health (NIH), where he investigated the immune response to retroviruses and studied the pathogenesis of AIDS. Dr. Koenig currently serves as a member of the boards of the Biotechnology Industry Organization (BIO), the Children’s National Medical Center and the Children’s Research Institute of Children’s National Medical Center, for which he also serves as chairman of the board. Dr. Koenig received his A.B. and Ph.D. from Cornell University and his M.D. from the University of Texas Health Science Center in Houston. We believe that Dr. Koenig’s education and professional background in science and medicine, his experience as chief executive officer of MacroGenics and as a scientist and senior executive at other life science companies and research organizations and his service as a director of other biopharmaceutical companies, medical institutions and industry groups qualify him to serve as a member of our board of directors.

Jill Carroll has served as a member of our board of directors since April 2013. Ms. Carroll has served as a senior associate for S.R. One, Limited, the corporate venture capital arm of GlaxoSmithKline, since September 2011. Prior to her tenure at S.R. One, Limited, she was Senior Director, Corporate Development at Dynavax Technologies Corporation, a biopharmaceutical company, from May 2004 to August 2010 and the Vice President of Corporate Development at Limerick Biopharma Inc., a pharmaceuticals company, from August 2010 to September 2011. Ms. Carroll also served as a consultant for the consulting firms Clearview Projects, Inc. from October 2001 to May 2004 and Mercer Management Consulting from March 1999 to July 2001. She received her B.S. in Chemistry from Duke University and her M.S. in Biochemistry, Cellular and Molecular Biology from Johns Hopkins University. We believe that Ms. Carroll’s educational background in science, her work as a

 

- 127 -


Table of Contents

management consultant and as an executive and venture capitalist focused on the biotechnology and pharmaceutical industries and her experience with biotechnology and pharmaceutical partnering deals qualify her to serve as a member of our board of directors.

Ed Hurwitz has served as a member of our board of directors since November 2012. Mr. Hurwitz is a managing director of Precision Bioventures, LLC, a consulting and advisory firm, and a director of the general partner of Alta BioPharma III, L.P., a fund affiliated with Alta Partners, a venture capital firm. He was a director at Alta Partners from 2002 through December 2013 and continues to serve as a consultant to that firm and as a board representative on its portfolio companies. He also serves on the boards of directors of Cara Therapeutics Inc., a biotechnology company and of MacroGenics, Inc. Prior to joining Alta, Mr. Hurwitz served as senior vice president and chief financial officer of Affymetrix, Inc., a manufacturer of DNA microarrays, from 1997 to 2002. From 1994 to 1997, Mr. Hurwitz was a biotechnology research analyst for the investment bank Robertson Stephens & Company, and from 1992 to 1994, was a biotechnology research analyst for the investment bank Smith Barney Shearson. From 1990 to 1992, he practiced commercial law at Cooley LLP. Mr. Hurwitz earned a J.D. and an M.B.A. from the U.C. Berkeley School of Law and Haas School of Business, respectively. He also holds a B.A. in Molecular Biology from Cornell University. We believe that Mr. Hurwitz’s education and professional background in science, business management and law, his work as a lawyer, research analyst and senior executive in the biotechnology industry and his experience as a director of other public and private biotechnology companies qualify him to serve as a member of our board of directors.

Arnold L. Oronsky, Ph.D. has served as a member of our board of directors since November 2003. Dr. Oronsky has been a general partner at InterWest Partners, LLC, a venture capital firm, since 1994. Prior to joining InterWest, Dr. Oronsky was vice president for discovery research at Lederle Laboratories, a division of American Cyanamid Company focused on the production of vaccines. Dr. Oronsky holds a Ph.D. in Immunology from Columbia University and has published over 125 scientific articles. He also serves as a Senior Lecturer in the Department of Medicine at Johns Hopkins Medical School. Dr. Oronsky serves as the chairman of the board of directors of Dynavax Technologies Corporation, a biopharmaceutical company, as well as on the boards of directors of Macrogenics, Inc., and TESARO, Inc., an oncology-focused biopharmaceutical company. Dr. Oronsky also served on the boards of directors of the biopharmaceutical companies, Metabasis Therapeutics, Inc., from 2000 to 2010, and Anesiva, Inc., from 2005 to 2010. Anesiva filed a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of California in January 2010. We believe that Dr. Oronsky’s education and professional experience in science and medicine, his experience building and operating research and development operations and his experience in the venture capital industry, particularly with biotech and pharmaceutical companies, qualify him to serve as a member of our board of directors.

James Rosen has served as a member of our board of directors since March 2010. Mr. Rosen is a partner at Intersouth Partners, a venture capital firm, where he serves on the life sciences investment team. Mr. Rosen began is work with Intersouth in 2005 and held various roles before becoming a partner in 2009. Prior to joining Intersouth, he spent 15 years in clinical, research and financial positions in the health care and biotechnology sectors, including serving as an equity research analyst at Brean Murray & Co., from 2000 to 2003, covering biopharmaceuticals, genomics, generics, drug delivery and medical device companies. Mr. Rosen holds a B.A. from Duke University, an M.B.A. from the University of North Carolina-Chapel Hill’s Kenan-Flagler School of Business and an M.S.P.H. from the University of North Carolina School of Public Health. We believe that Mr. Rosen’s education and professional background in science, business management and finance and his operational experience as a scientist and executive in the healthcare and biotechnology industries and as a venture capitalist concentrating on those industries, qualify him to serve as a member of our board of directors.

Sam Wu, M.D., Ph.D. has served as a member of our board of directors since December 2010. Dr. Wu has been a managing director of MedImmune Ventures, Inc., a venture capital fund within the AstraZeneca Group, since September 2010. Before joining MedImmune, Dr. Wu held various roles, including principal, at SV Life Sciences Advisers, LLC, from 2002 through 2010. Prior to his tenure at SV Life Sciences, Dr. Wu was an engagement manager with McKinsey and Company's Pharmaceuticals and Medical Products practice. Dr. Wu holds an A.B. in Biochemistry from Harvard College, and an M.D. and a Ph.D. in Biochemistry from Stanford University, where he was a Howard Hughes Predoctoral Fellow. We believe that Dr. Wu’s education and

 

- 128 -


Table of Contents

professional background in biochemistry and internal medicine and his experience in management consulting and as a venture capitalist concentrating on the biotechnology and pharmaceutical industries qualify him to serve as a member of our board of directors.

There are no family relationships among any of our directors or executive officers.

Board Composition

Our board of directors currently consists of seven members, all of whom were elected as directors pursuant to a stockholders agreement that we have entered into with the holders of our preferred stock. The stockholders agreement will terminate upon the closing of this offering and there will be no further contractual obligations regarding the election of our directors. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. Ms. Carroll has notified us that she intends to resign from our board of directors following this offering. In addition, Dr. Oronsky has informed us that he intends to resign from our board of directors no later than the first anniversary of the closing of this offering.

Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this offering provide that the authorized number of directors may be changed only by resolution of the board of directors. Our amended and restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this offering also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% 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 our directors then in office.

In accordance with the terms of our certificate of incorporation and bylaws that will become effective upon the closing of this offering, our board of directors will be divided into three classes, class I, class II and class III, with members of each class serving staggered three-year terms. Upon the closing of this offering, the members of the classes will be divided as follows:

 

   

the class I directors will be Dr. Oronsky and Dr. Wu, and their initial term will expire at the annual meeting of stockholders to be held in 2014;

 

   

the class II directors will be Ms. Carroll and Dr. Koenig, and their initial term will expire at the annual meeting of stockholders to be held in 2015; and

 

   

the class III directors will be Ms. Washer, Mr. Hurwitz and Mr. Rosen, and their initial term will expire at the annual meeting of stockholders to be held in 2016.

Upon the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires.

We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through an established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape.

Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that each of our directors, with the exception of Ms. Washer, is an “independent director” as defined under Rule 5605(a)(2) of the NASDAQ Listing Rules.

One of the key functions of our board of directors is informed oversight of our risk management process. The board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through various standing committees of our

 

- 129 -


Table of Contents

board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Our board of directors has established an audit committee and a compensation committee. We have also established a nominating and corporate governance committee, effective upon the closing of this offering. Each of these committees, which are the only standing committees of our board of directors, will operate under a charter that has been approved by our board of directors.

Audit committee. The current members of our audit committee are Ms. Carroll, Mr. Hurwitz and Mr. Rosen. Effective as of the closing of this offering, our audit committee will consist of Mr. Hurwitz, Dr. Oronsky and Mr. Rosen. Each of Mr. Hurwitz, Dr. Oronsky and Mr. Rosen satisfies, or will as of the date of this prospectus satisfy, the NASDAQ Stock Market independence standards and the independence standards of Rule 10A-3(b)(1) of the Securities Exchange Act. Each of the members of our audit committee meets the requirements for financial literacy under applicable rules and regulations of the SEC and the NASDAQ Stock Market. The board of directors has determined that Mr. Hurwitz qualifies as an “audit committee financial expert,” as defined by applicable rules of the NASDAQ Stock Market and the SEC. The audit committee assists our board of directors in its oversight of:

 

   

the integrity of our financial statements;

 

   

our compliance with legal and regulatory requirements;

 

   

the qualifications and independence of our independent registered public accounting firm; and

 

   

the performance of our independent registered public accounting firm.

The audit committee has direct responsibility for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. The audit committee establishes and implements policies and procedures for the pre-approval of all audit services and all permissible non-audit services provided by our independent registered public accounting firm and reviews and approves any related party transactions entered into by us.

Compensation committee. The current members of our compensation committee are Ms. Carroll, Mr. Hurwitz, Dr. Oronsky and Dr. Wu. Effective as of the closing of this offering, our compensation committee will consist of Mr. Hurwitz, Dr. Koenig and Mr. Rosen, each of whom is an independent director. The compensation committee:

 

   

approves the compensation and benefits of our executive officers;

 

   

reviews and makes recommendations to the board of directors regarding benefit plans and programs for employee compensation; and

 

   

administers our equity compensation plans.

Nominating and corporate governance committee. Effective upon the closing of this offering, the members of our nominating and corporate governance committee will be Mr. Hurwitz and Dr. Wu, each of whom is an independent director. The nominating and corporate governance committee will:

 

   

identify individuals qualified to become board members;

 

   

recommend to the board of directors nominations of persons to be elected to the board; and

 

- 130 -


Table of Contents
   

advise the board regarding appropriate corporate governance policies and assists the board in achieving them.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor has any of them ever been an officer or employee of our company.

Code of Business Conduct and Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, executive officers and employees. Following this offering, a copy of the code will be posted on the Corporate Governance section of our website, which is located at www.agtc.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.

Director Compensation

Prior to this offering, we did not have a formal policy regarding compensation of our non-employee directors, other than our chairman. We pay Dr. Koenig, the chairman of our board of directors, an annual cash retainer of $20,000. Dr. Koenig receives a fee of $1,500 for each meeting of our board of directors, or any board committee, that he attends in person. None of our other non-employee directors has historically received any compensation. We reimburse our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of director and committee meetings, attendance at meetings of our scientific advisory board and other business activities undertaken on our behalf. We do not pay any compensation to our President and Chief Executive Officer in connection with her service on our board of directors.

In February 2012, we granted Dr. Koenig an option to purchase 10,000 shares of our common stock at an exercise price of $0.10 per share, and in January 2013, we granted Dr. Koenig an option to purchase 1,120,664 shares of our common stock at an exercise price of $0.01 per share. The options granted to Dr. Koenig in February 2012 were fully vested upon their issuance. The options granted to Dr. Koenig in January 2013 provide for vesting in equal monthly installments over a period of four years. We have not granted stock options to any of our other non-employee directors.

The following table sets forth information regarding compensation awarded to, earned by or paid to Dr. Koenig during fiscal year 2013. See “Executive Compensation” for a discussion of the compensation of Ms. Washer.

 

Name

   Fees earned or
paid in cash (1)
     Option awards ($)(2)      Total ($)  

Scott Koenig, M.D., Ph.D.

   $ 20,000       $ 6,276       $ 26,276   

 

(1) Represents amount paid during fiscal year 2013.
(2) Represents the grant date fair value of option awards granted in fiscal year 2013 in accordance with ASC Subtopic 505-50. The assumptions we use in calculating these amounts are discussed in note 5 to notes to financial statements appearing elsewhere in this prospectus.

The table below shows the aggregate numbers of option awards held as of June 30, 2013 by each non-employee director who was serving as of June 30, 2013.

 

Name

   Options Outstanding at
Fiscal Year End (#)
 

Scott Koenig, M.D., Ph.D.

     1,598,664   

 

- 131 -


Table of Contents

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding compensation earned by our President and Chief Executive Officer and our other two executive officers who served during fiscal year 2013. We refer to these individuals as our named executive officers.

 

Name

  Year     Salary
($)
    Option
awards
($)(1)
    Non-equity
incentive plan
compensation ($)(2)
    Other
($)(3)
    Total ($)  

Susan B. Washer

    2013        285,000        23,655        112,175        9,010        429,840   

President and chief executive officer

           

Jeffrey D. Chulay, M.D.

    2013        326,398        6,960        106,334        10,126        449,818   

Vice president and chief medical officer

           

David R. Knop, Ph.D.

    2013        122,431        2,607        10,896        5,318        141,252   

Director, process development

           

 

(1) Represents the grant date fair value of option awards granted in fiscal year 2013 in accordance with ASC 718. The assumptions we use in calculating these amounts are discussed in note 5 to notes to financial statements appearing elsewhere in this prospectus.
(2) Amounts represent cash bonuses earned in fiscal year 2013, and paid during fiscal year 2014, based on achievement of individual performance goals and other factors deemed relevant by our compensation committee and board of directors.
(3) Consists of 401(k) matching contributions.

Narrative Disclosure to Summary Compensation Table

We review compensation annually for all of our employees, including our executives. In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders, and a long-term commitment to our company. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.

Our board of directors has historically determined our executives’ compensation. Our compensation committee typically has reviewed and discussed management’s proposed compensation with the chief executive officer for all executives other than our chief executive officer. Based on those discussions and its discretion, the compensation committee then has recommended the compensation for each executive officer. Our board of directors, without members of management present, has discussed the compensation committee’s recommendations and ultimately approved the compensation of our executive officers. Effective upon the closing of this offering, our compensation committee will approve the compensation and benefits of our executive officers.

In preparing to become a public company, we have begun a thorough review of all elements of our executive compensation program, including the function and design of our equity incentive programs, and in fiscal year 2014, our compensation committee engaged Aon Consulting’s Radford Surveys + Consulting to assist us with the identification of an appropriate peer group of companies for purposes of benchmarking the competitiveness of our executive compensation. Our compensation committee will evaluate the need for revisions to our executive compensation program to ensure that our program is competitive with the companies with which we compete for executive talent and that it is appropriate for a public company.

 

- 132 -


Table of Contents

Outstanding Equity Awards at Year End

The following table sets forth information regarding outstanding stock options held by our named executive officers as of June 30, 2013.

 

     Option Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
exercisable
    Number of
Securities
Underlying
Unexercised

Options (#)
unexercisable
     Option Exercise
Price ($)
     Option Expiration
Date
     Option
Grant Date
 

Susan B. Washer

     525,000        —         $ 0.10         2/10/2014         2/10/2004   
     186,489        —         $ 0.10         11/8/2016         11/8/2006   
     641,208 (1)      42,747       $ 0.10         9/18/2019         9/18/2009   
     135,712        —         $ 0.10         11/2/2021         11/2/2011   
     440,003 (2)      3,784,030       $ 0.01         1/6/2023         1/6/2013   

Jeffrey D. Chulay, M.D.

     281,000        —         $ 0.10         5/31/2017         5/31/2007   
     79,703        —         $ 0.10         5/31/2017         5/31/2007   
     70,313 (1)      4,687       $ 0.10         9/18/2019         9/18/2009   
     129,468 (2)      1,113,426       $ 0.01         1/6/2023         1/6/2013   

David R. Knop, Ph.D.

     14,000        —         $ 0.10         2/10/2014         2/10/2004   
     10,000        —         $ 0.10         12/10/2014         12/10/2004   
     10,000        —         $ 0.10         6/29/2016         6/29/2006   
     129,375 (1)      8,625       $ 0.10         9/18/2019         9/18/2009   
     2,000        —         $ 0.10         11/2/2021         11/2/2011   
     48,486 (2)      416,979       $ 0.01         1/6/2023         1/6/2013   

 

(1) This option becomes exercisable for 25% of the underlying shares on the first anniversary of the grant date, and thereafter becomes exercisable for the remaining underlying shares in equal monthly installments over three years, resulting in the option being exercisable for 100% of the underlying shares on the fourth anniversary of the grant date.
(2) This option becomes exercisable in equal monthly installments over four years from the date of grant.

Employment Agreements, Severance and Change in Control Arrangements

We do not have formal employment agreements with any of our named executive officers and none of our named executive officers is entitled to any severance payments in connection with the termination of his or her employment. Each of our named executive officers is an employee-at-will of the Company.

Stock Option and Other Compensation Plans

We believe that equity-based awards are important vehicles by which to align the interest of our employees with the financial interests of our stockholders, and we historically have awarded stock options broadly to our employees, including our named executive officers. The material terms and conditions of our stock option and other equity compensation plans are described below.

We have the following equity incentive plans: (i) 2001 Stock Option Plan; (ii) 2011 Stock Incentive Plan; (iii) 2013 Equity and Incentive Plan; and (iv) 2013 Employee Stock Purchase Plan. Following the closing of this offering, our 2013 Equity and Incentive Plan and 2013 Employee Stock Purchase Plan will be the only effective equity compensation plans pursuant to which we will make new awards.

2001 Stock Option Plan

The 2001 Stock Option Plan, as amended, provides for the grant of incentive and nonqualified stock options. Stock options may no longer be granted under the terms of the 2001 Stock Option Plan.

 

- 133 -


Table of Contents

The material features of our 2001 Stock Option Plan are summarized below. The complete text of our 2001 Stock Option Plan and amendments are filed as exhibits to the registration statement of which this prospectus forms a part.

General . The total number of shares of common stock reserved for issuance under the 2001 Stock Option Plan is 5,600,162. Any shares that may be issued under our 2001 Stock Option Plan to any person pursuant to an award are counted against this limit as one share for every one share granted.

Purpose . The purpose of our 2001 Stock Option Plan is to promote the company’s financial success by creating an additional incentive for key employees, directors and consultants or advisors of the company and certain successors or affiliates.

Administration . Our 2001 Stock Option Plan is administered by our board of directors, and such responsibility may be delegated to a duly appointed committee of our board of directors.

Source of shares . The shares of common stock issued or to be issued under our 2001 Stock Option Plan consist of authorized but unissued shares. Shares of common stock underlying any awards issued under the 2001 Stock Option Plan that were terminated, unexercised, or repurchased without having been fully exercised could be granted under the 2001 Stock Option Plan.

Eligibility . Options under the 2001 Stock Option Plan could be granted to employees (including officers) and directors of the company, any successor corporations thereto, and any present or future parent and/or subsidiary corporations of such corporation, or collectively, the Company Group. Options could also be granted to individuals rendering services as consultants, advisors or other independent contractors to the Company Group.

Options . Our 2001 Stock Option Plan permitted the grant of options to purchase shares of common stock intended to qualify as “incentive stock options” under the Internal Revenue Code of 1986, as amended, or the Code, and options that do not qualify as incentive stock options, which are referred to as nonqualified stock options. The 2001 Stock Option Plan permitted the grant of incentive stock options only to our employees.

Pursuant to the 2001 Stock Option Plan, the exercise price of each incentive stock option could not be less than 100% of the fair market value of shares of our common stock on the date of grant. Grants of incentive stock options to any 10% stockholder required that the exercise price be not less than 110% of the fair market value of shares of our common stock on the date of grant. The exercise price of any non-qualified stock option granted under the plan was determined by our board of directors but in no event could be less than the fair market value of shares of our common stock.

The term of options granted under the plan was subject to the discretion of the board of directors, but no incentive stock options granted under the plan are exercisable after the expiration of ten years from the date of grant (five years in the event the optionee owned 10% of the voting power of all classes of stocks as of the date of grant).

The 2001 Stock Option Plan permits for payment of the option price by cash or cash equivalent, check or any other form as permitted by our board of directors in its discretion.

No option granted pursuant to the 2001 Stock Option plan may be assigned, except by will or by the laws of decent and distribution.

Effect of a transfer of control . Upon the occurrence of a “transfer of control” (as defined in the 2001 Stock Option Plan), except as may be otherwise provided in any individual stock option award agreement, any unvested portion of an outstanding option that would otherwise become vested within twelve months following the effective time of a transfer of control shall become immediately vested as of a date prior to the transfer of control, which date shall be determined by our board of directors. Upon the occurrence of a transfer of control, the surviving, continuing, successor or purchasing corporation, or parent corporation thereof, may either assume

 

- 134 -


Table of Contents

the company’s rights and obligations or substitute for outstanding options substantially equivalent options for the acquiring corporation’s stock. Any options not assumed prior to the transfer of control shall be deemed canceled effective as of the closing of a transfer of control.

2011 Stock Incentive Plan

We have adopted our 2011 Stock Incentive Plan, which provides for the issuance of equity-based awards, denominated in shares of our common stock and including incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other share-based awards. No restricted stock awards, restricted stock units, stock appreciation rights or other share-based awards have been granted under the 2011 Stock Incentive Plan. We will not make any new awards under the 2011 Stock Incentive Plan following the closing of this offering.

The material features of our 2011 Stock Incentive Plan are summarized below. The complete text of our 2011 Stock Incentive Plan is filed as an exhibit to the registration statement of which this prospectus forms a part.

General . The total number of shares of common stock reserved for issuance under the 2011 Stock Incentive Plan is 25,283,337. Any shares that may be issued under our 2011 Stock Incentive Plan to any person pursuant to an award are counted against this limit as one share for every one share granted.

Purpose . The purpose of our 2011 Stock Incentive Plan is to advance the interests of our stockholders by enhancing our ability to attract, retain and motivate persons who are expected to make important contributions to the company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of our stockholders.

Administration . Our 2011 Stock Incentive Plan is administered by our board of directors. The board of directors may, to the extent permitted by law, delegate any or all of its powers under the 2011 Stock Incentive Plan to one or more committees or subcommittees of the board of directors. Subject to the terms of our 2011 Stock Incentive Plan, such committee or subcommittee may determine the types of awards and the terms and conditions of such awards, interpret provisions of our 2011 Stock Incentive Plan and select participants to receive awards.

Source of shares . The shares of common stock issued or to be issued under our 2011 Stock Incentive Plan consist of authorized but unissued shares and shares that we have reacquired. Shares of common stock underlying any awards issued under the 2011 Stock Incentive Plan that are terminated, surrendered, or cancelled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of common stock subject to such award being repurchased by us at the original issue price pursuant to a contractual repurchase right) or results in common stock not being issued shall be added back to the shares of common stock with respect to which awards may be granted under the 2011 Stock Incentive Plan.

Eligibility . Awards may be granted under the 2011 Stock Incentive Plan to our employees, officers, directors, and individual consultants and advisors.

Amendment or termination of our stock incentive plan . Our board of directors may terminate, suspend or amend the 2011 Stock Incentive Plan at any time. No amendment or termination may adversely impair the rights of participants with respect to outstanding awards without the affected participant’s consent to such amendment. In addition, an amendment will be contingent on approval of our stockholders to the extent required by law. Unless terminated earlier, our 2011 Stock Incentive Plan will terminate in 2021, but will continue to govern unexpired awards.

 

- 135 -


Table of Contents

Options . Our 2011 stock incentive plan permits the granting of options to purchase shares of common stock intended to qualify as “incentive stock options” under the Code, and options that do not qualify as incentive stock options, which are referred to as nonstatutory stock options. We may grant nonstatutory stock options to our employees, directors, officers, consultants or advisors in the discretion of our board of directors. Incentive stock options will only be granted to our employees and employees of other entities which are eligible to receive incentive stock options under the Code.

The exercise price of each incentive stock option may not be less than 100% of the fair market value of shares of our common stock on the date of grant. If we grant incentive stock options to any person holding 10% or more of the outstanding voting stock of the company, the exercise price may not be less than 110% of the fair market value of shares of our common stock on the date of grant. The exercise price of any non-qualified stock option will be determined by our board of directors and generally may not be less than the fair market value of shares of our common stock on the date of grant.

The term of each option may be established at the discretion of the board of directors. The board of directors may determine at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Options may be made exercisable in installments. The vesting and exercisability of options may be accelerated by the board of directors. The exercise price of an option may be amended to provide an exercise price per share that is lower than the then-current exercise price of such option provided that such amended exercise price is at least equal to the then-current fair market value.

In general, an optionee may pay the exercise price of an option by cash or check payable to the company, delivery of an irrevocable or unconditional undertaking by a broker to deliver funds, by tendering shares of our common stock, by a “cashless exercise” through a broker supported by an irrevocable and unconditional undertaking by such broker to deliver sufficient funds to pay the applicable exercise price, by delivery of shares of common stock having a fair market value equal to the aggregate exercise price of the options being exercised, delivery of a promissory note or such other lawful consideration as approved by the board of directors, or by any combination of these forms of payment.

Except as the board of directors may otherwise expressly determine or provide in an option grant, options granted under our 2011 stock incentive plan may not be sold, assigned, transferred, pledged or otherwise encumbered except by will or the laws of decent and distribution or, other than in the case of an incentive stock option, pursuant to a qualified domestic relations order.

Restricted stock . Awards of restricted stock consist of the right to acquire shares of common stock, subject to vesting restrictions and a right of repurchase in favor the company. Our board of directors determines the terms and conditions of restricted stock awards.

Restricted stock awards may have restrictions that lapse based upon length of service of the recipient or based upon the attainment of performance goals. Unless otherwise specified in the agreement governing the restricted stock award, all shares subject to the restricted stock award shall be entitled to vote and shall receive dividends during the periods of restriction.

Restricted stock units . Restricted stock units entitle the recipient to acquire shares of common stock pursuant to certain terms and conditions. The board of directors may determine the terms and conditions, including vesting, if any, related to award of restricted stock units, including the number of shares of common stock that the recipient shall be entitled to receive or purchase, the price to be paid, if any, and all other limitations and conditions applicable to the restricted stock units.

Stock appreciation rights . Stock appreciation rights entitle the recipient to receive, upon exercise of the stock appreciation right, a number of shares of common stock or, alternatively, a cash payment or combination of shares and cash, having an aggregate fair market value equal to the product of (a) the excess of the fair market

 

- 136 -


Table of Contents

value (as of the exercise date) over the exercise price per share of common stock specified in the stock appreciation right by (b) the number of shares of common stock subject to the stock appreciation rights. Stock appreciation rights may be subject to vesting or other restrictions determined by our board of directors.

Adjustments for share dividends and similar events . We will make appropriate adjustments in outstanding awards and the number of shares available for issuance under our stock incentive plan, including the individual limitations on awards, to reflect any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of common stock other than an ordinary cash dividend.

Effect of a change in control . Upon the occurrence of a “change in control” (as defined in the 2011 Stock Incentive Plan), the board of directors may take one or more of the following actions:

 

   

provide that the participant’s awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) in compliance with the applicable provisions of the Code;

 

   

upon written notice to the participant, provide that the participant’s unexercised options or other unexercised awards will terminate immediately prior to the consummation of such change of control unless exercised within a specified period following the date of such notice;

 

   

provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to any award shall lapse, in whole or in part prior to or upon such change of control;

 

   

provide for a cash payment to be made to each holder of an outstanding stock option equal to the difference between (a) the cash consideration the holder of a share of common stock would receive upon consummation of the change of control and (b) the aggregate exercise price of all outstanding options, in exchange for the termination of such options;

 

   

provide that, in connection with a liquidation or dissolution of the company, awards shall convert into the right to receive liquidation proceeds; and

 

   

any combination of the foregoing.

Upon a change in control, the board of directors is not obligated to treat all awards, or all awards of the same type, identically.

Upon the occurrence of a change in control other than a liquidation or dissolution of the company, the repurchase rights of the company under each outstanding restricted stock award (as defined in the 2011 Stock Incentive Plan) shall inure to the benefit of the company’s successor.

Upon a change in control involving a liquidation or dissolution of the company, except to the extent specifically provided to the contrary in the instrument evidencing a restricted stock award, all restrictions and conditions on such awards then outstanding shall automatically be deemed terminated and satisfied.

2013 Equity and Incentive Plan

Our board of directors has adopted, and our stockholders have approved, our 2013 Equity and Incentive Plan. A total of                      shares of our common stock will initially be reserved for issuance under our 2013 Equity and Incentive Plan, subject to automatic annual increases as set forth in the plan. The 2013 Equity and Incentive Plan provides for the issuance of (i) cash awards and (ii) equity-based awards, denominated in shares of our common stock, including incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, performance share awards and dividend equivalent rights.

 

- 137 -


Table of Contents

Purpose . The purpose of our 2013 Equity and Incentive Plan is to (i) provide long-term incentives and rewards to those employees, officers, directors and other key persons (including consultants) of the company and its subsidiaries who are in a position to contribute to the long-term success and growth of the company and its subsidiaries, (ii) to assist the company and its subsidiaries in attracting and retaining persons with the requisite experience and ability, and (iii) to more closely align the interests of such employees, officers, directors and other key persons with the interests of the company’s stockholders.

Administration . Our 2013 Equity and Incentive Plan will be administered by the compensation committee of our board of directors. The compensation committee is generally granted broad authority to administer the plan, including the power to determine and modify the terms and conditions, not otherwise inconsistent with the terms of the plan, of any award. All decisions and interpretations of the compensation committee shall be binding on all persons subject to the plan including the company and plan grantees.

Sources of shares. The shares of common stock to be issued under the 2013 Equity and Incentive Plan consist of authorized but unissued shares and shares that we have reacquired. Shares of common stock underlying any award issued under the 2013 Equity and Incentive Plan that are forfeited, canceled, satisfied without issuance of stock, otherwise terminated or, for shares of stock issued pursuant to any unvested full value award, reacquired by the company shall be added back to the shares of common stock with respect to which awards may be granted under the plan.

Eligibility . Incentive stock options may only be granted to our employees. All other awards may be granted to our employees, officers, directors and key persons (including consultants and prospective employees).

Amendment or termination of our 2013 Equity and Incentive Plan. Subject to requirements of law or any stock exchange or similar rules which would require a vote of our stockholders, our board of directors may, at any time, amend or discontinue the plan and the compensation 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 holder’s consent.

Options . Our 2013 Equity and Incentive Plan permits the granting of options to purchase common stock that are intended to qualify as “incentive stock options” under the Code, and options that do not qualify as incentive stock options, which are referred to as nonstatutory stock options. We may grant non-qualified stock options to our employees, directors, officers, consultants or advisors in the discretion of our board of directors. Incentive stock options will only be granted to our employees.

The exercise price of each incentive stock option may not be less than 100% of the fair market value of shares of our common stock on the date of grant. If we grant incentive stock options to any person holding 10% or more of the outstanding voting stock of the company, the exercise price may not be less than 110% of the fair value of shares of our common stock on the date of grant. The exercise price of any non-qualified stock option will be determined by our board of directors and may not be less than the fair value of shares of our common stock.

The term of each option may not exceed 10 years from the date of grant, and no option shall be transferable by the optionee other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, the compensation committee, in its sole discretion, may provide in the award agreement regarding a given option, or may agree in writing with respect to an outstanding option, that the optionee may transfer their nonstatutory stock options to members of their immediate family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, 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 option.

In general, an optionee may pay the exercise price of an option by cash or, if so provided in the applicable option agreement, by tendering shares of our common stock, by a “cashless exercise” through a broker supported by an irrevocable instruction to such broker to deliver sufficient funds to pay the applicable exercise price, by

 

- 138 -


Table of Contents

reducing the number of shares otherwise issuable to the optionee upon exercise of the option by a number of shares having a fair market value equal to the aggregate exercise price of the options being exercised or by any other method permitted by the compensation committee.

Stock appreciation rights. Pursuant to the 2013 Equity and Incentive Plan, we may grant stock appreciation rights, or an award entitling the recipient to receive cash or shares of our common stock having a value on the date of exercise calculated as follows: (i) the exercise price of a share of common stock on the grant date is less the fair market value of the common stock on the date of exercise and (ii) multiplied by the number of shares of stock with respect to which the stock appreciation right shall have been exercised.

The exercise price of a stock appreciation right shall not be less than 100% of the fair market value of our common stock on the date of grant, and the terms and conditions of the stock appreciation rights shall be determined from time to time by the compensation committee.

Restricted stock awards . Pursuant to the 2013 Equity and Incentive Plan, we may grant restricted stock awards entitling the recipient to acquire, at such a price as determined by the compensation committee, shares of common stock subject to such restrictions and conditions as the compensation committee may determine at the time of grant. Conditions may be based on continuing employment or achievement of pre-established performance goals and objectives. A holder of a restricted stock award may exercise voting rights upon (i) execution of a written instrument setting forth the award and (ii) payment of any applicable purchase.

Restricted stock units. Pursuant to the 2013 Equity and Incentive Plan, we may grant restricted stock units which entitle the holder, upon vesting of the right, to a number of shares of common stock as determined in the award agreement. The compensation committee shall determine the restrictions and conditions applicable to each restricted stock unit at the time of grant, and a holder of a restricted stock unit shall only have exercisable rights as a stockholder upon settlement of restricted stock units. Unless otherwise provided in the award agreement, a holder’s rights in all restricted stock units that have not vested shall automatically terminate immediately following the holder’s termination of employment with the company for any reason.

Unrestricted stock awards. Pursuant to the 2013 Equity and Incentive Plan, we may grant unrestricted awards of shares of common stock free of any restrictions under the plan. The right to receive shares of unrestricted stock awards on a deferred basis may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution.

Performance share awards . Pursuant to the 2013 Equity and Incentive Plan, we may grant performance share awards entitling the recipient to acquire shares of common stock upon the attainment of specified performance goals; provided, however, that the compensation committee, in its discretion, may provide either at the time of grant or at the time of settlement that a performance share award will be settled in cash. The period during which performance is to be measured for performance share awards shall not be less than one year, and such performance share awards, and all rights with respect to such awards, may not be sold, assigned, transferred, pledged or otherwise encumbered.

Dividend equivalent rights. Pursuant to the 2013 Equity and Incentive Plan, we may grant dividend equivalent rights entitling the recipient to receive credits based on cash dividends that would be paid on the shares of stock specified in the dividend equivalent right (or other award to which it relates). Dividend equivalent rights may be settled in cash or shares of stock or a combination thereof, in a single installment or installments. A dividend equivalent right granted as a component of another award may provide that such dividend equivalent right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such dividend equivalent right shall expire or be forfeited or annulled under the same conditions as such other award.

Cash awards. The compensation committee, in its discretion, may provide for cash payments to be made under the 2013 Equity and Incentive Plan. Such cash awards may be made subject to such terms, conditions and restrictions as the compensation committee considers necessary or advisable.

 

- 139 -


Table of Contents

Effect of a change in control . If we experience a “change in control,” as defined in the 2013 Equity and Incentive Plan, the compensation committee may in its discretion, at the time an award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or payment of the award; (ii) provide for termination of any awards not exercised prior to the occurrence of a change in control; provided that the holder of any such award is given written notice of such prospective action by the administrator at least ten calendar days prior to the effective date of the change in control; (iii) provide for payment to the holder of the award of cash or other property with a fair market value equal to the amount that would have been received upon the exercise or payment of the award had the award been exercised or paid upon the change in control in exchange for cancellation of the award; (iv) adjust the terms of the award in a manner determined by the compensation committee to reflect the change in control; (v) cause the award to be assumed, or new rights substituted therefor, by another entity; or (vi) make such other provision as the compensation committee may consider equitable to the holders of awards and in our best interests.

2013 Employee Stock Purchase Plan

Concurrently with this offering, we are establishing our 2013 Employee Stock Purchase Plan, or the ESPP. Our board of directors has adopted the ESPP, and our stockholders have approved it, effective upon the closing of this offering. Our executive officers and all of our other employees will be allowed to participate in our ESPP. A total of                  shares of our common stock will be reserved for issuance under our ESPP, subject to the eligibility requirements described below. Our compensation committee has full and exclusive authority to interpret the terms of the ESPP and determine eligibility.

Our employees are eligible to participate at the beginning of the first offering period that begins following their commencement of employment with us. However, an employee may not be granted rights to purchase stock under our ESPP if such employee:

 

   

is not customarily employed at least 20 hours per week and more than five months in a calendar year;

 

   

immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock; or

 

   

holds rights to purchase stock under all of our employee stock purchase plans that would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year.

Our ESPP is intended to qualify under Code Section 423, and provides for consecutive 6-month offering periods. The offering periods generally start on the first trading day on or after January 1 and July 1 of each year. Each offering period will begin after one exercise date and will end with the next exercise date approximately six months later. The administrator may, in its discretion, modify the terms of future offering periods.

Our ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their compensation. On the last trading day of each offering period, each participant will be automatically granted an option to purchase shares of our common stock. The option will be immediately exercisable for a number of shares equal to the lowest of (a) a number equal to the quotient of the aggregate payroll deductions that have been withheld for the account of the participant during the offering period divided by the purchase price for the shares (as described below); (b) 1,000 shares; or (c) such other lesser maximum number of shares as the administrator may determine prior to the commencement of the offering period.

The purchase price for the shares will be 85% of the fair market value of our common stock on the first or last trading day of the offering period, whichever is less. Participants may end their participation at any time during an offering period, and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment with us.

A participant may not transfer rights granted under the ESPP other than by will, the laws of descent and distribution or as otherwise provided under the ESPP.

In the event of our merger or change in control, as defined under the ESPP, a successor corporation may assume or substitute each outstanding purchase right. If the successor corporation refuses to assume or substitute for the outstanding purchase rights, the offering period then in progress will be shortened, and a new exercise

 

- 140 -


Table of Contents

date will be set which will occur prior to the proposed merger or change in control. The administrator will notify each participant in writing that the exercise date has been changed and that the participant’s option will be exercised automatically on the new exercise date unless the participant has already withdrawn from the offering period.

Our ESPP will automatically terminate in 2024, unless we terminate it sooner. In addition, our board of directors or our compensation committee has the authority to amend, suspend or terminate our ESPP, except that, subject to certain exceptions described in the ESPP, no such action may adversely affect any outstanding rights to purchase stock under our ESPP.

401(k) Retirement Plan

We maintain a 401(k) retirement plan through our professional employer organization that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Code. In general, all of our employees are eligible to participate, beginning on the first day of the month following commencement of their employment. The 401(k) plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit and have the amount of the reduction contributed to the 401(k) plan. We match participant contributions to the 401(k) plan up to 4% of a participant’s annual compensation, subject to statutory limits.

Limitation of Liability and Indemnification

Our amended and restated certificate of incorporation includes provisions that will limit or eliminate the personal liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breaches of their 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;

 

   

any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or

 

   

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

These limitations do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies, including injunctive relief or rescission. If Delaware law is amended to authorize the further elimination or limiting of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law as so amended.

As permitted by Delaware law, our certificate of incorporation that will be effective as of the closing date of this offering will also provide that:

 

   

we will indemnify our directors and officers to the fullest extent permitted by law;

 

   

we may indemnify our other employees and other agents to the same extent that we indemnify our officers and directors, unless otherwise determined by our board of directors; and

 

   

we will advance expenses to our directors and officers in connection with legal proceedings in connection with a legal proceeding to the fullest extent permitted by law.

The indemnification provisions contained in our certificate of incorporation that will be effective as of the closing date of this offering are not exclusive.

 

- 141 -


Table of Contents

We believe that these provisions are necessary to attract and retain qualified persons as directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we understand that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

In addition, we have entered into indemnification agreements with each of our directors and maintain standard policies of insurance under which coverage is provided to our directors and officers against losses arising from claims made by reason of breach of duty or other wrongful act, and to us with respect to payments which may be made by us to such directors and officers pursuant to the above indemnification provisions or otherwise as a matter of law.

 

- 142 -


Table of Contents

RELATED PERSON TRANSACTIONS

The following is a description of transactions since July 1, 2011 to which we have been a party, and in which any of our directors, executive officers or beneficial owners of more than 5% of our voting securities, or any of their respective affiliates or immediate family members, had or will have a direct or indirect material interest. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, from unrelated third parties.

2012 Bridge Loan and Series B Preferred Stock Financing

In May 2012, we issued and sold convertible promissory notes, which we refer to as our May 2012 notes, in an aggregate principal amount of $0.7 million to five holders of more than 5% of our voting securities. In connection with the issuance of the May 2012 notes, we issued to each purchaser warrants to purchase either (i) shares of the series of preferred stock issued in our next equity financing, at an exercise price equal to the amount per share paid by investors in such next equity financing, or (ii) at any time prior to such next equity financing, shares of our Series A-1 preferred stock, at an exercise price to be determined based on our fully-diluted capitalization at the time of exercise, with the number shares of preferred stock subject to each warrant equal to the quotient of (a) 20% of the principal amount of the note purchased by the applicable purchaser, divided by (b) the applicable exercise price of the warrant.

In connection with the November 2012 closing of our Series B preferred stock financing, these warrants became exercisable for an aggregate of 1,421,918 shares of our Series B-1 preferred stock at an exercise price of $0.1297 per share.

The following table sets forth the aggregate principal amount of promissory notes and the number of shares of Series B-1 preferred stock underlying the warrants that were issued to our directors, executive officers and holders of more than 5% of our voting securities, and their affiliates or immediate family members.

 

Purchaser

   Principal amount of convertible
promissory notes
     Number of shares Series B-1
Preferred Stock Underlying
Warrants (#)
 

Intersouth Partners VI, L.P.

   $ 202,480         312,228   

Entities affiliated with InterWest Partners

   $ 270,010         416,361   

MedImmune Ventures, Inc.

   $ 270,010         416,361   

In November 2012, pursuant to our Series B Purchase Agreement, we issued and sold 66,147,709 shares of our Series B-1 preferred stock for aggregate consideration of $7.8 million in cash plus the conversion of all outstanding principal and accrued interest on the May 2012 notes. In April 2013, as part of the same financing pursuant to the Series B Purchase Agreement, we issued and sold 122,749,634 shares of our Series B-2 preferred stock for aggregate cash consideration of $18.2 million.

Pursuant to the Series B Purchase Agreement, the holders of our Series B preferred stockholders were entitled to purchase an aggregate of 58,816,897 shares of our Series B-3 preferred stock for an aggregate of $10.7 million. The Series B holders exercised this right and we completed the sale of these Series B-3 shares on November 5, 2013.

 

- 143 -


Table of Contents

The following table sets forth the number of shares of Series B-1 preferred stock, Series B-2 preferred stock and Series B-3 preferred stock that were issued to our directors, executive officers and holders of more than 5% of our voting securities, and their affiliates or immediate family members.

 

Purchaser

   Shares of
Series B-1
preferred
stock
     Series B-1
purchase
price
    Shares of
Series B-2
preferred
stock
     Series B-2
purchase
price
     Shares of
Series B-3
preferred
stock
     Series B-3
purchase
price
 

Alta Partners VIII, L.P.

     26,473,934       $ 3,429,000        49,060,606       $ 7,285,500         23,507,953       $ 4,285,500   

S.R. One, Limited

     17,625,289       $ 2,286,000        32,707,070       $ 4,857,000         15,671,969       $ 2,857,000   

Entities affiliated with InterWest Partners

     6,409,436       $ 831,304 (1)      11,893,926       $ 1,766,248         5,699,111       $ 1,038,948   

Intersouth Partners VI, L.P.

     4,806,416       $ 623,392 (2)      8,919,218       $ 1,324,504         4,273,746       $ 779,104   

MedImmune Ventures, Inc.

     6,409,436       $ 831,304 (3)      11,893,926       $ 1,766,248         5,699,111       $ 1,038,948   

 

(1) Includes conversion of an aggregate of $281,591 in principal and accrued on May 2012 notes.
(2) Includes conversion of an aggregate of $211,164 in principal and accrued on May 2012 notes.
(3) Includes conversion of an aggregate of $281,591 in principal and accrued on May 2012 notes.

Agreements with Our Stockholders

In November 2012, in connection with our Series B preferred stock financing, we entered into an amended and restated investor rights agreement with the purchasers of our preferred stock and certain holders of our common stock. Under the amended and restated investor rights agreement, those holders have the right to demand that we file a registration statement, subject to certain limitations, and to request that their shares be covered by a registration statement that we may otherwise file. See “Description of Capital Stock—Registration Rights” for additional information. Under the amended and restated investor rights agreement, holders of our preferred stock also have a participation right to purchase their pro rata share of new securities that we may propose to sell and issue, from time to time. The participation right does not apply to this offering, and will terminate upon this closing of this offering.

In connection with our Series B preferred stock financing, we also entered into an amended and restated right of first refusal and co-sale agreement and an amended and restated voting agreement with certain purchasers of our common stock and preferred stock. The amended and restated right of first refusal and co-sale agreement provides for rights of first refusal and co-sale rights in respect of sales of securities by certain holders of our capital stock. The amended and restated voting agreement contains provisions with respect to the election of our board of directors and its composition. The amended and restated right of first refusal and co-sale agreement and the amended and restated voting agreement will each terminate upon the closing of this offering.

On October 22, 2013, the holders of a majority of the shares of our preferred stock, on behalf of all of the parties to the amended and restated investor rights agreement, agreed to waive their rights under the amended and restated investor rights agreement to require inclusion of our securities held by them in the registration statement for this offering.

Some of our directors are associated with our principal stockholders as indicated in the table below:

 

Director

  

Principal Stockholder

Ed Hurwitz    Alta Partners VIII, L.P.(1)
Jill Carroll    S.R. One, Limited
Arnold L. Oronsky, Ph.D.    Entities affiliated with InterWest Partners
Sam Wu, M.D., Ph.D.    MedImmune Ventures, Inc.
James Rosen    Intersouth Partners VI, L.P.

 

(1) From 2006 through December 2013, Mr. Hurwitz was a director of the general partner of Alta Partners VIII, L.P. Mr. Hurwitz is a director of the general partner of Alta Biopharma III, L.P., a fund affiliated with Alta Partners and continues to serve as a consultant to that firm and as a board representative on its portfolio companies.

 

- 144 -


Table of Contents

Indemnification of Officers and Directors

Our certificate of incorporation that will be effective as of the closing date of this offering provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with each of our directors that are broader in scope than the specific indemnification provisions contained in the Delaware General Corporation Law. See the “Executive Compensation—Limitation of Liability and Indemnification” section of this prospectus for a further discussion of these arrangements.

Policies and Procedures for Related Person Transactions

While we have not historically had a written policy with respect to the review and approval of transactions with our directors, officers and principal stockholders, it has been the practice of our board of directors to review all interested party transactions and not to authorize any such transaction unless the board of directors, excluding any interested directors, determines that the terms of the proposed transaction are as favorable or more favorable to our company than would be available from an unrelated party in an arms’ length negotiation. Pursuant to the amended and restated charter of our audit committee that we expect to become effective upon the closing of this offering, our audit committee will be responsible for reviewing and approving in advance any related person transactions. For the purposes of this policy, a “related person transaction” is any transaction between us or any of our subsidiaries and any (a) of our directors or executive officers, (b) nominee for election as a director, (c) person known to us to own more than five percent of any class of our voting securities, or (d) member of the immediate family of any such person, if the nature of such transaction is such that it would be required to be disclosed under Item 404 of Regulation S-K (or any similar successor provision).

In determining whether to approve a related person transaction, the audit committee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms no less favorable than terms generally available to an unaffiliated third-person under the same or similar circumstances and the extent of the related person’s interest in the transaction.

 

- 145 -


Table of Contents

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to beneficial ownership of our common stock, as of September 30, 2013, by:

 

   

each person or entity, or group of affiliated persons or entities, known by us to beneficially own more than 5% of our common stock;

 

   

each of our directors;

 

   

each of our named executive officers; and

 

   

all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of September 30, 2013 are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. Except as otherwise indicated, the address of each of the persons in this table is c/o Applied Genetic Technologies Corporation, 11801 Research Drive, Suite D, Alachua, Florida 32615.

Each stockholder’s percentage ownership before the offering is determined in accordance with Rule 13d-3 under the Exchange Act and is based on 3,816,836 shares of our common stock outstanding as of September 30, 2013, plus 319,203,488 shares of common stock into which our outstanding preferred stock will convert upon the closing of this offering. Each stockholder’s percentage ownership after the offering assumes the issuance of the                      shares of our common stock offered hereby and assumes no exercise of the underwriters’ over-allotment option. Except as otherwise set forth under the heading “Right to Acquire,” the table below reflects the issuance of an aggregate of 58,816,897 shares of our Series B-3 preferred stock, which occurred on November 5, 2013, but assumes no exercise of stock options and warrants outstanding at September 30, 2013 to purchase an aggregate of 29,830,112 shares of our common stock. Amounts under the heading “Right to Acquire” represent shares that may be acquired upon exercise of outstanding stock options or warrants exercisable within 60 days of September 30, 2013.

 

Name of Beneficial Owner

   Shares
Outstanding
     Right to
Acquire
     Total      Before the
Offering
    After the
Offering
 

Alta Partners VIII, L.P. (1)(2)

     99,006,493         —           99,006,493         30.7  

S.R. One, Limited (2)(3)

     66,004,328         —           66,004,328         20.4  

Entities affiliated with InterWest Partners (2)(4)

     48,176,979         613,384         48,790,363         15.1  

MedImmune Ventures, Inc. (2)(5)

     48,176,223         613,383         48,789,606         15.1  

Intersouth Partners VI, L.P. (2)(6)

     39,993,362         509,250         40,502,612         12.5  

Susan B. Washer (7)

     —           2,615,330         2,615,330         *     

Jeffrey D. Chulay, M.D. (8)

     —           753,864         753,864         *     

David R. Knop, Ph.D. (9)

     —           285,994         285,994         *     

Scott Koenig, M.D., Ph.D. (10)

     —           732,305         732,305         *     

Jill Carroll (3)

     —           —           —           *        —     

Edward Hurwitz (2)

     —           —           —           *        —     

Arnold L. Oronsky, Ph.D.(4)

     —           —           —           *        —     

James Rosen (6)

     —           —           —           *        —     

Samuel Wu, M.D., Ph.D.(5)

     —           —           —           *        —     

All current executive officers and
directors (10 persons)

     —           4,387,493         4,387,493         1.3  

 

- 146 -


Table of Contents
* Less than 1.0%
(1)

Consists of (i) 26,437,934 shares of common stock issuable upon conversion of Series B-1 preferred stock, (ii) 49,060,606 shares of common stock issuable upon conversion of Series B-2 preferred stock and (iii) 23,507,953 shares of common stock issuable upon conversion of Series B-3 preferred stock. The address of Alta Partners VIII, L.P. is One Embarcadero Center, 37 th Floor, San Francisco, California 94111. Alta Partners Management VIII, LLC is the general partner of Alta Partners VIII, L.P. and shares voting and dispositive power over the shares of our common stock held by Alta Partners VIII, L.P. Farah Champsi, Daniel Janney, and Guy Nohra are the managing directors of Alta Partners Management VIII, LLC and share dispositive and voting control over the shares of our common stock held by Alta Partner VIII, L.P. From 2006 through December 2013, Ed Hurwitz, a member of our board of directors, was a director of Alta Partners Management VIII, LLC.

(2) Includes shares of common stock issuable upon conversion of shares of our Series B-3 preferred stock that we expected to be issued on November 5, 2013.
(3) Consists of (i) 17,625,289 shares of common stock issuable upon conversion of Series B-1 preferred stock, (ii) 32,707,070 shares of common stock issuable upon conversion of Series B-2 preferred stock and (iii) 15,671,969 shares of common stock issuable upon conversion of Series B-3 preferred stock. The address of S.R. One, Limited is 161 Washington Street, Suite 500, Conshohocken, Pennsylvania 19428. Jill Carroll, a member of our board of directors, is a senior associate of S.R. One, Limited.
(4) Consists of (i) 24,174,506 shares of common stock issuable upon conversion of Series A-1 preferred stock, (ii) 6,409,436 shares of common stock issuable upon conversion of Series B-1 preferred stock, (iii) 11,893,926 shares of common stock issuable upon conversion of Series B-2 preferred stock, (iv) 5,699,111 shares of common stock issuable upon conversion of Series B-3 preferred stock, (v) 197,023 shares of common stock issuable upon conversion of Series A-1 preferred stock underlying warrants to purchase shares of our Series A-1 preferred stock exercisable within 60 days of the date of this table, and (vi) 416,361 shares of common stock issuable upon conversion of Series B-1 preferred stock underlying warrants to purchase shares of our Series B-1 preferred stock exercisable within 60 days of the date of this table. InterWest Partners VIII, L.P., InterWest Investors VIII, L.P., and InterWest Investors Q VIII, L.P. are collectively referred to as the entities affiliated with InterWest Partners. InterWest Management Partners VIII, LLC is the general partner of the entities affiliated with InterWest Partners and has sole voting and investment control over the shares held by the entities affiliated with InterWest Partners. Harvey B. Cash, Philip T. Gianos, W. Scott Hedrick, W. Stephen Holmes, Gilbert H. Kliman and Arnold L. Oronsky, a member of our board of directors, are the managing directors of InterWest Management Partners VIII, LLC. Each of the managing directors share voting and investment control with respect to the shares held by the entities affiliated with InterWest Partners. The address for these entities is c/o InterWest Partners, 2710 Sand Hill Road, Second Floor, Menlo Park, California 94025.
(5) Consists of (i) 24,173,750 shares of common stock issuable upon conversion of Series A-1A preferred stock, (ii) 6,409,436 shares of common stock issuable upon conversion of Series B-1 preferred stock, (iii) 11,893,926 shares of common stock issuable upon conversion of Series B-2 preferred stock, (iv) 5,699,111 shares of common stock issuable upon conversion of Series B-3 preferred stock, (v) 197,022 shares of common stock issuable upon conversion of Series A-1 preferred stock underlying warrants to purchase shares of our Series A-1 preferred stock exercisable within 60 days of the date of this table, and (vi) 416,361 shares of common stock issuable upon conversion of Series B-1 preferred stock underlying warrants to purchase shares of our Series B-1 Preferred Stock exercisable within 60 days of the date of this table. The address of MedImmune Ventures, Inc. is One MedImmune Way, Gaithersburg, Maryland 20878. Sam Wu, a member of our board of directors, is a managing director of MedImmune Ventures, Inc.
(6)

Consists of (i) 21,993,982 shares of common stock issuable upon conversion of Series A-1 preferred stock, (ii) 4,806,416 shares of common stock issuable upon conversion of Series B-1 preferred stock, (iii) 8,919,218 shares of common stock issuable upon conversion of Series B-2 preferred stock, (iv) 4,273,746 shares of common stock issuable upon conversion of Series B-3 preferred stock, (v) 197,022 shares of common stock issuable upon conversion of Series A-1 preferred stock underlying warrants to purchase shares of our Series A-1 preferred stock exercisable within 60 days of the date of this table, and (vi) 312,228 shares of common stock issuable upon conversion of Series B-1 preferred stock underlying

 

- 147 -


Table of Contents
  warrants to purchase shares of our Series B-1 preferred stock exercisable within 60 days of the date of this table. The address of Intersouth Partners VI, L.P. is 102 City Hall Plaza, Suite 200, Durham, North Carolina 27701. Mitchell Mumma and Dennis Dougherty are the managing members of Intersouth Associates VI, LLC, the sole general partner of Intersouth Partners VI, L.P., and share the power to vote or direct the voting of and to dispose or direct the disposition of the shares of our common stock held by Intersouth Partners VI, L.P. James Rosen, a member of our board of directors, is a Partner at Intersouth Associates VI, LLC.
(7) Excludes 8,039,859 shares subject to outstanding stock options that are not exercisable within 60 days of the date of the table.
(8) Excludes 2,346,136 shares subject to outstanding stock options that are not exercisable within 60 days of the date of the table.
(9) Excludes 714,006 shares subject to outstanding stock options that are not exercisable within 60 days of the date of the table.
(10) Excludes 1,336,359 shares subject to outstanding stock options that are not exercisable within 60 days of the date of the table.

 

- 148 -


Table of Contents

DESCRIPTION OF CAPITAL STOCK

The following section contains a description of our common stock and other securities that we have issued from time to time. Our authorized capital stock immediately prior to this offering consists of 410,000,000 shares of common stock, $0.001 par value per share, and 332,091,376 shares of preferred stock, $0.001 par value per share. As of September 30, 2013, we had 3,816,836 shares of common stock issued and outstanding, 281,660,162 shares of preferred stock issued and outstanding, 27,404,184 shares of common stock potentially issuable pursuant to outstanding stock options, and 2,425,928 shares of common stock potentially issuable pursuant to outstanding stock warrants to purchase preferred stock. The number of outstanding shares set forth above and in the discussion below reflects the issuance on November 5, 2013 of an aggregate of 58,816,897 shares of our Series B-3 preferred stock for an aggregate purchase price of $10.7 million, pursuant to a Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement, dated November 15, 2012, between us and the holders of our Series B and B-1 preferred stock. As of September 30, 2013, there were 28 holders of record of our common stock.

Common Stock

Voting rights . Holders of our common stock are entitled to one vote per share held of record on all matters to be voted upon by our stockholders. The election of directors by our stockholders is determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Other matters subject to a vote by our stockholders are decided by the affirmative vote of our stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter. Our common stock does not have cumulative voting rights.

Dividends . Subject to preferences that may be applicable to the holders of any outstanding shares of our preferred stock, the holders of our common stock are entitled to receive such lawful dividends as may be declared by our board of directors.

Liquidation and dissolution . In the event of our liquidation, dissolution or winding up, and subject to the rights of the holders of any outstanding shares of our preferred stock, the holders of shares of our common stock will be entitled to receive pro rata all of our remaining assets available for distribution to our stockholders.

Other rights and restrictions . Our certificate of incorporation does not permit us to redeem shares of our common stock at our election, provide for a sinking fund with respect to our common stock or provide for the granting of preemptive rights to any stockholder. All outstanding shares are fully paid and nonassessable.

Preferred Stock

Immediately prior to this offering, our certificate of incorporation provided for five series of preferred stock. In connection with this offering, all outstanding shares of preferred stock will be converted into shares of common stock in accordance with the provisions of our certificate of incorporation.

Upon the closing of this offering, our board of directors will be authorized, without stockholder approval, from time to time to issue up to 5,000,000 shares of preferred stock in one or more series, each of the series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as the board of directors may determine. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that we may issue in the future. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for others to acquire, or of discouraging others from attempting to acquire, a majority of our outstanding voting stock. We have no current plans to issue any shares of preferred stock.

 

- 149 -


Table of Contents

Options

As of September 30, 2013, options to purchase 27,404,184 shares of our common stock were outstanding under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan, at a weighted average exercise price of $0.09 per share.

Warrants

As of September 30, 2013, we had outstanding warrants to purchase 2,425,928 shares of our common stock at a weighted average exercise price of $0.26 per share.

Registration Rights

Under the terms of an investor rights agreement between us and certain of our investors, the holders of approximately 263 million shares of common stock and warrants to purchase up to approximately 2.4 million shares of common stock, or their transferees, have the right to require us to register their shares with the SEC so that those shares may be publicly resold, or to include their shares in certain registration statements we file.

Demand registration rights . At any time on or after the date that is 180 days after the effective date of the registration statement for this offering, the holders who in the aggregate hold more than 50% of the shares having registration rights have the right to demand that we file up to two resale registration statements. These registration rights are subject to specified conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances.

Form S-3 registration rights . If we are eligible to file a registration statement on Form S-3, each holder of shares having registration rights has the right to demand that we file up to two resale registration statements per year for such holder on Form S-3 so long as the aggregate offering price, net of any underwriters’ discounts or commissions, of securities to be sold under the registration statement on Form S-3 is at least $3,000,000, subject to specified exceptions, conditions and limitations.

“Piggyback” registration rights . If we register any securities for public sale, stockholders with registration rights will have the right to include their shares in the registration statement. The underwriters of any underwritten offering will have the right to limit the number of shares included in such offering for the account of stockholders with registration rights.

Expenses of registration . We will pay all expenses, other than underwriting discounts and commissions, relating to all demand registrations, Form S-3 registrations and piggyback registrations.

Expiration of registration rights . The registration rights described above will terminate upon the earlier of the fifth anniversary of the closing of this offering and, as to a given holder of registrable securities, when such holder of registrable securities, together with its affiliates, holds less than 1% of the outstanding shares of our common stock and all of such holder’s and such holder’s affiliates’ registrable securities may be sold during a 90 pursuant to Rule 144 promulgated under the Securities Act.

If our stockholders with registration rights cause a large number of securities to be registered and sold in the public market, those sales could cause the market price of our common stock to fall. If we were to initiate a registration and include registrable securities because of the exercise of registration rights, the inclusion of registrable securities could adversely affect our ability to raise capital.

 

- 150 -


Table of Contents

Anti-Takeover Effects of Provisions of Delaware Law and Our Charter and By-laws

Provisions of Delaware law and our certificate of incorporation and by-laws could make it more difficult to acquire us by means of a tender offer, a proxy contest, open market purchases, removal of incumbent directors and otherwise. These provisions, summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because negotiation of these proposals could result in an improvement of their terms.

We must comply with Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an interested stockholder, unless the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to an interested stockholder. An “interested stockholder” includes a person who, together with affiliates and associates, owns, or did own within three years before the determination of interested stockholder status, 15% or more of the corporation’s voting stock. The existence of this provision generally will have an anti-takeover effect for transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Upon the closing of this offering, our certificate of incorporation and by-laws will require that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent in writing. In addition, upon the closing of this offering, special meetings of our stockholders may be called only by the board of directors and some of our officers. Our by-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of candidates for election to our board of directors. Our certificate of incorporation and by-laws also provide that, effective upon the closing of this offering, our board of directors will be divided into three classes, with each class serving staggered three-year terms. These provisions may have the effect of deterring hostile takeovers or delaying changes in our control or management.

Listing on the NASDAQ Global Market

We have applied to have our common stock listed on the NASDAQ Global Market under the symbol “AGTC.”

Authorized but Unissued Shares

The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the NASDAQ Listing Rules. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

 

- 151 -


Table of Contents

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and a liquid public trading market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares issued upon exercise of outstanding options or warrants or in the public market after this offering, or the anticipation of those sales, could adversely affect the public market prices prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. We intend to apply to have our common stock listed on the NASDAQ Global Market under the symbol “AGTC.”

Upon the closing of this offering, and after giving effect to the issuance of the              shares of our common stock offered in this offering and the conversion of our outstanding shares of preferred stock into 319,203,488 shares of common stock upon the closing of this offering, we will have outstanding an aggregate of              shares of common stock, assuming no exercise of outstanding options or warrants after September 30, 2013. Of these shares, the              shares sold by us (assuming that the underwriters do not exercise their over-allotment option), in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.

The remaining              shares of common stock will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act and will further be subject to either restrictions on transfer under the lock-up agreements described below or restrictions on transfer for a period of 180 days from the effectiveness of the registration statement of which this prospectus forms a part under stock option agreements entered into between us and the holders of those shares. Following the expiration of these restrictions, these shares will become eligible for public sale if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.

In addition, of the 27,404,184 shares of common stock that were issuable pursuant to stock options outstanding under our 2001 Stock Option Plan and our 2011 Stock Incentive Plan as of September 30, 2013, options to purchase 5,970,145 shares of common stock had vested and were exercisable as of September 30, 2013. Upon exercise, these shares will be eligible for sale, subject to the lock-up agreements and securities laws described below. All of the 2,425,928 shares of common stock that were issuable pursuant to warrants outstanding as of September 30, 2013, were exercisable as of September 30, 2013 and upon issuance these shares will be eligible for sale, subject to the lock-up agreements and securities laws described below.

Rule 144

Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus forms a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in “broker’s transactions” or certain “riskless principal transactions” or to market makers, a number of shares within any three-month period that does not exceed the greater of:

 

   

1% of the number of shares of our common stock then outstanding, which will equal approximately              shares immediately after this offering; or

 

   

the average weekly trading volume in 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 such sale.

Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds

 

- 152 -


Table of Contents

5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and the NASDAQ Stock Market concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.

Non-Affiliate Resales of Restricted Securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus forms a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.

Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.

Rule 701

In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchased shares from us in connection with a compensatory stock or option plan or other written agreement entered into before the effective date of our initial public offering is entitled to sell such shares without further restriction under the Securities Act.

Lock-up Agreements

Our executive officers and directors and the holders of substantially all of our outstanding stock have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock for a period through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives of the underwriters.

The representatives of the underwriters currently do not anticipate shortening or waiving any of the lock-up agreements and do not have any pre-established conditions for such modifications or waivers. The representatives of the underwriters may, however, with the approval of our board of directors, release for sale in the public market all or any portion of the shares subject to the lock-up agreements.

Registration Rights

Subject to the lock-up agreements described above, upon the closing of this offering, the holders of approximately 263 million shares of common stock and warrants to purchase up to approximately 2.4 million shares of common stock will have the right to require us to register these shares under the Securities Act under specified circumstances. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. See “Description of Capital Stock—Registration Rights” for additional information regarding these registration rights.

Stock Options and Warrants

As of September 30, 2013, we had outstanding options to purchase 27,404,184 shares of common stock, of which options to purchase 5,970,145 shares of common stock were vested and exercisable. Following this offering, we intend to file registration statements on Form S-8 under the Securities Act to register all of the shares of common stock subject to outstanding options and options and other awards issuable pursuant to the 2013 Equity and Incentive Plan and the 2013 Employee Stock Purchase Plan.

 

- 153 -


Table of Contents

As of September 30, 2013, we also had outstanding and exercisable warrants to purchase 2,425,928 shares of common stock (calculated on an as-converted basis). Any shares purchased by our non-affiliates pursuant to the cashless exercise features of our warrants will be freely tradable under Rule 144(b)(1), subject in certain cases to the 180-day lock-up period described above. Any shares purchased through the exercise of these warrants for cash will be eligible for sale subject to the lock-up agreements and securities laws described above.

 

- 154 -


Table of Contents

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a general discussion of the material U.S. federal income tax considerations applicable to non-U.S. holders (as defined below) with respect to their purchase, ownership and disposition of shares of our common stock. This discussion is for general information only and is not tax advice. 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.

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, all of which are subject to change or to differing interpretation, possibly with retroactive effect. Any change could alter the tax consequences to non-U.S. holders described in this prospectus. We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset (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 U.S. federal estate or gift taxes, and state, local or non-U.S. taxes. 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 organizations;

 

   

financial institutions;

 

   

brokers or dealers in securities or currencies;

 

   

regulated investment companies;

 

   

pension plans;

 

   

controlled foreign corporations;

 

   

passive foreign investment companies;

 

   

persons subject to the alternative minimum tax;

 

   

owners that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment; and

 

   

certain U.S. expatriates.

In addition, this discussion does not address the tax treatment of partnerships or other pass-through entities, or persons who hold our common stock through partnerships or other pass-through entities, for U.S. federal income tax purposes. 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.

We have not sought and will not seek any ruling from the Internal Revenue Service, which we refer to as the IRS, with respect to the statements made and the conclusions reached in the following discussion. There can be no assurance that the IRS will not challenge one or more of the tax consequences described herein, or that any such challenge would not be sustained by a court.

NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL TAX LAWS TO THEIR PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

 

- 155 -


Table of Contents

Non-U.S. Holder Defined

For purposes of this discussion, a non-U.S. holder means a beneficial owner of our common stock that, for U.S. federal income tax purposes, is an individual, corporation, estate or trust that is not a U.S. person. For purposes of this discussion, a U.S. person is:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or any other organization taxable as a corporation for U.S. federal income tax purposes, created or organized in the United States or under the laws of the United States, any political subdivision thereof, any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

   

a trust if (1) a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (2) the trust has a valid election in effect to be treated as a U.S. person.

Distributions on Our Common Stock

As described in the section entitled “Dividend Policy,” we have not made distributions on our common stock and do not plan to make any distributions for the foreseeable future. However, if we do make distributions of cash or property on our common stock, those payments generally 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, Exchange or Other Disposition of Our Common Stock.”

Subject to the discussion below on backup withholding and FATCA, 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. A non-U.S. holder of our common stock who claims the benefit of an applicable income tax treaty generally will be required to provide a properly executed IRS Form W-8BEN (or other appropriate version of IRS Form W-8 or successor form) and satisfy applicable certification and other requirements. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

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 by providing a properly executed IRS Form W-8ECI (or successor form). 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. In addition, 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.

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.

 

- 156 -


Table of Contents

Gain on Sale, Exchange or Other Disposition of Our Common Stock

Subject to the discussion below on backup withholding and 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, exchange or other 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 at the graduated U.S. federal income tax rates applicable to U.S. persons and, if the non-U.S. holder is a foreign corporation, it also may be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on such effectively connected gain.

 

   

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) 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; or

 

   

we are, or have been, at any time during the five-year period preceding such disposition (or the non-U.S. holder’s holding period, if shorter) a “U.S. real property holding corporation.” 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. Even if we are or were to become a U.S. real property holding corporation, gains realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax if 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, 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. No assurance can be provided that our common stock will continue to 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 payments of dividends on our common stock to such holder and the tax withheld, if any, with respect to such dividends, along with certain other information. Non-U.S. holders may have to comply with specific certification procedures to establish that the holder is not a U.S. person in order to avoid backup withholding with respect to dividends on our common stock. Dividends paid to non-U.S. holders subject to the U.S. withholding tax, as described above in “Distributions on Our Common Stock,” generally will be exempt from U.S. backup withholding.

Information reporting and backup withholding generally will 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 other agreement.

 

- 157 -


Table of Contents

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 timely filed with the IRS.

FATCA Withholding and Information Reporting

The Foreign Account Tax Compliance Act of 2010, commonly referred to as FATCA, generally will impose a U.S. federal withholding tax at a rate of 30% on dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to certain foreign entities (including foreign financial institutions and foreign intermediaries), unless such foreign entity satisfies various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with the entity). The withholding tax rules generally will be applicable to dividends on our common stock that are paid after June 30, 2014, and to gross proceeds from a sale or other disposition of our common stock that occurs after December 31, 2016. Although U.S. Treasury Regulations implementing FATCA were recently finalized, these rules remain unclear in many respects and are subject to material changes. Prospective investors should consult their tax advisors regarding the possible implications of FATCA on their investment in our common stock.

 

- 158 -


Table of Contents

UNDERWRITING

Barclays Capital Inc. and BMO Capital Markets Corp. are acting as representatives of the underwriters and book-running managers of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of shares of common stock shown opposite its name below:

 

Underwriters

   Number of
Shares

Barclays Capital Inc.

  

BMO Capital Markets Corp.

  

Wedbush Securities Inc.

  

Cantor Fitzgerald & Co.

  

Roth Capital Partners, LLC

  
  

 

Total

  
  

 

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:

 

   

the representations and warranties made by us to the underwriters are true;

 

   

there is no material change in our business or the financial markets; and

 

   

we deliver customary closing documents to the underwriters.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the shares.

 

     No Exercise      Full Exercise  

Per Share

   $                    $                

Total

   $         $     

The representatives have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover page of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $         per share. After the offering, the representatives may change the offering price and other selling terms.

The expenses of the offering that are payable by us are estimated to be approximately $         (excluding underwriting discounts and commissions). We have also agreed to reimburse the underwriters for certain of their expenses, in an amount of up to $        , as set forth in the underwriting agreement.

Option to Purchase Additional Shares

We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of             shares from us at the public offering price less underwriting discounts and commissions. This option may be exercised to the extent the underwriters sell more than             shares in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting Section.

 

- 159 -


Table of Contents

Lock-Up Agreements

We, all of our directors and executive officers, and holders of substantially all of our outstanding stock have agreed that, for a period of 180 days, or the lock-up period, after the date of this prospectus subject to certain limited exceptions described below, we and they will not directly or indirectly, without the prior written consent of Barclays Capital Inc. and BMO Capital Markets Corp., (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing.

These lock-up restrictions will not apply to: (1) transactions relating to shares of common stock or other securities acquired in the open market after the date of this prospectus; (2) bona fide gifts, sales or other dispositions made exclusively by the holder to the holder’s family, partners, members, stockholders or affiliates (as applicable), and transfers or other dispositions by will, other testamentary documents or intestate succession, provided , that such transferee agrees to be bound by the terms of the lock-up agreement, the parties agree to not make any filing or public announcement regarding such transfer or disposition prior to the expiration of the lock-up period and the holder notifies Barclays Capital Inc. and BMO Capital Markets Corp. at least two business days prior to the proposed transfer or disposition; (3) the exercise of warrants or stock options granted pursuant to the Company’s stock option/incentive plans or otherwise, or the conversion of securities, in each case outstanding on the date of this prospectus, provided that the restrictions shall apply to the shares of common stock issued upon such exercise or conversion; (4) the establishment of any trading plan established pursuant to Rule 10b5-1 under the Exchange Act, provided that no sales or securities convertible into common stock shall be made pursuant to such plan prior to the expiration of the lock-up period, and the Company does not, and is not required to, report the establishment of such plan in any public report or filing with the SEC under the Exchange Act prior to the expiration of the lock-up period; (5) any forfeiture, sale or other transfer to the company in connection with the termination of the holder’s employment with or services to the company; and (6) the transfer of shares to the company to satisfy withholding taxes for any equity award granted prior to the date of this prospectus.

Barclays Capital Inc. and BMO Capital Markets Corp., 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. When determining whether or not to release common stock and other securities from lock-up agreements, Barclays Capital Inc. and BMO Capital Markets Corp. will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time. At least three business days before the effectiveness of any release or waiver of any of the restrictions described above with respect to an officer or director of the Company, Barclays Capital Inc. and BMO Capital Markets Corp. will notify us of the impending release or waiver and we have agreed to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price was negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives considered:

 

   

the history and prospects for the industry in which we compete;

 

- 160 -


Table of Contents
   

our financial information;

 

   

the ability of our management and our business potential and earning prospects;

 

   

the prevailing securities markets at the time of this offering; and

 

   

the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stabilization, Short Positions and Penalty Bids

The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:

 

   

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

   

A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

 

   

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

 

   

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ Global Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

 

- 161 -


Table of Contents

Listing on The NASDAQ Global Market

We have applied to have our common stock approved for listing on the NASDAQ Global Market under the symbol “AGTC.”

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriters or their affiliates have a lending relationship with us, certain of those underwriters or their affiliates routinely hedge, and certain other of those underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the shares of common stock offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the shares of common stock offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the shares of common stock or possession or distribution of this prospectus or any other offering or publicity material relating to the shares of common stock in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly, offer or sell any shares of common stock or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of shares of common stock by it will be made on the same terms.

 

- 162 -


Table of Contents

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each, a Relevant Member State, an offer to the public of any common stock which are the subject of the offering contemplated herein may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

   

to legal entities which are qualified investors as defined under the Prospectus Directive;

 

   

by the underwriters to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 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 of the underwriters for any such offer; or

 

   

in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of common stock shall result in a requirement for us or any underwriter 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 receives any communication in respect of, or who acquires any common stock under, the offers contemplated here in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter and us that:

 

   

it is a qualified investor as defined under the Prospectus Directive; and

 

   

in the case of any common stock acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the common stock acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in the circumstances in which the prior consent of the representatives of the underwriters has been given to the offer or resale or (ii) where common stock have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of such common stock to it is not treated under the Prospectus Directive as having been made to such persons.

For the purposes of this representation and the provision above, the expression an “offer of common stock to the public” in relation to any common stock 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 any common stock to be offered so as to enable an investor to decide to purchase or subscribe for the common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000, or the FSMA) as received in connection with the issue or sale of the common stock in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to the common stock in, from or otherwise involving the United Kingdom.

 

- 163 -


Table of Contents

Switzerland

This document, as well as any other material relating to the shares which are the subject of the offering contemplated by this prospectus, do not constitute an issue prospectus pursuant to Article 652a and/or 1156 of the Swiss Code of Obligations. The shares will not be listed on the SIX Swiss Exchange and, therefore, the documents relating to the shares, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange. The shares are being offered in Switzerland by way of a private placement, i.e., to a small number of selected investors only, without any public offer and only to investors who do not purchase the shares with the intention to distribute them to the public. The investors will be individually approached by the issuer from time to time. This document, as well as any other material relating to the shares, is personal and confidential and does not constitute an offer to any other person. This document may only be used by those investors to whom it has been handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available to other persons without express consent of the issuer. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in (or from) Switzerland.

Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case 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 in Hong Kong (except if permitted to do so under the 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” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

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 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 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, 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 by a relevant person which is: (i) a corporation (which is not an accredited investor) 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 (ii) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

 

- 164 -


Table of Contents

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, 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 a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

 

- 165 -


Table of Contents

LEGAL MATTERS

The validity of the common stock being offered will be passed upon for us by Foley Hoag LLP, Boston, Massachusetts. The underwriters are represented by Latham & Watkins LLP, Houston, Texas, in connection with certain legal matters related to this offering.

EXPERTS

The balance sheets as of June 30, 2012 and 2013, and the related statements of operations, statements of convertible preferred stock and stockholders’ (deficit) equity and statements of cash flows for the years then ended, appearing in this prospectus have been audited by McGladrey LLP, an independent registered public accounting firm, as stated in their report appearing elsewhere herein, and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares of common stock to be sold in this offering. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits, schedules and amendments to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement and to the exhibits and schedules to the registration statement filed as part of the registration statement. Statements contained in this prospectus about the contents of any contract or any other document filed as an exhibit are not necessarily complete, and, and in each instance, we refer you to the copy of the contract or other documents filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of the registration statement by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s public reference room. In addition, the SEC maintains an Internet website, which is located at www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC’s Internet website.

Upon the closing of this offering, we will become subject to the full informational and periodic reporting requirements of the Exchange Act. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing financial statements certified by an independent registered public accounting firm. We also maintain a website at www.agtc.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Our website is not a part of this prospectus.

 

- 166 -


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

INDEX TO FINANCIAL STATEMENTS

 

     Page(s)  

Report of Independent Registered Public Accounting Firm

     F-2   

Financial Statements

  

Balance Sheets at June 30, 2012 and 2013

     F-3   

Statements of Operations for the fiscal years ended June 30, 2012 and 2013

     F-4   

Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity for the fiscal years ended June 30, 2012 and 2013

     F-5   

Statements of Cash Flows for the fiscal years ended June 30, 2012 and 2013

     F-6   

Notes to Financial Statements

     F-7   

Interim Unaudited Financial Statements

  

Unaudited Balance Sheets at June 30, 2013 and September 30, 2013

     F-30   

Unaudited Statements of Operations for the three months ended September 30, 2012 and 2013

     F-31   

Unaudited Statements of Cash Flows for the three months ended September 30, 2012 and 2013

     F-32   

Notes to Unaudited Financial Statements

     F-33   

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Applied Genetics Technologies Corporation:

We have audited the accompanying balance sheets of Applied Genetics Technologies Corporation (the Company) as of June 30, 2012 and 2013, and the related statements of operations, convertible preferred stock and stockholders’ (deficit) equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Applied Genetics Technologies Corporation as of June 30, 2012 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ McGladrey LLP

Raleigh, North Carolina

November 4, 2013

 

F-2


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

BALANCE SHEETS

JUNE 30, 2012 AND 2013

(in thousands, except per share data)

 

     June 30,  
     2012     2013     Pro forma
2013
(Note 2)
 
                 (unaudited )  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 774      $ 8,893      $ 19,615   

Restricted cash

     50        —          —     

Short-term investments

     —          14,000        14,000   

Grants receivable

     184        143        143   

Other current assets

     87        475        475   
  

 

 

   

 

 

   

 

 

 

Total current assets

     1,095        23,511        34,233   

Property and equipment, net

     53        341        341   

Intangible assets, net

     1,672        1,630        1,630   

Other assets

     4        8        8   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 2,824      $ 25,490      $ 36,212   
  

 

 

   

 

 

   

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY

      

Current liabilities:

      

Accounts payable

   $ 118      $ 792      $ 792   

Accrued expenses

     369        359        359   

Deferred revenue

     —          212        212   

Current portion of debt and capital lease

     1,007        1        1   

Series B purchase rights

     —          2,096        —     
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,494        3,460        1,364   

Long-term liabilities:

      

Debt and capital lease, net of current portion

     16        —          —     

Warrant liabilities

     80        110        —     
  

 

 

   

 

 

   

 

 

 

Total liabilities

     1,590        3,570        1,364   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies (Note 8)

      

Series A-1 convertible preferred stock, par value $0.001 per share, 29,737 shares authorized, 22,466 shares issued and outstanding at June 30, 2012 and 2013, and no shares issued and outstanding pro forma (unaudited) (aggregate liquidation preference of $21,698)

     21,526        21,526        —     

Series A-1A convertible preferred stock, par value $0.001 per share, 11,572 shares authorized, 11,479 shares issued and outstanding at June 30, 2012 and 2013, and no shares issued and outstanding pro forma (unaudited) (aggregate liquidation preference of $11,086)

     10,998        10,998        —     

Series B-1 convertible preferred stock, par value $0.001 per share, 67,570 shares authorized, no shares and 66,147 shares issued and outstanding at June 30, 2012 and 2013, respectively, and no shares issued and outstanding pro forma (unaudited) (aggregate liquidation preference of $8,579)

     —          6,539        —     

Series B-2 convertible preferred stock, par value $0.001 per share, 140,542 shares authorized, no shares and 122,750 shares issued: outstanding at June 30, 2012 and 2013, respectively, and no shares issued and outstanding pro forma (unaudited) (aggregate liquidation preference of $18,228)

     —          19,040        —     

Series B-3 convertible preferred stock, par value $0.001 per share, 82,670 shares authorized, no shares issued and outstanding at June 30, 2012 and 2013 and pro forma (unaudited)

     —          —          —     

Stockholders’ (deficit) equity:

      

Common stock, par value $0.001 per share, 45,102 shares and 410,000 shares authorized at June 30, 2012 and 2013, respectively, 3,817 shares issued and outstanding at June 30, 2012 and 2013, and 323,017 shares issued and outstanding pro forma (unaudited)

     4        4        323   

Additional paid-in capital

     12,142        12,239        82,951   

Accumulated deficit

     (43,436     (48,426     (48,426
  

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (31,290     (36,183     34,848   
  

 

 

   

 

 

   

 

 

 

Total liabilities, convertible preferred stock and stockholders’ (deficit) equity

   $ 2,824      $ 25,490      $ 36,212   
  

 

 

   

 

 

   

 

 

 

The accompanying notes to financial statements

are an integral part of these statements.

 

F-3


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

STATEMENTS OF OPERATIONS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(in thousands, except per share data)

 

    Fiscal Years Ended
June 30,
 
    2012     2013  

Revenue:

   

Grant revenue

  $ 718      $ 439   

Sponsored research revenue

    364        503   
 

 

 

   

 

 

 

Total revenue

    1,082        942   
 

 

 

   

 

 

 

Operating expenses:

   

Research and development

    2,354        3,133   

General and administrative

    787        1,403   
 

 

 

   

 

 

 

Total operating expenses

    3,141        4,536   
 

 

 

   

 

 

 

Loss from operations

    (2,059     (3,594
 

 

 

   

 

 

 

Other income (expense):

   

Interest income

    —          10   

Interest expense

    (69     (191

Fair value adjustments to warrant liabilities

    204        (8

Fair value adjustments to Series B purchase rights

    —          (1,207
 

 

 

   

 

 

 

Total other income (expense), net

    135        (1,396
 

 

 

   

 

 

 

Net loss

  $ (1,924   $ (4,990
 

 

 

   

 

 

 

Net loss per share, basic and diluted

  $ (0.50   $ (1.31
 

 

 

   

 

 

 

Weighted-average shares outstanding, basic and diluted

    3,817        3,817   
 

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted (unaudited) (Note 2)

    $ (0.03
   

 

 

 

Weighted-average pro forma shares outstanding, basic and diluted (unaudited) (Note 2)

      145,105   
   

 

 

 

The accompanying notes to financial statements

are an integral part of these statements.

 

F-4


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(in thousands)

 

    Convertible Preferred Stock           Common Stock     Additional
Paid-In
Capital
    Accumulated
Deficit
    Total
Stockholders’
Deficit
 
    Series A-1     Series A-1A     Series B-1     Series B-2     Series B-3                
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount           Shares     Amount        

Balance, June 30, 2011

    22,466      $ 21,526        11,479      $ 10,998        —        $ —          —        $ —          —        $ —              3,817      $ 4      $ 12,118      $ (41,512   $ (29,390

Share-based compensation

    —          —          —          —          —          —          —          —          —          —              —          —          24        —          24   

Net loss

    —          —          —          —          —          —          —          —          —          —              —          —          —          (1,924     (1,924
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2012

    22,466      $ 21,526        11,479      $ 10,998        —        $ —          —        $ —          —        $ —              3,817      $ 4      $ 12,142      $ (43,436   $ (31,290

Beneficial conversion of notes payable to preferred stock

    —          —          —          —          —          —          —          —          —          —              —          —          72        —          72   

Conversion of notes payable

    —          —          —          —          5,970        741        —          —          —          —              —          —          —          —          —     

Issuance of preferred stock and Series B purchase rights, net of issuance costs

    —          —          —          —          60,177        5,798        122,750        19,040        —          —              —          —          —          —          —     

Share-based compensation

    —          —          —          —          —          —          —          —          —          —              —          —          25        —          25   

Net loss

    —          —          —          —          —          —          —          —          —          —              —          —          —          (4,990     (4,990
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2013

    22,466      $ 21,526        11,479      $ 10,998        66,147      $ 6,539        122,750      $ 19,040        —        $ —              3,817      $ 4      $ 12,239      $ (48,426   $ (36,183

Issuance of Series B-3 convertible preferred stock (unaudited)

    —          —          —          —          —          —          —          —          58,817        10,722            —          —          —          —          —     

Conversion of convertible preferred stock to common stock (unaudited)

    (22,466     (21,526     (11,479     (10,998 )       (66,147 )       (6,539     (122,750     (19,040     (58,817     (10,722         319,200        319        68,506        —          68,825   

Reclassification of Series B purchase rights (unaudited)

    —          —          —          —          —          —          —          —          —          —              —          —          2,096        —          2,096   

Reclassification of warrants to purchase stock to additional paid-in capital (unaudited)

    —          —          —          —          —          —          —          —          —          —              —          —          110        —          110   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro Forma, June 30, 2013 (unaudited)

    —        $ —          —        $ —          —        $ —          —        $ —          —        $ —              323,017      $ 323      $ 82,951      $ (48,426   $ 34,848   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes to financial statements

are an integral part of this statement.

 

F-5


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(in thousands)

 

     Fiscal Year Ended
June 30,
 
     2012     2013  

Cash flows from operating activities

    

Net loss

   $ (1,924   $ (4,990

Adjustments to reconcile net loss to net cash used in operating activities:

    

Share-based compensation

     24        25   

Depreciation and amortization

     262        285   

Non-cash interest expense

     23        163   

Fair value adjustments to warrant liabilities

     (204     8   

Fair value adjustments to Series B purchase rights

     —          1,207   

Change in operating assets and liabilities

     —          —     

Decrease in grant receivable

     294        41   

Increase in other current assets

     (22     (392

(Decrease) increase in accounts payable

     (24     674   

Increase in deferred revenues

     —          212   

Increase (decrease) in accrued expenses

     199        (10
  

 

 

   

 

 

 

Net cash used in operating activities

     (1,372     (2,777
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchase of property and equipment

     (8     (352

Purchase of and costs related to intangible assets

     (100     (179

Release of restricted cash

     —          50   

Purchase of short-term investments

     —          (14,000
  

 

 

   

 

 

 

Net cash used in investing activities

     (108     (14,481
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from issuance of preferred stock and Series B purchase rights, net of issuance costs of $306

     —          25,727   

Proceeds from issuance of convertible notes with detachable warrants

     750        —     

Proceeds from issuance of bank term note and warrants

     —          507   

Payment of bank term notes and capital lease

     (323     (857
  

 

 

   

 

 

 

Net cash provided by financing activities

     427        25,377   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (1,053     8,119   

Cash and cash equivalents, beginning of year

     1,827        774   
  

 

 

   

 

 

 

Cash and cash equivalents, end of year

   $ 774      $ 8,893   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for interest

   $ 38      $ 39   
  

 

 

   

 

 

 

Supplemental disclosure of non-cash financing activities

    

Capital lease of property and equipment

   $ 7      $ —     

Conversion of Series B purchase rights to Series B-2 convertible preferred stock

   $ —        $ 834   

Conversion of notes payable and accrued interest to Series B-1 convertible preferred stock

   $ —        $ 741   

The accompanying notes to financial statements

are an integral part of these statements.

 

F-6


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(1) Organization and Operations:

Applied Genetic Technologies Corporation (the “Company” or “AGTC”) was incorporated as a Florida corporation on January 19, 1999 and reincorporated as a Delaware corporation on October 24, 2003. The Company is a clinical-stage biotechnology company developing gene therapy products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology.

The Company has devoted substantially all of its efforts to research and development, including clinical trials. The Company has not completed the development of any products. The Company has generated revenue from collaboration agreements, sponsored research payments and grants, but has not generated product revenue to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, the difficulties inherent in the development of commercially viable products, the need to obtain additional capital necessary to fund the development of its products, and competition from other companies. As of June 30, 2013, the Company had an accumulated deficit of $48,426. The Company has financed its operations to date primarily through private placements of its convertible preferred stock, collaborations, bank debt, convertible debt financings, grant funding and payments for sponsored research. The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to transition to large-scale production of products. The Company expects to continue to incur losses for the foreseeable future. At June 30, 2013, the Company had capital resources consisting of cash, cash equivalents and short-term investments of $22,893 and believes that these resources will be sufficient to allow the Company to fund its current operating plan for at least the next 12 months.

 

(2) Summary of Significant Accounting Policies:

 

  (a) Basis of Presentation – The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

 

  (b) Segment Reporting – The Company operates in only one segment. The chief operating decision-maker and management use cash flows as the primary measure to manage the business and do not segment the business for internal reporting or decision making.

 

  (c) Unaudited pro forma information – The unaudited pro forma balance sheet as of June 30, 2013, gives effect to: the issuance of 58,817 shares of the Company’s Series B-3 preferred, which the Company expects to occur on November 5, 2013 (note 14), for cash proceeds of $10,722; the conversion of all the convertible preferred stock, including the Series B-3, into shares of common stock upon the consummation of this proposed offering; the reclassification of the Series B purchase rights liability to additional paid-in capital; and the conversion of all outstanding warrants exercisable for shares of Series A-1, Series A-1A and Series B-1 preferred stock into warrants exercisable for shares of common stock, resulting in the preferred stock warrant liability being reclassified to additional paid-in capital. Unaudited pro forma net loss per share is computed using the weighted-average number of common stock equivalents outstanding after giving effect to the conversion of all the convertible preferred stock into shares of common stock as if such conversion had occurred at the beginning of the period presented, or the date of original issuance, if later.

 

F-7


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

  (d) Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

  (e) Cash and cash equivalents – The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and money market accounts. Cash equivalents are carried at cost, which approximates fair value due to their short-term nature.

 

  (f) Restricted cash – The Company considers any cash legally set aside for a restricted purpose to be restricted cash. The restricted cash is recorded as current unless a related liability is classified as long-term. The balance sheet at June 30, 2012 includes $50 in cash equivalents restricted to secure the Company’s credit card with a credit limit of the same amount. The collateral money market account paid interest on a monthly basis. The Company maintained the credit card on an unsecured basis as of June 30, 2013. The balance sheets at both June 30, 2012 and 2013 include $7 in accounts payable for credit card debt. The credit card balance is paid in full on a monthly basis.

 

  (g) Short-term investments – The Company considers all investments with a maturity of 91 to 360 days at the time of purchase to be short-term investments. Short-term investments include certificates of deposit with maturity within 91 to 360 days of date of purchase. Short-term investments are carried at cost, which approximates fair value due to their short-term nature.

 

  (h) Fair value of financial instruments – The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. 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. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and observable.

To the extent that 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.

 

F-8


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

Items measured at fair value on a recurring basis include short-term investments, Series B purchase rights and warrant liabilities (Note 6).

 

  (i) Property and equipment – Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are generally three to seven years. The Company incurs maintenance costs on some of its major lab equipment. The maintenance contracts are prepaid and expensed over the life of the agreement, usually twelve months or less.

 

  (j) Intangible assets – Intangible assets consist primarily of licenses and patents. The Company obtains licenses from third parties and capitalizes the costs related to exclusive licenses that have alternative future use in multiple potential programs. The Company also capitalizes costs related to filing, issuance, and prosecution of patents. The Company reviews its capitalized costs periodically to determine that costs recorded include costs for patent applications that have future value. The Company evaluates costs related to patents that it is not actively pursuing and writes off any of these costs. Amortization expense is computed using the straight-line method over the estimated useful lives of the assets, which are generally eight to twenty years. The Company amortizes in-licensed patents and patent application from the date of the applicable license and internally developed patents and patent applications from the date of the initial application. Licenses and patents converted to research use only are expensed immediately.

 

  (k) Impairment of long-lived assets – The Company reviews its long-lived assets for impairment when impairment indicators are present. If impairment indicators exist, management determines whether impairment in value has occurred by comparing the estimated undiscounted cash flows from future operations with the carrying values of the assets. Management considers several indicators in assessing impairment, including trends and prospects, as well as the effects of obsolescence, demand, competition and other economic factors. For the fiscal years ended June 30, 2012 and 2013, the Company did not identify any indicators of impairment for its long-lived assets. The Company has not yet generated positive cash flows, and such cash flows may not materialize for a significant period in the future. As a result, future evaluations of long-lived assets may result in a conclusion that such assets have been impaired.

 

  (l) Warrants to purchase convertible preferred stock – In conjunction with various financing transactions, the Company issued warrants to purchase shares of the Company’s Series A-1, Series A-1A and Series B-1 preferred stock. The Company’s Series A-1, Series A-1A and Series B-1 preferred stock are subject to redemption under circumstances outside of the Company’s control. Therefore, the associated shares are presented as temporary equity. Consequently, the warrants to purchase shares of Series A-1, Series A-1A and Series B-1 preferred stock are accounted for as liabilities and adjusted to fair value at the end of each reporting period. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option pricing model. The estimates in Black-Scholes option pricing model are based, in part, on subjective assumptions, including stock price volatility, term of the warrants, risk free interest rate, dividend yield, and fair value of the preferred stock underlying the warrants. Such assumptions could differ materially in the future. The gain or loss associated with the change in the fair value of the preferred stock warrant liability from the prior period is recognized as a component of other (expense) income, net.

 

  (m)

Revenue recognition – The Company has primarily generated revenue through collaboration agreements, sponsored research arrangements with nonprofit organizations for the development and

 

F-9


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

  commercialization of product candidates and revenues from federal research and development grant programs. The Company recognizes revenue when amounts are realized or realizable and earned. Revenue is considered realizable and earned when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable; and (4) collection of the amounts due are reasonably assured.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current liabilities. The Company recognizes revenue for reimbursements of research and development costs under collaboration agreements as the services are performed. The Company records these reimbursements as revenue and not as a reduction of research and development expenses, as the Company has the risks and rewards as the principal in the research and development activities.

The Company evaluates the terms of sponsored research agreement grants and federal grants to assess the Company’s obligations and if the Company’s obligations are satisfied by the passage of time, revenue is recognized on a straight-line basis. In situations where the performance of the Company’s obligations has been satisfied when the grant is received, revenue is recognized upon receipt of the grant. Certain grants contain refund provisions. The Company reviews those refund provisions to determine the likelihood of repayment. If the likelihood of repayment of the grant is determined to be remote, the grant is recognized as revenue. If the probability of repayment is determined to be more than remote, the Company records the grant as a deferred revenue liability, until such time that the grant requirements have been satisfied.

 

  (n) Income taxes – The Company uses the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

As required by GAAP, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company files income tax returns in the U.S. federal jurisdiction and the state of Florida. As of June 30, 2012 and 2013, the Company does not have any significant uncertain tax positions.

 

  (o)

Research and development – Research and development costs include costs incurred in identifying, developing and testing product candidates. Costs consist primarily of payroll expenses for research related employees, laboratory costs, animal and lab maintenance and supplies, rent, utilities, clinical and pre-clinical expenses, as well as payments for sponsored research, scientific and regulatory consulting fees and testing. Costs are charged to expense as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. When outside contracts for research products or testing require advance payments, they are recorded on the balance sheet as a prepaid item and expensed when the service is provided or reaches a specific milestone outlined in the

 

F-10


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

  contract. Advance payments related to research and development were $63 and $444, at June 30, 2012 and 2013, respectively, and are included in other current assets on the balance sheets.

 

  (p) Inventory – The Company expenses costs for clinical materials stored for master and working viral banks that remain at the sites in anticipation of their future use at those sites. Since the Company can use each of the raw materials in only a single product, each raw material is deemed to have no future economic value independent of the development status of that single drug.

 

  (q) Share-based compensation – The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is recognized on a straight-line basis over the period during which the employee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on third-party valuations, historical data, peer company data and judgment regarding future trends and factors. The Company accounts for stock options issued to non-employees in accordance with the provisions of ASC Subtopic 505-50, Equity-Based Payments to Non-employees , which requires valuing the stock options using the Black-Scholes option pricing model and measuring such stock options to their current fair value when they vest.

 

  (r) Net loss per share and unaudited pro forma net loss per share – Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, preferred stock, stock options, and warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share was the same for all periods presented. The calculations for the unaudited pro forma basic and diluted net loss per share assume the conversion of all outstanding shares of preferred stock into shares of common stock as if the conversions had occurred at the beginning of the period or the date of issuance, if later.

 

(3) Property and Equipment, Net:

Property and equipment consists of the following:

 

     June 30,  
     2012     2013  

Lab equipment

   $ 714      $ 945   

Office equipment

     88        79   

Leasehold improvements

     8        8   

Software

     19        32   
  

 

 

   

 

 

 

Property and equipment, gross

     829        1,064   

Less: Accumulated depreciation and amortization

     (776     (723
  

 

 

   

 

 

 

Property and equipment, net

   $ 53      $ 341   
  

 

 

   

 

 

 

 

F-11


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(3) Property and Equipment, Net: (Continued)

 

Depreciation and amortization expense was $54 and $64 for the fiscal years ended June 30, 2012 and 2013, respectively. Depreciation and amortization expense of $10 and $14 was included in general and administrative expenses for the years ended June 30, 2012 and 2013, respectively. Depreciation and amortization expense of $44 and $50 was included in research and development expenses for the fiscal years ended June 30, 2012 and 2013, respectively. The Company disposed of fully depreciated assets with a gross value of $117 in the fiscal year ended June 30, 2013.

 

(4) Intangible Assets, Net:

Intangible assets subject to amortization consist of the following:

 

     June 30,  
     2012     2013  

Licenses

   $ 991      $ 1,080   

Patents

     1,700        1,789   

Other

     —          2   
  

 

 

   

 

 

 

Intangible assets, gross

     2,691        2,871   

Less: Accumulated amortization

     (1,019     (1,241
  

 

 

   

 

 

 

Intangible assets, net

   $ 1,672      $ 1,630   
  

 

 

   

 

 

 

Amortization expense related to intangible assets for the years ended June 30, 2012 and 2013 was $208 and $221, respectively. All amortization expense related to intangible assets is included in research and development expenses on the statements of operations.

Estimated amortization expense for the next five years and thereafter is as follows:

 

Fiscal Year Ending June 30,

   Amount  

2014

   $  228   

2015

     222   

2016

     210   

2017

     207   

2018

     198   

Thereafter

     565   
  

 

 

 
   $ 1,630   
  

 

 

 

 

(5) Stock Option Plans:

The Company’s 2001 Stock Option Plan was adopted effective July 30, 2001. The plan allows for the issuance of options to purchase shares of common stock as incentive and/or nonqualified stock options to certain employees and non-employees. On September 18, 2009, the board resolved to amend the plan to increase the allowed total of options available for issue from 4,222 to 5,600.

 

F-12


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(5) Stock Option Plans: (Continued)

 

In August 2011, the Company approved a Stock Incentive Plan with an effective date of July 30, 2011. The plan allows for the issuance of options to purchase shares of common stock as incentive and/or nonqualified stock options to certain employees and non-employees. On April 6, 2013, the board resolved to amend the plan to increase the total of options available for issue to 29,625.

 

  (a) Incentive stock options – Incentive stock options are granted to employees at the discretion of the board of directors of the Company. The exercise price of the options must at least be equal to 100% of the stock’s fair market value on the date of the award.

 

  (b) Nonqualified stock options – Nonqualified stock options can be granted to employees or non-employees at the discretion of the board of directors of the Company.

Incentive stock options

Options issued to employees are exercisable at a price ranging from $0.01 to $0.10 per share. Based upon third-party valuations, historical data, peer company data and judgment regarding future trends and factors, management has determined the per share price equals or exceeds fair market value. There is currently no active market for the Company’s stock. The employee options generally vest ratably over four years, with 25% vesting one full year after the grant date and 1/48 th of each month thereafter, until vested in full. The options expire ten years from the date of the award.

A summary of the employee option activity is as follows:

 

     Fiscal Year Ended June 30,  
     2012      2013  
     Shares     Weighted
Average
Exercise
Price
     Shares      Weighted
Average
Exercise
Price
 

Outstanding , beginning of year

     2,412      $ 0.11         2,412       $ 0.10   

Granted

     138        0.10         6,758         0.01   

Exercised

     —          —           —           —     

Terminated

     (138     0.358         —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding , end of year

     2,412      $ 0.10         9,170       $ 0.03   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable , end of year

     2,014           2,990      
  

 

 

      

 

 

    

Weighted average fair value of options granted during the year

   $ 0.05         $ 0.01      
  

 

 

      

 

 

    

 

F-13


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(5) Stock Option Plans: (Continued)

 

The following table summarizes information about incentive stock options outstanding:

 

 

   June 30,  
     2012      2013  

Exercise Price

   Number      Weighted
Average
Contractual
Life Remaining
     Number      Weighted
Average
Contractual
Life Remaining
 
$0.01      —           —           6,758         9.53   
$0.10      2,412         5.49         2,412         4.49  
  

 

 

       

 

 

    
     2,412            9,170      
  

 

 

       

 

 

    

The following table summarizes information about incentive stock options exercisable:

 

 

   June 30,  
     2012      2013  

Exercise Price

   Number      Weighted
Average
Contractual
Life Remaining
     Number      Weighted
Average
Contractual
Life Remaining
 
$0.01      —           —           693         9.53   
$0.10      2,014         5.10         2,297         4.38   
  

 

 

       

 

 

    
     2,014            2,990      
  

 

 

       

 

 

    

As of June 30, 2013, options to purchase 2,297 and 693 shares were exercisable at $0.10 and $0.01 per share, respectively, and options to purchase 16,334 shares remain available to be granted. As of June 30, 2012 and 2013, there was $16 and $30, respectively, of total unrecognized compensation cost related to non-vested incentive stock options.

Share-based compensation cost related to employee incentive stock options included in expense amounted to $18 and $19 for the years ended June 30, 2012 and 2013, respectively. The expense was allocated as follows:

 

     Fiscal Year Ended
June 30,
 
     2012      2013  

Research and development

   $ 9       $ 11   

General and administrative

     9         8   
  

 

 

    

 

 

 
   $ 18       $ 19   
  

 

 

    

 

 

 

 

F-14


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(5) Stock Option Plans: (Continued)

 

 

The fair value of each option granted is estimated on the grant date using the Black-Scholes stock option pricing model. The following assumptions were made in estimating fair value:

 

    

Fiscal Year Ended

June 30,

 

Assumption

  

2012

   2013  

Dividend yield

   0.00%      0.00%   

Expected term

   6.25 years      6.25 years   

Risk-free interest rate

   1.39%      1.37% to 1.40%   

Expected volatility

   65.02%      63.23%   

The dividend yield is based upon the assumption that the Company will not declare a dividend over the life of the options. Since adopting ASC 718, the Company has been unable to use historical employee exercise and option expiration data to estimate the expected term assumption for the Black-Scholes grant-date valuation. The Company therefore has utilized the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment , to estimate on a formula basis the expected term of our stock options considered to have “plain vanilla” characteristics. The risk-free interest rate is based on the U.S. Treasury yield curve on the date of the grant. The Company computes volatility under the “calculated value method” of ASC 718 by utilizing the average of a peer group comprised of publicly-traded companies and expect to continue to do so until the Company has adequate historical data regarding the volatility of the Company’s traded stock price. The peer group was determined based upon companies considered to be direct competition or having been presented by independent parties as a “comparable” company based upon market sector. In determining a comparable, the Company has excluded “large-cap” entities. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation expense recognized in the statement of operations for the years ended June 30, 2012 and 2013 does not record tax related effects on stock-based compensation given the Company’s historical and anticipated operating losses and offsetting changes in its valuation allowance that fully reserves against potential deferred tax assets.

The fair value of the shares of common stock that underlie the stock options the Company has granted has historically been determined by the Company’s board of directors based upon information available to it at the time of grant. The Company’s board of directors considered numerous objective and subjective factors in the assessment of fair value, including reviews of the Company’s business and financial condition, the conditions of the industry in which the Company operates and the markets that the Company serves and general economic, market and United States and global capital market conditions, the lack of marketability of its common stock, the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, the preferences and privileges of the preferred stock over the rights of the common stock, the status of the clinical trials and preclinical studies relating to its product candidates and third-party valuations of its common stock. The Company’s board has generally considered the most persuasive evidence of fair value to be the prices at which the Company’s securities were sold in actual arms’ length transactions.

 

F-15


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(5) Stock Option Plans: (Continued)

 

Nonqualified stock options issued to non-employees

Options to non-employees are exercisable at fixed prices ranging from $0.01 to $0.10 per share. Management has determined the exercise price equals or exceeds fair market value. There is currently no active market for the Company’s stock. The non-employee options vest variably over three to four years and expire ten years from the date of the award. A summary of non-employee option activity follows:

 

     Fiscal Year Ended June 30,  
     2012      2013  
     Shares     Weighted
Average
Exercise
Price
     Shares      Weighted
Average
Exercise
Price
 

Outstanding, beginning of year

     2,239      $ 0.10         2,239       $ 0.10   

Granted

     31        0.10         1,884         0.01   

Terminated

     (31     0.219         —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding, end of year

     2,239      $ 0.10         4,123       $ 0.06   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable, end of year

     2,057           2,351      
  

 

 

      

 

 

    

Weighted average fair value of options granted during the year

   $ 0.05         $ 0.01      
  

 

 

      

 

 

    

In accounting for stock options to non-employees, the value of goods and services related to the options granted are recognized as the awards vest, which is generally consistent with receipt of services. Therefore, vested portions vary based upon services and terms of each option. The Company revalues non-vested, non-employee options each reporting period using the estimated fair value of the Company’s common stock as of the last day of each reporting period. Share-based consulting cost amounted to $6 for the years ended June 30, 2012 and 2013 and was allocated to general and administrative expense.

 

F-16


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(6) Fair Value of Financial Instruments and Investments:

The following fair value hierarchy table presents information about each major category of our financial assets and liabilities measured at fair value on a recurring basis:

 

Description

   Total      Quoted prices
in active markets
(Level 1)
     Significant other
observable inputs
(Level 2)
     Significant
unobservable  inputs

(Level 3)
 

Assets:

           

June 30, 2013

           

Short-term investments

   $ 14,000       $ —         $ 14,000       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

June 30, 2012

           

Warrant liabilities

   $ 80       $ —         $ —         $ 80   
  

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2013

           

Series B purchase rights

   $ 2,096       $ —         $ —         $ 2,096   

Warrant liabilities

     110         —           —           110   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,206       $ —         $ —         $ 2,206   
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments – Short-term investments consist of certificates of deposit placed through an account registry service, with maturities up to one year, for which the fair market value is measured based on level 2 inputs (quoted prices for identical assets in markets that are not active).

Warrant liabilities – In connection with various financing transactions that were consummated in periods prior to June 30, 2013, the Company issued warrants for the purchase of up to 384, 94, and 1,422 shares of the Company’s Series A-1, Series A-1A and Series B-1 convertible preferred stock, respectively, to certain investors and lenders. Each warrant was immediately exercisable and generally expires approximately 5 or 10 years from the original date of issuance. The warrants to purchase shares of the Company’s convertible preferred stock have an exercise price equal to the estimated fair value of the underlying instrument as of the initial date such shares were issued. Each warrant is exercisable on either a physical settlement or net share settlement basis.

There were no exercises, cancellations, or expirations of warrants during the fiscal years ended June 30, 2012 and 2013. All warrants were fully vested and exercisable as of June 30, 2012 and 2013.

The terms and accounting treatment for the warrants outstanding are summarized below:

 

     June 30,
     2012    2013

Warrants to purchase:

   Shares      Exercise
Price
     Expiration    Shares      Exercise
Price
     Expiration

Series A-1 Convertible Preferred Stock

     384       $ 0.9658       October 3, 2013 -
July 5, 2017
     384       $ 0.9658       October 3, 2013 -
July 5, 2017

Series A-1A Convertible Preferred Stock

     94       $ 0.9658       October 3, 2013 -

July 5, 2017

     94       $ 0.9658       October 3, 2013 -

July 5, 2017

Series B-1 Convertible Preferred Stock

     1,145       $ 0.1297       May 2, 2017      1,422       $ 0.1297       May 2, 2017 -
August 31, 2019
  

 

 

          

 

 

       
     1,623               1,900         
  

 

 

          

 

 

       

 

F-17


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(6) Fair Value of Financial Instruments and Investments: (Continued)

 

All warrants have been classified in the accompanying balance sheets as liabilities.

The fair value of the warrants on the date of issuance, and on each financial reporting date for those warrants classified as liabilities, is estimated using the Black-Scholes option pricing model. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants include:

 

     Fiscal Year Ended June 30,  

Assumption

   2012      2013  

Exercise price

   $ 0.1297 to $0.9658       $ 0.1297 to $0.9658   

Fair value of preferred shares

     $0.1297         $0.1485   

Expected life (in years)

     1.26 to 7.17         0.26 to 7.00   

Risk-free interest rate

     0.27% to 1.39%         0.07% to 1.69%   

Expected volatility

     65.02%         63.23%   

Series B purchase rights

In November 2012, the Company entered into a Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”), which authorized the sale of up to 290,782 shares of convertible preferred stock in three separate tranches of Series B-1, Series B-2 and Series B-3 preferred stock, respectively. Simultaneously with the execution of the Series B Purchase Agreement, the Company issued and sold an aggregate of 66,147 shares of Series B-1 preferred stock at a price per share of $0.1297. The Series B Purchase Agreement provided that the holders of the Series B-1 shares (“Series B holders”) were also entitled to purchase up to an aggregate of 140,542 shares of Series B-2 preferred stock for an aggregate purchase price equal to $18,228 (the “second tranche”) and up to an aggregate of 82,670 shares of Series B-3 preferred stock for an aggregate purchase price equal to $10,722 (the “third tranche”). The price per share and number of shares to be issued in exchange for such amount was to be determined separately for each tranche by reference to which, if any, of three milestones specified in the Series B Purchase Agreement had been satisfied by the Company.

The purchase rights were legally separable and exercisable apart from the Series B-1 shares and, because representatives of the Series B holders hold a majority of the seats on the board of directors, the decision to complete the second and third tranche was deemed to be outside the control of the Company. The Company therefore recorded, at the time of entry into the Series B Purchase Agreement, a Series B purchase right liability of $1,723 for the fair value of the Company’s obligation to sell the Series B-2 and Series B-3 preferred stock in the second and third tranches. The Series B purchase right liability was valued separately for each series using the Black-Scholes option-pricing method to assign a value to the purchase right relating to that series under each of the possible applicable valuation scenarios, depending on which milestones were met, with each scenario being assigned an estimated probability as of the valuation date. The aggregate of these probability-weighted valuations was assigned as the value of the purchase right for each tranche. The initial fair value of the Series B purchase rights was estimated to be $612 for the second tranche and $1,111 for the third tranche. The total value allocated to the Series B purchase rights reduced the amount allocated to the carrying value of the Series B-1 preferred stock on the Company’s balance sheet.

 

F-18


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(6) Fair Value of Financial Instruments and Investments: (Continued)

 

The significant assumptions used as inputs in the Black-Scholes valuation were as follows:

 

Assumption

   Fiscal Year Ended June 30, 2013  

Exercise price

   $ 0.1297 to $0.1823   

Years to maturity

     0.37 to 1.87   

Risk-free interest rate

     0.04% to 0.25%   

Volatility

     40.0% to 60.0%   

The most significant and judgmental inputs driving the fair value of the Company’s Series B purchase rights are the assumptions regarding the fair value of the underlying preferred shares and the volatility factor. With all other inputs constant, an increase or decrease in the assumed fair value of the preferred shares would result in a higher or lower estimate of the fair value of the Series B purchase rights, respectively, although there would not be a direct correlation. Similarly, an increase or decrease in the assumed volatility factor would result in a higher or lower estimate of the fair value of the Series B purchase rights, respectively.

In April 2013, following the satisfaction by the Company of the first milestone, the Series B holders exercised their rights with respect to the second tranche and purchased an aggregate of 122,750 shares of Series B-2 preferred stock at a price per share of $0.1485, for gross cash proceeds of $18,228. During fiscal year 2013, a change in value of the Series B purchase right liability of $1,207 was recorded to other expense, and the $834 balance of the value allocated to the Series B-2 purchase right immediately prior to the closing of the second tranche was recorded as proceeds of the issuance of the Series B-2 preferred stock.

The Company reports the change in fair value during each period as a non-operating gain or loss recorded as a component of other (expenses) income in the statement of operations. The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for warrant liabilities and Series B purchase rights for the fiscal years ended June 30, 2012 and 2013:

 

     Warrant
liabilities
    Series B
purchase
rights
 

Beginning balance as of July 1, 2011

   $ 205      $ —     

Fair value of warrants issued

     79        —     

Change in fair value of during period

     (204     —     
  

 

 

   

 

 

 

Ending balance as of June 30, 2012

     80        —     

Fair value of warrants issued

     22        —     

Fair value of Series B purchase rights issued

     —          1,723   

Change in fair value of during period

     8        1,207   

Series B purchase rights converted to Series B-2 convertible preferred stock

     —          (834
  

 

 

   

 

 

 

Ending balance as of June 30, 2013

   $ 110      $ 2,096   
  

 

 

   

 

 

 

 

F-19


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(7) Debt and Capital Lease:

Debt and capital lease are summarized as follows:

 

     June 30,  
     2012     2013  

Term loans, net of original issue discount

   $ 336      $     —     

Convertible notes payable, net of original issue discount

     683        —     

Capital lease

     4        1   
  

 

 

   

 

 

 
     1,023        1   

Less current portion

     (1,007     (1
  

 

 

   

 

 

 

Debt and capital lease, net of current portion

   $ 16      $ —     
  

 

 

   

 

 

 

Term loans – In July 2010, the Company entered into a loan and security agreement with Square 1 Bank. Under the terms of this agreement, the Company borrowed $800 in July 2010 in exchange for the issuance of a promissory note. The note carried a fixed interest rate of 7%. Interest-only payments were paid monthly through January 2011, followed by 30 equal installments of principal and interest. In consideration of this agreement, the Company issued warrants to purchase 52 shares of Series A-1 preferred stock with an exercise price of $0.9658 per share. The warrants are exercisable upon issuance and will automatically convert upon expiration, seven years after issuance, if not already exercised. The estimated fair value of the warrants at issuance was $32 which was recorded as a discount to the note payable. This discount was amortized over the original life of the loan using the effective interest rate method. Upon early repayment concurrent with the Series B-2 financing, the loss on extinguishment was not material and was classified as interest expense. The loan was collateralized by all assets of the Company except intellectual property.

In August 2012, the Company entered into an amended loan and security agreement with Square 1 Bank to provide additional financing in the form of a second term loan. Under the terms of this amended agreement, in September 2012, the Company borrowed $507 in exchange for the issuance of a promissory note. The note carried an interest rate of 9% through December 2012 and 7% thereafter. Interest-only payments were paid monthly through December 2012, followed by 24 equal installments of principal and interest. In consideration of this amended agreement, the Company issued warrants to purchase 277 shares of Series B-1 preferred stock with an exercise price of $0.1297 per share. The warrants are exercisable upon issuance and will automatically convert upon expiration, seven years after issuance, if not already exercised. The estimated fair value of the warrants at issuance was $22 which was recorded as a discount to the note payable. This discount was amortized over the original life of the loan using the effective interest rate method. Upon early repayment concurrent with the Series B-2 financing, the loss on extinguishment was not material and was classified as interest expense. The loan was collateralized by all assets of the Company except intellectual property.

Interest expense for both notes for the years ended June 30, 2012 and 2013, including non-cash amortization of the discount, was $46 and $70, respectively. The amended loan and security agreement was terminated in April 2013 upon payment of the note balances.

Capital lease – In September 2011, the Company converted an operating lease for its phone system into a capital lease agreement in the amount for $7. The lease is repayable monthly over 24 months, beginning October 2011. During fiscal year 2012, these assets were capitalized as office equipment and are being depreciated accordingly. As of June 30, 2013, the outstanding capital lease balance was $1.

 

F-20


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(7) Debt and Capital Lease : (Continued)

 

Convertible note – In May 2012, the Company entered into a convertible note and warrant purchase agreement with existing investors in exchange for gross cash proceeds of $750. The term notes had an interest rate of 8.0% per annum, with principal and interest payable at the stated date of May 2, 2013 (the “Maturity Date”) or earlier due to a liquidity event or a financing with gross proceeds to the Company of at least $10,000 (a “Trigger Financing”). The note holders could extend the maturity date with a rate of 10.0% per annum beyond the stated due date. The warrants issued were for the purchase of Series B-1 preferred stock with an exercise price of $0.1297 per share. The estimated fair value of the warrants at issuance was $79 which was recorded as a discount to the note payable. This discount was amortized over the original life of the loan using the effective interest rate method until these notes converted into Series B preferred stock in November 2012 as described further below.

All unpaid principal and accrued but unpaid interest on these convertible notes would be converted automatically into preferred stock securities (“New Preferred”) issued by the Company in a Trigger Financing closed on or prior to the due date. The number of shares of New Preferred to be issued upon such conversion would be equal to the quotient obtained by dividing (i) the outstanding principal and accrued but unpaid interest under the note by (ii) the price per share equal to the original price per share of such New Preferred, and the issuance of such shares upon such conversion would be upon the same terms and subject to the conditions applicable to the Trigger Financing.

In the event that (i) the Company had not consummated the Trigger Financing by the Maturity Date, or (ii) prior to the closing of the Trigger Financing, there occurred any transaction or series of related transactions resulting in the (a) acquisition of greater than 50% of the voting equity interests of the Company by means of stock purchase, share exchange or other form of corporate reorganization, (b) acquisition, consolidation, merger or like transaction involving the Company in which the shareholders of the Company immediately prior to such transaction own less than 50% of the voting power of the surviving entity, or (c) sale, lease, license, transfer or other conveyance of all or substantially all of the assets of the Company (a “Liquidity Event”), the holder of each convertible note could, at its option, convert the note into shares of the Company’s Series A-1 Preferred Stock (or, at the holder’s election, shares of the Company’s Series A-1A Preferred Stock) (the “Existing Preferred”). The number of shares of Existing Preferred to be issued upon such conversion would be equal to the quotient obtained by dividing (i) the outstanding principal and accrued but unpaid interest under the note by (ii) the price per share obtained by dividing (A) $42,208 by (B) the number of fully diluted shares of the Company as of the date of such conversion.

In conjunction with the Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement entered into in November 2012 (see Note 11), the Company converted the notes payable with a carrying value of $709 and related accrued interest of $32 into 5,970 shares of Series B-1 Preferred Stock. The notes payable included a contingent beneficial conversion feature related to a Trigger Financing. The issuance of the Series B preferred stock met the definition of a Trigger Financing and the contingency was resolved. Accordingly, upon conversion of the notes payable, the Company recognized a beneficial conversion feature charge of $72. This beneficial conversion charge has been included as a component of interest expense in the statement of operations. Interest expense for these notes for the years ended June 30, 2012 and 2013, including non-cash amortization of the discount and the beneficial conversion charge discussed above, was $21 and $121, respectively.

 

F-21


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(7) Debt and Capital Lease : (Continued)

 

The aggregate future maturities of the Company’s capital lease as of June 30, 2013 were as follows:

 

Fiscal Year Ending June 30,

   Amount  

2014

   $ 1   

Less: amount representing interest

     —     
  

 

 

 

Total future maturities

   $ 1   
  

 

 

 

 

(8) Commitments and Contingencies:

Operating leases – The Company leases office equipment, office space, and lab space under operating leases expiring through December 2014. For the years ended June 30, 2012 and 2013, rent expense under these and other operating leases was $82 and $102, respectively. Minimum future lease payments under non-cancelable operating leases as of June 30, 2013 in the aggregate are:

 

Fiscal Year Ending June 30,

   Amount  

2014

   $ 81   

2015

     23   
  

 

 

 

Total minimum future lease payments

   $ 104   
  

 

 

 

Other contingencies – Under various agreements, the Company will be required to pay royalties and milestone payments upon the successful development and commercialization of products. The Company has entered into funding agreements with various not-for-profit organizations. The Company may become obligated to pay royalties on net product sales of any collaboration product that it successfully develops and subsequently commercializes or, if it out-licenses rights to a collaboration product, a specified percentage of certain payments it receives from its licensee. The Company is not obligated to make such payments unless and until annual sales of a collaboration product exceed a designated threshold. The Company’s obligation to make such payments would end upon its payment of a specified amount.

The Company is also party to various agreements entered into in the ordinary course of its business, principally relating to licensed technology, that require future payments relating to milestones or royalties on future sales of specified products. At June 30, 2013, the Company had nine license agreements with six different entities, including five with the University of Florida Research Foundation. Several of these entities are stockholders of the Company. The Company is required to pay minimum annual royalty and license maintenance for all licenses until such time when the license is terminated by either expiration of underlying patents or voluntary termination by either party per the agreement. Once a product reaches commercialization, the above-mentioned minimum annual payments will be replaced by annual royalties ranging from 0.5% to 4.0% on net sales. The Company is responsible for all costs related to preparation, filing, issuance, prosecution and maintenance of the underlying patents covered in the license agreements. As of June 30, 2013, the Company held one license where certain milestones have been met that requires additional royalty payments. The Company may terminate its license agreements with zero to ninety days written notice depending upon the terms of each specific agreement. The Company paid annual royalty and license maintenance payments of $41 and $61 for the fiscal years ended June 30, 2012 and 2013, respectively. All royalty and license maintenance payments are included in research and development expenses on the statement of operations.

 

F-22


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(8) Commitments and Contingencies: (Continued)

 

Minimum annual royalty and license maintenance payments under these agreements are as follows:

 

Fiscal Year Ending June 30,

   Amount  

2014

   $ 81   

2015

   $ 101   

2016 and every fiscal year thereafter

   $ 141   

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party with respect to the Company’s products. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. From time to time, the Company is involved in various claims and legal actions that arise in the normal course of business. Management believes that the outcome of such legal actions will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.

 

(9) Concentrations:

The Company has demand deposits and money market funds in a regional bank that are insured by the FDIC up to FDIC limits. In addition, the Company has short-term investments in certificates of deposits at various financial institutions that are 100% FDIC insured.

All of the Company’s grant receivables at June 30, 2012 and 2013 are derived or due from government grants. Any future changes in the availability of grants for such research would have a significant impact on the Company’s operations.

 

(10) Income Taxes:

For the fiscal years ended June 30, 2012 and 2013, the Company did not record a current or deferred income tax expense or benefit.

 

F-23


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(10) Income Taxes: (Continued)

 

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets (liabilities) are comprised of the following:

 

     June 30,  
     2012     2013  

Deferred tax assets:

    

Net operating loss carryforwards

   $ 10,848      $ 11,724   

Research and development credit carryforwards

     184        218   

Accruals and other

     47        40   
  

 

 

   

 

 

 

Gross deferred tax assets

     11,079        11,982   

Deferred tax asset valuation allowance

     (11,019     (11,928
  

 

 

   

 

 

 

Total deferred tax assets

   $ 60      $ 54   
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Depreciation and amortization

   $ (60   $ (54
  

 

 

   

 

 

 

Total deferred tax liabilities

   $ (60   $ (54
  

 

 

   

 

 

 

Net deferred tax asset (liability)

   $ —        $ —     
  

 

 

   

 

 

 

At June 30, 2013, the Company has net operating losses of approximately $46,900 that may be applied against future taxable income and expire in various years from 2022 to 2033. At June 30, 2013, the Company also has research and development tax credits of approximately $873 that may provide future tax benefits and expire from 2027 to 2042.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Therefore, any tax benefits to be realized in future years as a result of the utilization of the Company’s net operating loss carry forwards as of June 30, 2013, computed based on statutory federal and state rates, are completely offset by valuation allowances established since realization of the deferred tax benefits are not considered more likely than not. The valuation allowance increased approximately $909 during the fiscal year ended June 30, 2013, due primarily to net operating losses generated during the period.

A reconciliation of income tax expense computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

 

     Fiscal Year Ended
June 30,
 
     2012     2013  

Federal income tax benefit at statutory rate

     (34 )%      (34 )% 

State income tax, net of federal benefit

     (5     (5

Permanent differences

     (8     27   

Research and development credit

     10        8   

Other

     9        3   

Change in valuation allowance

     28        1   
  

 

 

   

 

 

 

Effective income tax rate

     0     0
  

 

 

   

 

 

 

 

F-24


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(10) Income Taxes: (Continued)

 

Under the provisions of the Internal Revenue Code, the Company’s net operating loss and tax credit carry forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carry forwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future.

For fiscal years through June 30, 2013, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carry forwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position for these two years. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carry forwards and the valuation allowance.

The Company files income tax returns in the United States and in the state of Florida. The federal and state returns are generally subject to tax examinations for the tax years ended June 30, 2009 through June 30, 2013. To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state authorities, to the extent utilized in a future period.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2012 and 2013, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.

 

(11) Convertible Preferred Stock and Stockholders’ (Deficit) Equity:

Common Stock – As of June 30, 2012, the Company’s common stock consisted of 45,102 authorized shares. In November 2012, the Company amended and restated its Certificate of Incorporation to increase the number of shares authorized to be issued to 410,000 shares of $0.001 par value common stock. At June 30, 2012 and 2013, the Company had 3,817 shares issued and outstanding.

The following shares of common stock are reserved for future issuance:

 

     June 30, 2013  

Conversion of preferred stock and preferred stock warrants

     262,812   

Stock options issued and outstanding

     13,293   

Authorized for future grant under the 2011 Stock Incentive Plan

     16,334   
  

 

 

 
     292,439   
  

 

 

 

 

F-25


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(11) Convertible Preferred Stock and Stockholders’ (Deficit) Equity: (Continued)

 

Convertible preferred stock as of June 30, 2012 and 2013 consists of the following:

 

     Shares
Authorized
     Original Issue
Price per Share
     Shares Issued and
Outstanding
     Aggregate Liquidation
Amount
     Carrying Value  

Series A-1

     29,737       $ 0.9658         22,466       $ 21,698       $ 21,526   

Series A-1A

     11,572       $ 0.9658         11,479         11,086         10,998   
  

 

 

       

 

 

    

 

 

    

 

 

 

Balance at June 30, 2012

     41,309            33,945       $ 32,784       $ 32,524   
  

 

 

       

 

 

    

 

 

    

 

 

 

Series A-1

     29,737       $ 0.9658         22,466       $ 21,698       $ 21,526   

Series A-1A

     11,572       $ 0.9658         11,479         11,086         10,998   

Series B-1

     67,570       $ 0.1297         66,147         8,579         6,539   

Series B-2

     140,542       $ 0.1485         122,750         18,228         19,040   

Series B-3

     82,670         —           —           —           —     
  

 

 

       

 

 

    

 

 

    

 

 

 

Balance at June 30, 2013

     332,091            222,842       $ 59,591       $ 58,103   
  

 

 

       

 

 

    

 

 

    

 

 

 

Rights and privileges of preferred stock – In November 2012, in connection with the transactions contemplated by the Series B Purchase Agreement, the Company amended and restated its certificate of incorporation. The material rights and privileges of the Company’s preferred stock as set forth in the Company’s amended and restated certificate of incorporation are as follows:

Authorized Shares . The Company is authorized to issue 332,091 shares of preferred stock, par value $0.001 per share, of which 29,737 are designated Series A-1 Preferred Stock, 11,572 are designated Series A-1A Preferred Stock, 67,570 are designated Series B-1 Preferred Stock, 140,542 are designated Series B-2 Preferred Stock and 82,670 are designated Series B-3 Preferred Stock. The Series A-1 and Series A-1A Preferred Stock are referred to collectively as the “Series A Preferred,” the Series B-1, B-2 and B-3 Preferred Stock are referred to collectively as the “Series B Preferred’” and the Series A Preferred and the Series B Preferred are referred to collectively as the “Preferred Stock.”

Dividends . Holders of shares of all series of Preferred Stock are entitled to receive cash dividends at the rate of eight percent (8%) of the applicable purchase price of each such share. Such dividends are payable only when, as and if declared by the board of directors of the Company and are non-cumulative. Upon the automatic conversion of Preferred Stock to common stock in the event a successful initial public offering, any dividends declared and unpaid on the Preferred Stock shall be paid. To date, no dividends have been declared or paid.

Liquidation Preference. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (a “Liquidation Event”), before any distribution or payment shall be made to the holders of any Series A Preferred or common stock, the holders of shares of the Series B Preferred shall be entitled to be paid, out of the assets of the Company legally available for distribution (or the consideration received in any Deemed Liquidation Event, as defined in the certificate of incorporation), an amount equal to the purchase price of such Series B Preferred share plus all declared and unpaid dividends on the Series B-1 Preferred, Series B-2 Preferred or Series B-3 Preferred, as the case may be (the “Series B Liquidation Preference”). If, upon any such Liquidation Event, the assets of the Company (or the consideration received in the Deemed Liquidation Event) shall be insufficient to make payment in full to all holders of Series B Preferred of the Series B Liquidation Preference, then such assets (or consideration) shall be distributed among the holders of Series B Preferred at the time outstanding, ratably in proportion to

 

F-26


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(11) Convertible Preferred Stock and Stockholders’ (Deficit) Equity: (Continued)

 

the amounts to which they would be entitled with respect to such shares of Series B Preferred if sufficient assets were available to make such payment in full.

Upon any Liquidation Event, after the payment in full of the Series B Liquidation Preference to the holders of Series B Preferred, but before any distribution or payment shall be made to the holders of any common stock, the holders of shares of the Series A Preferred shall be entitled to be paid, out of the assets of the Company legally available for distribution (or the consideration received in the Deemed Liquidation Event), for each share of Series A Preferred, an amount equal to the purchase price of such Series A Preferred share plus all declared and unpaid dividends on the Series A-1 Preferred and Series A-1A Preferred, as the case may be (the “Series A Liquidation Preference”). If, upon any such Liquidation Event, the assets of the Company (or the consideration received in the Deemed Liquidation Event) shall be insufficient to make payment in full to all holders of Series A Preferred of the Series A Liquidation Preference, then such assets (or consideration) shall be distributed among the holders of Series A Preferred at the time outstanding, ratably in proportion to the amounts to which they would be entitled with respect to such shares of Series A Preferred if sufficient assets were available to make such payment in full.

Upon any Liquidation Event, after the payment in full of the Series B Liquidation Preference and the Series A Liquidation Preference, the assets of the Company legally available for distribution in such Liquidation Event (or the consideration received in the Deemed Liquidation Event), if any, shall be distributed ratably to the holders of the common stock and the Preferred Stock on an as-if-converted to common stock basis.

Conversion Rights. Each share of Preferred Stock is 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 fully-paid and nonassessable shares of common stock. As of June 30, 2013, the number of shares of common stock to which a holder of shares of Preferred Stock was entitled upon conversion was as follows: Series A Preferred, 2.11 shares; and Series B Preferred, one share.

The conversion ratios applicable to the Preferred Stock are subject to adjustment in the event that the Company effects any subdivision or reverse split or declares any dividend or distribution in shares of common stock, in each case in respect of its common stock, or if the common stock issuable upon the conversion of the Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, merger, consolidation or otherwise. The conversion ratios applicable to the Preferred Stock are also subject to anti-dilution adjustment in the event of certain dilutive issuances by the Company of its common stock.

Each share of Preferred Stock shall automatically be converted into shares of common stock, based on the then-effective applicable conversion ratio (i) at any time upon the written consent of the holders of at least a majority of the then outstanding shares of Preferred Stock, voting as a single class or (ii) immediately upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which (x) the per share price is at least three (3) times the Series B-3 Purchase Price (as adjusted for stock splits, dividends, recapitalizations and the like after the filing date hereof), or, in the event that the closing of the third tranche has not yet occurred and the Series B-3 Purchase Price has not been determined, then the per share price is at least $0.7425 (as adjusted for stock splits, dividends, recapitalizations and the like after the filing date hereof) and (y) the gross cash proceeds to the Company (before underwriting discounts, commissions and fees) are at least $40,000.

 

F-27


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(11) Convertible Preferred Stock and Stockholders’ (Deficit) Equity: (Continued)

 

Voting Rights . Each holder of shares of the Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of Preferred Stock could be converted immediately after the close of business on the record date for voting. Except as otherwise provided in the certificate of incorporation or as required by law, holders of shares of Preferred Stock vote together with the holders of shares of common stock and not as a separate class.

Subject to supermajority votes for some matters, matters submitted to a vote of the Company’s stockholders shall be decided by the affirmative vote of the stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter.

As long as at least 10% of the authorized shares of Series B Preferred remain outstanding, the holders of the outstanding shares of Series B Preferred, voting as a separate class, shall be entitled to elect five (5) members of the board of directors and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors;

As long as at least 10% of the authorized shares of Series A Preferred remain outstanding, the holders of record of the then outstanding shares of Series A Preferred, voting as a separate class on an as-if-converted to common stock basis, shall be entitled to elect three (3) members of the board of directors at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; and

The holders of record of the then outstanding shares of common stock and Preferred Stock, voting together as a single class on an as-if-converted to common stock basis, shall be entitled to elect the remaining member of the board of directors, which member shall be the Company’s chief executive officer and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director.

The vote or written consent of the holders of at least a majority of the then outstanding shares of Preferred Stock, voting together as a single class is required for the Company to, among other things: liquidate or dissolve; amend, alter or repeal any provision of its certificate of incorporation or bylaws; authorize or issue any other security convertible into or exercisable for any equity security having rights, preferences or privileges senior to or on parity with the Series B Preferred, or increase or decrease the authorized number of shares of Preferred Stock; with certain exceptions, redeem or declare any dividend on any shares of capital stock of the Company; incur more than $2,000 of indebtedness; acquire any minority-owned subsidiary or dispose of any capital stock or assets of any subsidiary; increase or decrease the authorized number of members of the Company’s board of directors; take any action that would limit, change or alter the rights, preferences or privileges of any series of the Preferred Stock; or make any acquisition of the capital stock or assets of another entity or enter into any strategic alliance, technology or intellectual property licensing arrangement, or other corporate partnership with any entity involving the payment, contribution or assignment by the Company of more than $1,000.

 

F-28


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(12) Accrued Expenses:

Accrued expenses consist of the following:

 

     June 30,  
     2012      2013  

Research and development-related

   $ 151       $ 61   

Compensation-related

     207         298   

Other

     11         —     
  

 

 

    

 

 

 
   $ 369       $ 359   
  

 

 

    

 

 

 

 

(13) 401(k) Plan:

The Company has a 401(k) Plan (the “Plan”) through the Company’s staff leasing company. Employees may elect to defer up to 25% of their compensation. The Company matches employee contributions up to 4%. Total matching contributions to the Plan for the years ended June 30, 2012 and 2013 were approximately $34 and $40, respectively.

 

(14) Subsequent Events:

The Company has completed an evaluation of all subsequent events through November 4, 2013, to ensure appropriate disclosure of events both recognized in the financial statements as of June 30, 2013, and events which occurred subsequently but were not recognized in the financial statements. The Company has concluded that no subsequent event has occurred that requires disclosure except the following:

In October 2013, the Series B holders notified the Company of their election to exercise their rights with respect to the third tranche to purchase an aggregate of 58,817 shares of Series B-3 preferred stock at a price per share equal to $0.1823, for gross proceeds of $10,722. The Company expects to complete the sale of the shares of Series B-3 preferred stock on November 5, 2013.

 

F-29


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

 

     June 30,
2013
    September 30, 
2013
    Pro forma
September 30,
2013
 

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 8,893      $ 7,857      $ 18,579   

Short-term investments

     14,000        13,000        13,000   

Grants receivable

     143        172        172   

Other current assets

     475        714        706   
  

 

 

   

 

 

   

 

 

 

Total current assets

     23,511        21,743        32,457   

Property and equipment, net

     341        327        327   

Intangible assets, net

     1,630        1,648        1,648   

Other assets

     8        4        4   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 25,490      $ 23,722      $ 34,436   
  

 

 

   

 

 

   

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY

      

Current liabilities:

      

Accounts payable

   $ 792      $ 1,109      $ 1,109   

Accrued expenses

     359        265        265   

Deferred revenue

     212        146        146   

Current portion of debt and capital lease

     1        —          —     

Series B purchase rights

     2,096        7,061        —     
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     3,460        8,581        1,520   

Long-term liabilities:

      

Warrant liabilities

     110        250        —     
  

 

 

   

 

 

   

 

 

 

Total liabilities

     3,570        8,831        1,520   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

      

Series A-1 convertible preferred stock, par value $0.001 per share, 29,737 shares authorized at June 30, 2013 and September 30, 2013, 22,466 and 22,467 shares issued and outstanding at June 30, 2013 and September 30, 2013, respectively, and no shares issued and outstanding pro forma (aggregate liquidation preference of $21,698)

     21,526        21,527        —     

Series A-1A convertible preferred stock, par value $0.001 per share, 11,572 shares authorized, 11,479 shares issued and outstanding at June 30, 2013 and September 30, 2013, and no shares issued and outstanding pro forma (aggregate liquidation preference of $11,086)

     10,998        10,998        —     

Series B-1 convertible preferred stock, par value $0.001 per share, 67,570 shares authorized, 66,147 shares issued and outstanding at June 30, 2013 and September 30, 2013, and no shares issued and outstanding pro forma (aggregate liquidation preference of $8,579)

     6,539        6,539        —     

Series B-2 convertible preferred stock, par value $0.001 per share, 140,542 shares authorized, 122,750 shares issued and outstanding at June 30, 2013 and September 30, 2013, and no shares issued and outstanding pro forma (aggregate liquidation preference of $18,228)

     19,040        19,040        —     

Series B-3 convertible preferred stock, par value $0.001 per share, 82,670 shares authorized, no shares issued and outstanding at June 30, 2013, September 30, 2013 and pro forma

     —          —          —     

Stockholders’ (deficit) equity

      

Common stock, par value $.001 per share, 410,000 shares authorized, 3,817 shares issued and outstanding at June 30, 2013 and September 30, 2013, and 323,020 shares issued and outstanding pro forma

     4        4        323   

Additional paid-in capital

     12,239        12,273        88,083   

Accumulated deficit

     (48,426     (55,490     (55,490
  

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (36,183     (43,213     32,916   
  

 

 

   

 

 

   

 

 

 

Total liabilities, convertible preferred stock and stockholders’ (deficit) equity

   $ 25,490      $ 23,722      $ 34,436   
  

 

 

   

 

 

   

 

 

 

The accompanying notes to financial statements

are an integral part of these statements.

 

F-30


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

 

     Three Months Ended
September 30,
 
     2012     2013  

Revenue:

    

Grant revenue

   $ 177      $ 191   

Sponsored research revenue

     82        67   
  

 

 

   

 

 

 

Total revenue

     259        258   
  

 

 

   

 

 

 

Operating expenses:

    

Research and development

     539        1,443   

General and administrative

     280        781   
  

 

 

   

 

 

 

Total operating expenses

     819        2,224   
  

 

 

   

 

 

 

Loss from operations

     (560     (1,966
  

 

 

   

 

 

 

Other income (expense):

    

Interest income

     —          7   

Interest expense

     (44     —     

Fair value adjustments to warrant liabilities

     —          (140

Fair value adjustments to Series B purchase rights

     —          (4,965
  

 

 

   

 

 

 

Total other income (expense), net

     (44     (5,098
  

 

 

   

 

 

 

Net loss

   $ (604   $ (7,064
  

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (0.16   $ (1.85
  

 

 

   

 

 

 

Weighted-average shares outstanding, basic and diluted

     3,817        3,817   
  

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted

     $ (0.04
    

 

 

 

Weighted-average pro forma shares outstanding, basic and diluted

       192,329   
    

 

 

 

 

 

The accompanying notes to financial statements

are an integral part of these statements.

 

F-31


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

     Three Months Ended
September 30,
 
         2012             2013      

Cash flows from operating activities

    

Net loss

   $ (604   $ (7,064

Adjustments to reconcile net loss to net cash used in operating activities:

    

Share-based compensation

     —          34   

Depreciation and amortization

     61        79   

Non-cash interest expense

     23        —     

Fair value adjustments to warrant liabilities

     —          140   

Fair value adjustments to Series B purchase rights

     —          4,965   

Change in operating assets and liabilities

    

Increase in grant receivable

     (34     (29

Increase in other current assets

     (62     (239

Increase in accounts payable

     273        317   

Decrease in deferred revenues

     —          (66

Increase (decrease) in accrued expenses

     8        (94
  

 

 

   

 

 

 

Net cash used in operating activities

     (335     (1,957
  

 

 

   

 

 

 

Cash flows from investing activities

    

Purchase of property and equipment

     (1     (4

Purchase of and costs related to intangible assets

     (83     (75

Maturity of short-term investments

     —          5,000   

Purchase of short-term investments

     —          (4,000
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (84     921   
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from exercise of convertible, preferred stock warrants

     —          1   

Proceeds from issuance of bank term note and warrants

     507        —     

Payment of bank term notes and capital lease

     (53     (1
  

 

 

   

 

 

 

Net cash provided by financing activities

     454        —     
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     35        (1,036

Cash and cash equivalents, beginning of period

     774        8,893   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 809      $ 7,857   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for interest

   $ 8      $ —     
  

 

 

   

 

 

 

 

 

The accompanying notes to financial statements

are an integral part of these statements.

 

F-32


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(1) Organization and Operations:

Applied Genetic Technologies Corporation (the “Company” or “AGTC”) was incorporated as a Florida corporation on January 19, 1999 and reincorporated as a Delaware corporation on October 24, 2003. The Company is a clinical-stage biotechnology company developing gene therapy products designed to transform the lives of patients with severe inherited orphan diseases in ophthalmology.

The Company has devoted substantially all of its efforts to research and development, including clinical trials. The Company has not completed the development of any products. The Company has generated revenue from collaboration agreements, sponsored research payments and grants, but has not generated product revenue to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, the difficulties inherent in the development of commercially viable products, the need to obtain additional capital necessary to fund the development of its products, and competition from other companies. As of September 30, 2013, the Company had an accumulated deficit of $55,490. The Company has financed its operations to date primarily through private placements of its convertible preferred stock, collaborations, bank debt, convertible debt financings, grant funding and payments for sponsored research. The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risk of failure of clinical studies, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to transition to large-scale production of products. The Company expects to continue to incur losses for the foreseeable future. At September 30, 2013, the Company had capital resources consisting of cash, cash equivalents and short-term investments of $20,857 and believes that these resources will be sufficient to allow the Company to fund its current operating plan for at least the next 12 months.

 

(2) Summary of Significant Accounting Policies:

The Company’s significant accounting policies are more fully described in Note 2 of the Notes to the audited financial statements as of June 30, 2012 and 2013 included in the prospectus of which these financial statements are a part.

 

  (a) Basis of Presentation – The accompanying financial information as of September 30, 2013 and for the three months ended September 30, 2012 and 2013 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The June 30, 2013 balance sheet was derived from the Company’s audited financial statements. The financial information as of September 30, 2013 and for the three months ended September 30, 2012 and 2013 should be read in conjunction with the June 30, 2013 audited annual financial statements and notes thereto included elsewhere in the prospectus.

In the opinion of management, the unaudited financial information as of September 30, 2013 and for the three months ended September 30, 2012 and 2013 reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations and cash flows. The results of operations for the three months ended September 30, 2013 are not necessarily indicative of the operating results for the full fiscal year or any future period.

 

  (b)

Pro forma information – The pro forma balance sheet as of September 30, 2013, gives effect to: the issuance of 58,817 shares of the Company’s Series B-3 convertible preferred stock, which occurred on

 

F-33


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

  November 5, 2013 (Note 6), for cash proceeds of $10,722; the reclassification of $8 of deferred issuance costs related to the Series B-3 preferred stock closing to additional paid in capital; the conversion of all the convertible preferred stock, including the Series B-3, into shares of common stock upon the consummation of the initial public offering contemplated by the prospectus of which these financial statements are a part; the reclassification of the Series B purchase rights liability to additional paid-in capital; and the conversion of all outstanding warrants exercisable for shares of Series A-1, Series A-1A and Series B-1 preferred stock into warrants exercisable for shares of common stock, resulting in the preferred stock warrant liability being reclassified to additional paid-in capital. Unaudited pro forma net loss per share is computed using the weighted-average number of common stock equivalents outstanding after giving effect to the conversion of all the convertible preferred stock into shares of common stock as if such conversion had occurred at the beginning of the period presented, or the date of original issuance, if later.

 

  (c) Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

 

  (d) Fair value of financial instruments – The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. 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. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and observable.

To the extent that 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.

Items measured at fair value on a recurring basis include short-term investments, Series B purchase rights and warrant liabilities (Note 4).

 

F-34


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(2) Summary of Significant Accounting Policies: (Continued)

 

  (e) Warrants to purchase convertible preferred stock – In conjunction with various financing transactions, the Company issued warrants to purchase shares of the Company’s Series A-1, Series A-1A and Series B-1 preferred stock. The Company’s Series A-1, Series A-1A and Series B-1 preferred stock are subject to redemption under circumstances outside of the Company’s control. Therefore, the associated shares are presented as temporary equity. Consequently, the warrants to purchase shares of Series A-1, Series A-1A and Series B-1 preferred stock are accounted for as liabilities and adjusted to fair value at the end of each reporting period. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option pricing model. The estimates in Black-Scholes option pricing model are based, in part, on subjective assumptions, including stock price volatility, term of the warrants, risk free interest rate, dividend yield, and fair value of the preferred stock underlying the warrants. Such assumptions could differ materially in the future. The gain or loss associated with the change in the fair value of the preferred stock warrant liability from the prior period is recognized as a component of other income (expense), net.

 

  (f) Share-based compensation – The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost is recognized on a straight-line basis over the period during which the employee is required to provide service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on third-party valuations, historical data, peer company data and judgment regarding future trends and factors. The Company accounts for stock options issued to non-employees in accordance with the provisions of ASC Subtopic 505-50, Equity-Based Payments to Non-employees , which requires valuing the stock options and measuring such stock options to their current fair value when they vest.

 

  (g) Deferred issuance costs – The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process probable equity financings as other assets until such financings are consummated. After consummation of an in-process probable equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering. As of September 30, 2013, the Company recorded deferred financing costs of $172 in other assets in the accompanying balance sheet in contemplation of a probable equity financing. Should the equity financing no longer be considered probable of being consummated, the deferred financing costs would be expensed immediately as a charge to operating expenses in the statement of operations.

 

  (h) New Accounting Pronouncements – In July 2013, the FASB issued amended guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. The guidance requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented as a reduction of a deferred tax asset when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists, with certain exceptions. This accounting guidance is effective prospectively for the Company beginning in the first quarter of fiscal year 2015, with early adoption permitted. While the Company is currently evaluating the impact, its adoption is not expected to have a material impact on the Company’s financial statements.

 

F-35


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(3) Stock Option Plans:

On September 18, 2013, the Company’s board of directors approved a grant of 13,010 incentive stock options and 1,102 nonqualified stock options under the Company’s 2011 Stock Incentive Plan. There are 2,221 additional shares available for issuance under this plan.

 

  (a) Incentive stock options – Incentive stock options are granted to employees at the discretion of the board. The exercise price of the options must at least be equal to 100% of the stock’s fair market value on the date of the award.

 

  (b) Nonqualified stock options – Nonqualified stock options can be granted to employees or non-employees at the discretion of the board.

Incentive stock options

A summary of the employee option activity is as follows:

 

     Three Months ended September 30,  
     2012      2013  
     Shares      Weighted
Average
Exercise
Price
     Shares      Weighted
Average
Exercise
Price
 

Outstanding , June 30

     2,412       $ 0.10         9,170       $ 0.03   

Granted

     —           —           13,010         0.14   

Exercised

     —           —           —           —     

Terminated

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Outstanding , September 30

     2,412       $ 0.10         22,180       $ 0.10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable , September 30

     2,085            3,477      
  

 

 

       

 

 

    

Weighted average fair value of options granted during the period

     —            $ 0.14      
  

 

 

       

 

 

    

As of June 30, 2013 and September 30, 2013, there was approximately $30 and $1,319, respectively of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock incentive plans.

 

F-36


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(3) Stock Option Plans: (Continued)

 

Nonqualified stock options issued to non-employees

A summary of non-employee option activity follows:

 

     Three Months ended September 30,  
     2012      2013  
     Shares      Weighted
Average
Exercise
Price
     Shares      Weighted
Average
Exercise
Price
 

Outstanding , June 30

     2,239       $ 0.10         4,123       $ 0.06   

Granted

     —           —           1,102         0.14   

Exercised

     —           —           —           —     

Terminated

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Outstanding , September 30

     2,239       $ 0.10         5,225       $ 0.08   
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable , September 30

     2,081            2,493      
  

 

 

       

 

 

    

Weighted average fair value of options granted during the period

     —            $ 0.14      
  

 

 

       

 

 

    

In accounting for stock options to non-employees, the value of goods and services related to the options granted is recognized as the awards vest, which is generally consistent with receipt of services. Therefore, vested portions vary based upon services and terms of each option. The Company revalues non-vested, non-employee options each reporting period using the estimated fair value of the Company’s common stock as of the last day of each reporting period.

 

F-37


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(4) Fair Value of Financial Instruments and Investments:

The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis:

 

Description

   Total      Quoted prices
in active markets
(Level 1)
     Significant other
observable inputs
(Level 2)
     Significant
unobservable inputs
(Level 3)
 

Assets:

           

June 30, 2013

           

Short-term investments

   $ 14,000       $ —        $ 14,000       $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

September 30, 2013

           

Short-term investments

   $ 13,000       $ —        $ 13,000       $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

June 30, 2013

           

Series B purchase rights

   $ 2,096       $ —        $ —        $ 2,096   

Warrant liabilities

     110         —          —          110   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,206       $ —        $ —        $ 2,206   
  

 

 

    

 

 

    

 

 

    

 

 

 

September 30, 2013

           

Series B purchase rights

   $ 7,061       $ —        $ —        $ 7,061   

Warrant liabilities

     250         —          —          250   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,311       $ —        $ —        $ 7,311   
  

 

 

    

 

 

    

 

 

    

 

 

 

Short-term investments – Short-term investments consist of certificates of deposit placed through an account registry service, with maturities up to one year, for which the fair market value is measured based on level 2 inputs (quoted prices for identical assets in markets that are not active).

Warrant liabilities – The fair value of the warrants on the date of issuance, and on each financial reporting date for those warrants classified as liabilities, is estimated using the Black-Scholes option pricing model. The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants include:

 

Assumption

   Three Months Ended
September 30, 2013
 

Exercise price

     $0.1297 to $0.9658   

Fair value of preferred shares

     $0.24   

Expected life (in years)

     0.01 to 5.92   

Risk-free interest rate

     0.03% to 1.39%   

Expected volatility

     85.00%   

Series B purchase rights – The Series B purchase right liability was valued separately for each series using the Black-Scholes option-pricing method to assign a value to the purchase right relating to that series under each of the possible applicable valuation scenarios, depending on which milestones were met, with each scenario being assigned an estimated probability as of the valuation date. The aggregate of these

 

F-38


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2013

(shares and dollars in thousands, except per share data)

 

(4) Fair Value of Financial Instruments and Investments: (Continued)

 

probability-weighted valuations was assigned as the value of the purchase right for each tranche. The significant assumptions used as inputs in the Black-Scholes valuation were as follows:

 

Assumption

   Three Months Ended
September 30, 2013
 

Exercise price

     $0.1485 to $0.1823   

Years to maturity

     1.00   

Risk-free interest rate

     0.10%   

Volatility

     85.00%   

The Company reports the change in fair value during each period as a non-operating gain or loss recorded as a component of other (expense) income, net in the statement of operations. The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for warrant liabilities and Series B purchase rights for the fiscal year ended June 30, 2013 and the three months ended September 30, 2013:

 

     Warrant
liabilities
     Series B
purchase
rights
 

Beginning balance as of July 1, 2012

   $ 80       $ —    

Fair value of warrants issued

     22         —    

Fair value of Series B purchase rights issued

     —          1,723   

Change in fair value during the period

     8         1,207   

Series B purchase rights converted to Series B-2 convertible preferred stock

     —          (834
  

 

 

    

 

 

 

Ending balance as of June 30, 2013

     110         2,096   

Change in fair value during the period

     140         4,965   
  

 

 

    

 

 

 

Ending balance as of September 30, 2013

   $ 250       $ 7,061   
  

 

 

    

 

 

 

 

(5) Accrued Expenses:

Accrued expenses consist of the following:

 

     Fiscal Year Ended
June  30, 2013
     Three Months  Ended
September 30, 2013
 

Research and development-related

   $ 61       $ 76   

Compensation-related

     298         189   
  

 

 

    

 

 

 
   $ 359       $ 265   
  

 

 

    

 

 

 

 

(6) Subsequent Events:

On November 5, 2013, the Company completed the sale of 58,817 shares of Series B-3 preferred stock at a price per share equal to $0.1823, for gross proceeds of $10,722. As a result of this transaction, the fair value of the Series B purchase rights liability outstanding immediately before this closing will be recorded as additional proceeds of this issuance of the Series B-3 preferred stock.

 

F-39


Table of Contents

            Shares

 

LOGO

Applied Genetic Technologies Corporation

Common Stock

 

 

Prospectus

            , 2014

 

 

Barclays

BMO Capital Markets

 

 

Wedbush PacGrow Life Sciences

Cantor Fitzgerald

Roth Capital Partners

 

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


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with this offering described in this Registration Statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee and the FINRA filing fee.

 

         Amount      

Securities and Exchange Commission registration fee

   $ 9,016   

FINRA filing fee

                 *   

NASDAQ Global Market listing fee

                 *   

Accountants’ fees and expenses

                 *   

Legal fees and expenses

                 *   

Transfer agent’s fees and expenses

                 *   

Printing and engraving expenses

                 *   

Miscellaneous

                 *   

Total Expenses

   $           *   
  

 

 

 

 

* To be provided by amendment.

 

Item 14. Indemnification of Directors and Officers.

Section 102 of the Delaware General Corporation Law permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Upon the closing of this offering, our certificate of incorporation will provide that none of our directors shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as director, notwithstanding any provision of law imposing such liability, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to 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 or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Upon the closing of this offering, our certificate of incorporation will provide that we will indemnify each person who was or is a party or threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of AGTC,

 

II-1


Table of Contents

or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise to the fullest extent permitted by the Delaware General Corporation Law. Upon the closing of this offering, our certificate of incorporation will provide that expenses must be advanced to these indemnitees under certain circumstances.

The indemnification provisions contained in our certificate of incorporation that will be effective as of the closing date of this offering are not exclusive. In addition, we intend to enter into indemnification agreements with each of our directors. Each indemnification agreement will provide that we will indemnify the director to the fullest extent permitted by law for claims arising in his capacity as a director, provided that he acted in good faith and in a manner that he reasonably believed to be in, or not opposed to, our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. In the event that we do not assume the defense of a claim against a director, we are required to advance his expenses in connection with his defense, provided that he undertakes to repay all amounts advanced if it is ultimately determined that he is not entitled to be indemnified by us.

In addition, we maintain standard policies of insurance under which coverage is provided to our directors and officers against losses arising from claims made by reason of breach of duty or other wrongful act, and to us with respect to payments which may be made by us to such directors and officers pursuant to the above indemnification provisions or otherwise as a matter of law. In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, against certain liabilities.

 

Item 15. Recent Sales of Unregistered Securities.

Options and restricted stock

At various times since November 1, 2010, we have granted options to purchase 8,950,713 shares of common stock to our employees, directors, and consultants pursuant to our 2011 Stock Incentive Plan and 2001 Stock Option Plan at exercise prices ranging from $0.01 to $0.10. During this time, we also issued 23,917 shares of our common stock upon the exercise of options issued pursuant to our 2001 Stock Incentive Plan for aggregate consideration of $2,392. The issuance of these options and shares was exempt from registration under Section 4(a)(2) of the Securities Act, as a sale not involving a public offering, and pursuant to Rule 701 of the Securities Act of 1933, as securities issued pursuant to a compensatory benefit plan.

The following table provides information regarding the number of options and shares of common stock issued upon the exercise of options in each calendar year during this period.

 

Year

   Options issued (#)      Weighted average
exercise price of
issued options ($)
     Total shares
of  stock

issued upon
exercise of
outstanding
options (#)
     Weighted average
exercise price of
exercised options
($)
 

November 1, 2010—October 31, 2011

     141,000       $ 0.10         23,917       $ 0.10   

November 1, 2011—October 31, 2012

     168,544       $ 0.10         —           —     

November 1, 2012—October 31, 2013

     22,753,493       $ 0.09         —           —     

November 1, 2013—January 10, 2014

     —           —           —           —     

Convertible promissory notes and warrants

In May 2012, we issued and sold convertible promissory notes, the May 2012 notes, in an aggregate principal amount of $0.7 million to five of our existing accredited investors. These promissory notes converted into an aggregate of 5,970,277 shares of our Series B-1 preferred stock in November 2012. In connection with the issuance of the May 2012 notes, we issued warrants to purchase either (i) shares of the series of preferred stock issued in our next equity financing, at an exercise price equal to the amount per share paid by investors in

 

II-2


Table of Contents

such next equity financing, or (ii) at any time prior to such next equity financing, shares of our Series A-1 preferred stock, at an exercise price to be determined based on our fully-diluted capitalization at the time of exercise. These warrants are currently exercisable for an aggregate of 1,421,918 shares of our Series B-1 preferred stock at an exercise price of $0.1297 per share.

These issuances of the May 2012 notes and warrants were exempt from registration under Section 4(a)(2) of, and Rule 506 promulgated under, the Securities Act, as sales not involving a public offering.

Preferred stock

In November 2012, pursuant to a Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement, dated November 15, 2012, we issued and sold 66,147,709 shares of our Series B-1 preferred stock to nine of our existing accredited investors for aggregate consideration of $7.8 million in cash plus the conversion of all outstanding principal and accrued interest on the May 2012 notes. In April 2013, as part of the same financing, we issued and sold an additional 122,749,634 shares of our Series B-2 preferred stock to nine of our existing accredited investors for aggregate consideration of $18.2 million.

Pursuant to the Series B Purchase Agreement, the holders of our Series B preferred stockholders were entitled to purchase an aggregate of 58,816,897 shares of our Series B-3 preferred stock for an aggregate of $10.7 million. The Series B holders exercised this right and we completed the purchase and sale of these Series B-3 shares on November 5, 2013.

In September 2013, we issued and sold 1,247 shares of our series A-1 preferred stock upon the exercise of warrants for aggregate consideration of $1,204.

These issuances of preferred stock were, or in the case of the issuance of our Series B-3 preferred stock, we expect that they will be, exempt from registration under Section 4(a)(2) of, and Rule 506 promulgated under, the Securities Act, as sales not involving a public offering.

 

Item 16. Exhibits and Financial Statement Schedules.

The exhibits to the registration statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.

 

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

 

   

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

II-3


Table of Contents
   

For the purpose of determining any liability under the Securities Act of 1933, 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.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

 

II-4


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Alachua, State of Florida, on the 10 th day of January, 2014.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION

By:

  /s/ Susan B. Washer
 

Susan B. Washer

 

President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints each of Susan B. Washer and John N. Spencer, Jr. 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 SEC, 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.

In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

   Date

/s/ Susan B. Washer

Susan B. Washer

  

Chief Executive Officer, President and

Director (Principal Executive Officer)

   January 10, 2014

/s/ John N. Spencer, Jr.

John N. Spencer, Jr.

  

Interim Chief Financial Officer (Principal Financial and Accounting Officer)

   January 10, 2014

/s/ Scott Koenig

Scott Koenig

  

Director

   January 10, 2014

/s/ Jill Carroll

Jill Carroll

  

Director

   January 10, 2014

/s/ Ed Hurwitz

Ed Hurwitz

  

Director

   January 10, 2014

/s/ Arnold L. Oronsky

Arnold Oronsky

  

Director

   January 10, 2014

/s/ James Rosen

James Rosen

  

Director

   January 10, 2014

/s/ Sam Wu

Sam Wu

  

Director

   January 10, 2014

 

II-5


Table of Contents

EXHIBIT INDEX

 

Exhibit
number

  

Description

1.1*      Underwriting Agreement
3.1        Fourth Amended and Restated Certificate of Incorporation of the Registrant
3.2        Certificate of Amendment to Fourth Amended and Restated Certificate of Incorporation of the Registrant, effective April 10, 2013.
3.3*      Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of this offering
3.4        Bylaws of the Registrant, as amended
3.5*      Amended and Restated Bylaws of the Registrant, to be effective upon the closing of this offering
4.1*      Specimen certificate evidencing shares of common stock
5.1*      Opinion of Foley Hoag LLP
10.1*      Lease Agreement made as of September 19, 2011, by and between Thomson-Davis Enterprises, LLC and Applied Genetic Technologies Corporation
10.2†      Exclusive License Agreement with Sublicensing Terms, effective as of September 25, 2001, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.3†      Restated Amendment to License Agreement made and, effective as of January 31, 2005, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.4†      First Amendment After Restated Amendment to License Agreement, made and effective as of November 28, 2007, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.5†      Standard Exclusive License Agreement with Sublicensing Terms, effective as of October 7, 2003, by and between the University of Florida Research Foundation, Inc., Johns Hopkins University and Applied Genetic Technologies Corporation
10.6†      First Amendment to Standard Exclusive License Agreement with Sublicensing Terms, made as of November 2004, by and between the University of Florida Research Foundation, Inc., Johns Hopkins University and Applied Genetic Technologies Corporation
10.7†      Second Amendment to Standard Exclusive License Agreement with Sublicensing Terms, made as of February 25, 2009, by and among Applied Genetic Technologies Corporation, the University of Florida Research Foundation, Inc. and Johns Hopkins University
10.8†      Non-Exclusive License Agreement with Sublicensing Terms, made as of January 19, 2006, by and between The UAB Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.9†      Standard Exclusive License Agreement with Know How, effective as of September 18, 2012, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.10†    Standard Non-Exclusive License Agreement, effective as of September 18, 2012, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation
10.11†    Standard Exclusive License Agreement with Know How, effective as of November 5, 2012, by and between the University of Florida Research Foundation, Inc. and Applied Genetic Technologies Corporation

 

II-6


Table of Contents

Exhibit
number

    

Description

  10.12       Amended and Restated Investor Rights Agreement, dated as of November 15, 2012
  10.13      Applied Genetic Technologies Corporation 2001 Stock Option Plan, as amended**
  10.14      Applied Genetic Technologies Corporation 2011 Stock Incentive Plan, as amended, and forms of Incentive Stock Option Agreement and Nonstatutory Stock Option Agreement thereunder**
  10.15    Applied Genetic Technologies Corporation 2013 Equity And Incentive Plan**
  10.16   

Applied Genetic Technologies Corporation 2013 Employee Stock Purchase Plan**

  10.17      Form of Applied Genetic Technologies Corporation Warrant to Purchase Shares of Series A-1 Preferred Stock
  10.18      Form of Applied Genetic Technologies Corporation Warrant to Purchase Shares of Series B-1 Preferred Stock
  10.19       Warrant to Purchase Shares of Series A-1 Preferred Stock of Applied Genetic Technologies Corporation issued to Silicon Valley Bank and effective on September 23, 2005
  10.20       Warrant to Purchase Shares of Series A-1 Preferred Stock of Applied Genetic Technologies Corporation issued to Silicon Valley Bank and effective on June 30, 2006
  10.21       Warrant to Purchase Shares of Series A-1 Preferred Stock of Applied Genetic Technologies Corporation issued to Square 1 Bank on July 6, 2010
  10.22       Warrant to Purchase Shares of Series B-1 Preferred Stock of Applied Genetic Technologies Corporation issued to Square 1 Bank on August 31, 2012
  10.23       Form of Indemnification Agreement for Directors Associated with an Investment Fund
  10.24       Form of Indemnification Agreement for Directors Not Associated with an Investment Fund
  23.1         Consent of McGladrey LLP
  23.2*       Consent of Foley Hoag LLP (included in Exhibit 5.1)
  24.1*       Power of Attorney (included on signature page)

 

* To be filed by amendment
** Management contract or compensatory plan or arrangement
Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission

 

II-7

Exhibit 3.1

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

APPLIED GENETIC TECHNOLOGIES CORPORATION

Sue Washer hereby certifies that:

ONE: The name of the corporation is Applied Genetic Technologies Corporation. The date of filing the original Certificate of Incorporation of the corporation with the Secretary of State of the State of Delaware was October 24, 2003.

TWO: She is the duly elected and acting President and Chief Executive Officer of the corporation.

THREE: The Third Amended and Restated Certificate of Incorporation of the corporation is hereby amended and restated to read as follows:

I.

The name of the corporation is Applied Genetic Technologies Corporation (the “ Corporation ”).

II.

The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, 19808, and the name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.

III.

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (“ DGCL ”).

IV.

A. The Corporation is authorized to issue two classes of capital stock to be designated, respectively, “ Common Stock ” and “ Preferred Stock .” The total number of shares of capital stock which the Corporation is authorized to issue is Seven Hundred Forty-Two Million Ninety-One Thousand Three Hundred Seventy-Six (742,091,376) shares, Four Hundred Ten Million (410,000,000) shares of which shall be Common Stock (the “ Common Stock ”) and Three Hundred Thirty-Two Million Ninety-One Thousand Three Hundred Seventy-Six (332,091,376) shares of which shall be Preferred Stock (the “ Preferred Stock ”). The Preferred Stock shall have a par value of One Tenth of One Cent ($0.001) per share and the Common Stock shall have a par value of One Tenth of One Cent ($0.001) per share.


B. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock and Preferred Stock of the Corporation (voting together as a single class on an as-if-converted basis to Common Stock).

C. Twenty-Nine Million Seven Hundred Thirty-Seven Thousand One Hundred Ninety-Eight (29,737,198) of the authorized shares of Preferred Stock are hereby designated “Series A-1 Preferred Stock” (the “ Series A-1 Preferred ”), Eleven Million Five Hundred Seventy-Two Thousand Two Hundred Six (11,572,206) of the authorized shares of Preferred Stock are hereby designated “Series A-1A Preferred Stock” (the “ Series A-1A Preferred ,” and with the Series A-1 Preferred, the “ Series A Preferred ”), Sixty-Seven Million Five Hundred Sixty-Nine Thousand Six Hundred Twenty-Seven (67,569,627) of the authorized shares of Preferred Stock are hereby designated “Series B-1 Preferred Stock” (the “ Series B-1 Preferred ”), One Hundred Forty Million Five Hundred Forty-Two Thousand One Hundred Seventy-Eight (140,542,178) of the authorized shares of Preferred Stock are hereby designated “Series B-2 Preferred Stock” (the “ Series B-2 Preferred ”) and Eighty-Two Million Six Hundred Seventy Thousand One Hundred Sixty-Seven (82,670,167) of the authorized shares of Preferred Stock are hereby designated “Series B-3 Preferred Stock” (the “ Series B-3 Preferred ,” and with the Series B-1 Preferred and Series B-2 Preferred, the “ Series B Preferred ”).

D. The rights, preferences, privileges, restrictions and other matters relating to the Preferred Stock are as follows:

 

  1. D IVIDEND R IGHTS .

(a) Holders of shares of the Preferred Stock, in preference to the holders of Common Stock, shall be entitled to receive pari passu , when, as and if declared by the Board of Directors of the Corporation (the “ Board ”), but only out of funds that are legally available therefor, cash dividends at the rate of eight percent (8%) of the applicable Purchase Price (as defined below) per annum on each outstanding share of Preferred Stock. Such dividends shall be payable only when, as and if declared by the Board and shall be non-cumulative.

(b) As used herein, the term “ Purchase Price ” shall mean (i) for each share of the Series A-1 Preferred and the Series A-1A Preferred, $0.9658 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series A Purchase Price ”), (ii) for each share of the Series B-1 Preferred, $0.1297 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-1 Purchase Price ”), (iii) for each share of the Series B-2 Preferred, the Series B-2 Issue Price (as such term is defined in that certain Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement among the Corporation and the other parties named therein as amended from time to time in effect, a copy of which can be obtained from the Corporation at its principal place of business, which, at the time of

 

2


filing of this Fourth Amended and Restated Certificate of Incorporation, is 11801 Research Drive, Suite D, Alachua, FL 32615 Attn: President (the “ Series B Purchase Agreement ”)) (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-2 Purchase Price ”) and (iv) for each share of the Series B-3 Preferred, the Series B-3 Issue Price (as such term is defined in the Series B Purchase Agreement) (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-3 Purchase Price ”). Notwithstanding the foregoing, (A) in the event that an Optional Closing (as such term is defined in the Series B Purchase Agreement (an “ Optional Closing ”)) for the sale of shares of Series B-2 Preferred occurs prior to the Second Closing (as such term is defined in the Series B Purchase Agreement (the “ Second Closing ”)), then the Series B-2 Purchase Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Second Closing, at which time the Series B-2 Purchase Price for such shares shall be calculated as described in the foregoing sentence or in the event that the Second Closing does not occur, the Series B-2 Purchase Price for such shares shall be adjusted in accordance with Section 2.6(c) of the Series B Purchase Agreement and (B) in the event that an Optional Closing for the sale of shares of Series B-3 Preferred occurs prior to the Third Closing (as such term is defined in the Series B Purchase Agreement (the “ Third Closing ”)), then the Series B-3 Purchase Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Third Closing, at which time the Series B-3 Purchase Price for such shares shall be calculated as described in the foregoing sentence or in the event that the Third Closing does not occur, the Series B-3 Purchase Price for such shares shall be adjusted in accordance with Section 2.6(c) of the Series B Purchase Agreement. The books and records of the Corporation shall reflect the Purchase Price in respect of each outstanding share of Preferred Stock.

(c) So long as any shares of any Preferred Stock are outstanding, the Corporation shall not pay or declare any dividend, whether in cash or property, or make any other distribution on the Common Stock, or purchase, redeem or otherwise acquire for value any shares of Common Stock until all dividends as set forth in Section 1(a) above with respect to all outstanding shares of Preferred Stock shall have been paid or declared and set apart, except for:

(i) acquisitions of Common Stock by the Corporation pursuant to agreements which permit the Corporation to repurchase such shares at the lesser of cost or fair market value (as determined in good faith by the Board) of such shares upon termination of services to the Corporation;

(ii) acquisitions of Common Stock in exercise of the Corporation’s right of first refusal to repurchase such shares; or

(iii) acquisitions of Common Stock approved by the Board and the holders of at least a majority of the outstanding shares of Preferred Stock.

 

3


(d) In the event dividends are paid on any share of Common Stock, the Corporation shall pay an additional dividend on all outstanding shares of the Preferred Stock in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock.

(e) The provisions of Sections 1(c) and 1(d) shall not apply to a dividend payable solely in shares of Common Stock that results in an adjustment pursuant to Section 5(f) hereof.

 

  2. V OTING R IGHTS .

(a) General Rights. Each holder of shares of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Preferred Stock could be converted (pursuant to Section 5 hereof) immediately after the close of business on the record date for voting for such meeting or such written consent and shall have voting rights and powers equal to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation and applicable law. Except as otherwise provided herein or as required by law, holders of shares of Preferred Stock shall vote together with the holders of shares of Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the holders of shares of Common Stock.

(b) Preferred Stock Protective Provisions. For so long as any shares of Preferred Stock remain 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 or consent required by law or herein) the vote or written consent of the holders of at least a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as-if-converted to Common Stock basis:

(i) liquidate, dissolve or wind-up the business and affairs of the Corporation, or effect any Deemed Liquidation Event;

(ii) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation;

(iii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security having rights, preferences or privileges senior to or on parity with the Series B Preferred, or increase or decrease the authorized number of shares of Preferred Stock;

(iv) purchase or redeem or pay or declare any dividend on any shares of capital stock of the Corporation prior to the purchase, redemption or declaration of any dividend on shares of the Preferred Stock 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 in connection with the cessation of such employment or service at the lower of cost or the fair market value of such shares;

 

4


(v) create, or authorize the creation of, or issue, or authorize the issuance of any debt security (other than equipment leases or bank lines of credit) if the aggregate indebtedness of the Corporation following such action would exceed $2,000,000 in the aggregate (excluding equipment leases or bank lines of credit) unless such debt security has received the prior approval of the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors (as defined in Section 2(c)(i)(A) of this Article IV) or (B) following the Second Closing and for so long as there are any Series B-2 Directors in office, a majority of the Series B-2 Directors (as defined in Section 2(c)(ii)(A) of this Article IV);

(vi) create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation or all or substantially all of the assets of any direct or indirect subsidiary;

(vii) increase or decrease the authorized number of members of the Corporation’s Board;

(viii) take any action that would limit, change or alter the rights, preferences or privileges of any series of the Preferred Stock; or

(ix) (A) effect any acquisition of the capital stock of another entity or acquire or permit any subsidiary to acquire, all or substantially all of the assets of another entity or (B) enter into any strategic alliance, technology or intellectual property licensing arrangement, or other corporate partnership with any entity involving the payment, contribution or assignment by the Corporation or to the Corporation of money or assets with a value greater than $1,000,000, unless such transaction has received the prior approval of the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors or (B) following the Second Closing and for so long as there are any Series B-2 Directors in office, a majority of the Series B-2 Directors.

(c) Election of Board of Directors.

(i) Between the date of the Corporation’s first issuance of shares of Series B-1 Preferred (the “ Series B-1 Original Issue Date ”) and the Second Closing, the Board shall consist of seven (7) members, and:

(A) the holders of record of the then outstanding shares of Series B Preferred, voting as a separate class on an as-if-converted to Common Stock basis, shall be entitled to elect two (2) members of the Board (the “ Series B-1 Directors ”) at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors;

 

5


(B) the holders of record of the then outstanding shares of Series A Preferred, voting as a separate class on an as-if-converted to Common Stock basis, shall be entitled to elect three (3) members of the Board at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; and

(C) the holders of record of the then outstanding shares of Common Stock and Preferred Stock, voting together as a single class on an as-if-converted to Common Stock basis, shall be entitled to elect all remaining members of the Board (one (1) of which shall be the Corporation’s Chief Executive Officer) at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors.

(ii) Following the Second Closing, the Board shall consist of nine (9) members, and:

(A) as long as at least 10% of the authorized shares of Series B Preferred remain outstanding, the holders of record of the then outstanding shares of Series B Preferred, voting as a separate class on an as-if-converted to Common Stock basis, shall be entitled to elect five (5) members of the Board (the “ Series B-2 Directors ”) at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors;

(B) as long as at least 10% of the authorized shares of Series A Preferred remain outstanding, the holders of record of the then outstanding shares of Series A Preferred, voting as a separate class on an as-if-converted to Common Stock basis, shall be entitled to elect three (3) members of the Board at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors; and

(C) the holders of record of the then outstanding shares of Common Stock and Preferred Stock, voting together as a single class on an as-if-converted to Common Stock basis, shall be entitled to elect the remaining member of the Board, which member shall be the Corporation’s Chief Executive Officer, at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors, and to remove from office such directors and to fill any vacancy caused by the resignation, death or removal of such directors.

 

  3. L IQUIDATION R IGHTS .

(a) Upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary (a “ Liquidation Event ”), before any distribution or payment shall be made to the holders of any Series A Preferred or

 

6


Common Stock by reason of their ownership thereof, the holders of shares of the Series B Preferred shall be entitled to be paid, pari passu , out of the assets of the Corporation legally available for distribution (or the consideration received in the Deemed Liquidation Event (as such term is defined in Section 4 below)), (i) for each share of Series B-1 Preferred held by them, an amount per share of Series B-1 Preferred equal to the Series B-1 Purchase Price, (ii) for each share of Series B-2 Preferred held by them, an amount per share of Series B-2 Preferred equal to the Series B-2 Purchase Price and (iii) for each share of Series B-3 Preferred held by them, an amount per share of Series B-3 Preferred equal to the Series B-3 Purchase Price, in each case plus all declared and unpaid dividends on the Series B-1 Preferred, Series B-2 Preferred or Series B-3 Preferred, as the case may be (the “ Series B Liquidation Preference ”). If, upon any such Liquidation Event, the assets of the Corporation (or the consideration received in the Deemed Liquidation Event) shall be insufficient to make payment in full to all holders of Series B Preferred of the Series B Liquidation Preference, then such assets (or consideration) shall be distributed, pari passu , among the holders of Series B Preferred at the time outstanding, ratably in proportion to the amounts to which they would be entitled with respect to such shares of Series B Preferred if sufficient assets were available to make such payment in full.

(b) Upon any Liquidation Event, after the payment in full of the Series B Liquidation Preference to the holders of Series B Preferred, but before any distribution or payment shall be made to the holders of any Common Stock, the holders of shares of the Series A Preferred shall be entitled to be paid, pari passu , out of the assets of the Corporation legally available for distribution (or the consideration received in the Deemed Liquidation Event), for each share of Series A-1 Preferred and each share of Series A-1A Preferred held by them, an amount per share of Series A-1 Preferred and an amount per share of Series A-1A Preferred equal to the Series A Purchase Price plus all declared and unpaid dividends on the Series A-1 Preferred and Series A-1A Preferred, as the case may be (the “ Series A Liquidation Preference ”). If, upon any such Liquidation Event, the assets of the Corporation (or the consideration received in the Deemed Liquidation Event) shall be insufficient to make payment in full to all holders of Series A Preferred of the Series A Liquidation Preference, then such assets (or consideration) shall be distributed, pari passu , among the holders of Series A Preferred at the time outstanding, ratably in proportion to the amounts to which they would be entitled with respect to such shares of Series A Preferred if sufficient assets were available to make such payment in full.

(c) Upon any Liquidation Event, after the payment in full of the Series B Liquidation Preference and the Series A Liquidation Preference as set forth in Sections 3(a) and 3(b) above, the assets of the Corporation legally available for distribution in such Liquidation Event (or the consideration received in the Deemed Liquidation Event), if any, shall be distributed ratably to the holders of the Common Stock and the Preferred Stock on an as-if-converted to Common Stock basis.

 

7


  4. D EEMED L IQUIDATION E VENTS .

(a) In the event that the Corporation is a party to a Deemed Liquidation Event (as hereinafter defined), then each holder of Preferred Stock shall be entitled to receive, for each share of Preferred Stock then held, out of the proceeds of such Deemed Liquidation Event, the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event pursuant to Sections 3(a) and 3(b) above unless the treatment of such Deemed Liquidation Event as a Liquidation Event is waived by (i) between the Series B-1 Original Issue Date and the Second Closing, at least seventy percent (70%) of the then outstanding shares of Preferred Stock or (ii) following the Second Closing, at least a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as-if-converted to Common Stock basis by written notice sent to the Corporation at least five (5) days prior to the effective date of such Deemed Liquidation Event.

(b) For the purposes of this Section 4: “ Deemed Liquidation Event ” shall mean (i) any consolidation or merger of the Corporation with or into any other corporation or other entity or person, or any other corporate reorganization, in which the capital stock of the Corporation immediately prior to such consolidation, merger or reorganization, represents less than 50% of the voting power of the surviving entity (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; (ii) any transaction or series of related transactions to which the Corporation is a party in which in excess of fifty percent (50%) of the Corporation’s voting power is transferred; provided that this clause (ii) shall not include (x) any consolidation or merger effected exclusively to change the domicile of the Corporation, or (y) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Corporation or any successor or indebtedness of the Corporation is cancelled or converted or a combination thereof; and (iii) any sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Corporation.

(c) In any Deemed Liquidation Event, if the consideration to be received is securities of a corporation or other entity or other property other than cash, its value will be deemed its fair market value as determined in good faith by the Board on the date such determination is made.

 

  5. C ONVERSION R IGHTS .

The holders of shares of Preferred Stock shall have the following rights with respect to the conversion of shares of Preferred Stock into shares of Common Stock (the “ Conversion Rights ”):

(a) Optional Conversion. 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 fully-paid and nonassessable shares of Common Stock. The number of shares of Common Stock to which a holder of shares of Preferred Stock shall be entitled upon conversion shall be the

 

8


product obtained by multiplying the applicable Preferred Conversion Rate then in effect (determined as provided in Section 5(b)) by the number of shares of Preferred Stock being converted.

(b) Preferred Conversion Rate. The “ Preferred Conversion Rate ” shall mean (i) for conversion of either the Series A-1 Preferred or the Series A-1A Preferred, the quotient obtained by dividing the Series A Purchase Price by the Series A-1/A-1A Preferred Conversion Price, calculated as provided in Section 5(c) (the “ Series A-1/A-1A Preferred Conversion Rate ”), (ii) for conversion of the Series B-1 Preferred, the quotient obtained by dividing the Series B-1 Purchase Price by the Series B-1 Preferred Conversion Price, calculated as provided in Section 5(c) (the “ Series B-1 Preferred Conversion Rate ”), (iii) for conversion of the Series B-2 Preferred, the quotient obtained by dividing the Series B-2 Purchase Price by the Series B-2 Preferred Conversion Price, calculated as provided in Section 5(c) (the “ Series B-2 Preferred Conversion Rate ”) and (iv) for conversion of the Series B-3 Preferred, the quotient obtained by dividing the Series B-3 Purchase Price by the Series B-3 Preferred Conversion Price, calculated as provided in Section 5(c) (the “ Series B-3 Preferred Conversion Rate ”).

(c) Preferred Conversion Price. The “ Preferred Conversion Price ” shall initially be (i) $0.4586 for either the Series A-1 Preferred or the Series A-1A Preferred (“ Series A-1/A-1A Preferred Conversion Price ”), (ii) the Series B-1 Purchase Price for the Series B-1 Preferred (“ Series B-1 Preferred Conversion Price ”), (iii) the Series B-2 Purchase Price for the Series B-2 Preferred (“ Series B-2 Preferred Conversion Price ”) and (iv) the Series B-3 Purchase Price for the Series B-3 Preferred (“ Series B-3 Preferred Conversion Price ”). Notwithstanding the foregoing, (i) in the event that an Optional Closing for the sale of shares of Series B-2 Preferred occurs prior to the Second Closing, then the Series B-2 Preferred Conversion Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Second Closing, at which time the Series B-2 Preferred Conversion Price for such shares shall be adjusted to equal the Series B-2 Purchase Price and (ii) in the event that an Optional Closing for the sale of shares of Series B-3 Preferred occurs prior to the Third Closing, then the Series B-3 Preferred Conversion Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Third Closing, at which time the Series B-3 Preferred Conversion Price for such shares shall be adjusted to equal the Series B-3 Purchase Price. Each initial Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 5. All references to each Preferred Conversion Price herein shall mean such Preferred Conversion Price as so adjusted.

(d) Mechanics of Conversion. Each holder of Preferred Stock who desires to optionally convert the same into shares of Common Stock pursuant to Section 5(a) shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or any transfer agent for the Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same. Such notice shall state the number of shares of Preferred Stock being converted. Thereupon, the Corporation shall promptly issue and deliver at such office to such holder

 

9


a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined in good faith by the Board as of the date of such conversion), any declared and unpaid dividends on the shares of Preferred Stock being converted held of record by such holder as of the record date of such dividend and (ii) in cash (at the Common Stock’s fair market value determined in good faith by the Board as of the date of conversion) the value of any fractional share of Common Stock otherwise issuable to any holder of Preferred Stock, as the case may be. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Preferred Stock to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock immediately after the close of business on such date.

(e) Adjustment for Stock Splits and Combinations. If at any time or from time to time after the Series B-1 Original Issue Date the Corporation effects a subdivision of the outstanding Common Stock, the applicable Preferred Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if at any time or from time to time after the Series B-1 Original Issue Date the Corporation combines the outstanding shares of Common Stock into a smaller number of shares, the applicable Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f) Adjustment for Common Stock Dividends and Distributions. If at any time or from time to time after the Series B-1 Original Issue Date the Corporation pays to holders of Common Stock a dividend or other distribution in additional shares of Common Stock, the applicable Preferred Conversion Price then in effect shall be decreased as of the time of such issuance, as provided below:

(i) The applicable Preferred Conversion Price shall be adjusted by multiplying the applicable Preferred Conversion Price then in effect by a fraction:

(A) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and

(B) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

(ii) If the Corporation fixes a record date to determine which holders of Common Stock are entitled to receive such dividend or other

 

10


distribution, the applicable Preferred Conversion Price shall be fixed as of the close of business on such record date and the number of shares of Common Stock shall be calculated immediately prior to the close of business on such record date; and

(iii) If such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the applicable Preferred Conversion Price shall be adjusted pursuant to this Section 5(f) to reflect the actual payment of such dividend or distribution.

(g) Adjustment for Reclassification, Exchange, Substitution, Reorganization, Merger or Consolidation. If at any time or from time to time after the Series B-1 Original Issue Date, the Common Stock issuable upon the conversion of the Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, merger, consolidation or otherwise (other than a Deemed Liquidation Event or a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 5), in any such event each holder of shares of Preferred Stock shall then have the right to convert such shares into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, merger, consolidation or other change by holders of the maximum number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification, merger, consolidation or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of the shares of Preferred Stock after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the applicable Preferred Conversion Price then in effect and the number of shares issuable upon conversion of shares of Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable. For the avoidance of doubt, nothing in this Section 5(g) shall be construed as preventing the holders of Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the DGCL in connection with a merger triggering an adjustment hereunder, nor shall this Section 5(g) be deemed conclusive evidence of the fair value of the shares of Preferred Stock in any such appraisal proceeding.

(h) Sale of Shares Below the Dilution Conversion Price.

(i) A “ Qualifying Dilutive Issuance ” shall be deemed to have occurred with respect to a series of Preferred Stock if at any time or from time to time after the Series B-1 Original Issue Date, the Corporation issues or sells, or is deemed by the express provisions of this Section 5(h) to have issued or sold, Additional Shares of Common Stock (as defined below), other than as provided in Section 5(f) or 5(g) above, for an Effective Price (as defined below) less than the lower of (a) the Preferred Conversion Price for such applicable series in effect immediately prior to the issuance of

 

11


such Additional Shares of Common Stock or (b) if such Qualifying Dilutive Issuance occurs (1) prior to the Second Closing, the Series B-1 Preferred Conversion Price, (2) after the Second Closing but before the Third Closing, the Series B-2 Preferred Conversion Price and (3) after the Third Closing, the Series B-3 Preferred Conversion Price (the lower of (a) or (b), the “ Dilution Conversion Price ”). Notwithstanding the foregoing, (i) in the event that an Optional Closing for the sale of shares of Series B-2 Preferred occurs prior to the Second Closing, then the Dilution Conversion Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Second Closing, at which time the Dilution Conversion Price for such shares shall be adjusted to equal the Series B-2 Preferred Conversion Price and (ii) in the event that an Optional Closing for the sale of shares of Series B-3 Preferred occurs prior to the Third Closing, then the Dilution Conversion Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Third Closing, at which time the Dilution Conversion Price for such shares shall be adjusted to equal the Series B-3 Preferred Conversion Price. Upon each Qualifying Dilutive Issuance for any series of Preferred Stock, the then existing applicable Preferred Conversion Price for such series of Preferred Stock shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying such applicable Preferred Conversion Price in effect immediately prior to such issuance or sale by a fraction:

(A) the numerator of which shall be (1) the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the Aggregate Consideration (as defined below) received or deemed received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the then-existing applicable Dilution Conversion Price, and

(B) the denominator of which shall be (1) the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale, plus (2) the total number of Additional Shares of Common Stock so issued.

For the purposes of the preceding sentence, the number of shares of Common Stock deemed to be outstanding as of a given date shall be the sum of (A) the number of shares of Common Stock outstanding and (B) the number of shares of Common Stock issuable upon exercise of options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (as defined below), including the Preferred Stock, outstanding (assuming exercise of any outstanding options therefor) immediately preceding the given date.

(ii) No adjustment shall be made to any Preferred Conversion Price in an amount less than one cent per share. Any adjustment otherwise required by this Section 5(h) that is not required to be made due to the preceding sentence shall be included in any subsequent adjustment to such Preferred Conversion Price.

 

12


(iii) For the purpose of making any adjustment required under this Section 5(h), the aggregate consideration received by the Corporation for any issue or sale of securities (the “ Aggregate Consideration ”) shall: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Corporation before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Corporation in connection with such issue or sale and without deduction of any expenses payable by the Corporation, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

(iv) For the purpose of the adjustment required under this Section 5(h), if the Corporation issues or sells (x) Preferred Stock or other stock, options, warrants, purchase rights or other securities convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as “ Convertible Securities ”) or (y) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Dilution Conversion Price, in each case the Corporation shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such rights or options or Convertible Securities plus:

(A) in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Corporation upon the exercise of such rights or options; and

(B) in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Corporation upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities).

(C) If the minimum amount of consideration payable to the Corporation upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further , that if the minimum amount of consideration payable to the Corporation upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Corporation upon the exercise or conversion of such rights, options or Convertible Securities.

 

13


(D) No further adjustment of the applicable Preferred Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, such Preferred Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Preferred Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior conversions of any shares of Preferred Stock.

(v) For the purpose of making any adjustment to the Preferred Conversion Price of any shares of Preferred Stock required under this Section 5(h), “ Additional Shares of Common Stock ” shall mean all shares of Common Stock issued by the Corporation or deemed to be issued pursuant to this Section 5(h) (including shares of Common Stock subsequently reacquired or retired by the Corporation) on or after the Series B-1 Original Issue Date, other than:

(A) shares of Common Stock issued upon conversion of any shares of Preferred Stock;

(B) shares of Common Stock or Convertible Securities issued after the Series B-1 Original Issue Date to employees, officers or directors of, or consultants or advisors to the Corporation or any subsidiary pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors or (B) following the Second Closing and for so long as there are any Series B-2 Directors, a majority of the Series B-2 Directors;

(C) shares of Common Stock issued pursuant to the exercise of Convertible Securities outstanding as of the Series B-1 Original Issue Date;

(D) shares of Common Stock or Convertible Securities issued for consideration other than cash pursuant to a merger, consolidation,

 

14


acquisition, strategic alliance or similar business combination approved by the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors or (B) following the Second Closing and for so long as there are any Series B-2 Directors, a majority of the Series B-2 Directors;

(E) shares of Common Stock or Convertible Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors or (B) following the Second Closing and for so long as there are any Series B-2 Directors, a majority of the Series B-2 Directors; and

(F) any Common Stock or Convertible Securities issued in connection with strategic transactions involving the Corporation and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein has been approved by the Board, including the approval of (A) between the Series B-1 Original Issue Date and the Second Closing, the Series B-1 Directors or (B) following the Second Closing and for so long as there are any Series B-2 Directors, a majority of the Series B-2 Directors, and is not substantially for equity financing purposes.

References to Common Stock in the subsections of this clause (v) above shall mean all shares of Common Stock issued by the Corporation or deemed to be issued pursuant to this Section 5(h). The “ Effective Price ” of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Corporation under this Section 5(h), into the Aggregate Consideration received, or deemed to have been received by the Corporation for such issue under this Section 5(h), for such Additional Shares of Common Stock. In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, determinable.

(vi) In the event that the Corporation issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance (the “ First Dilutive Issuance ”), then in the event that the Corporation issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive Issuance as a part of the same transaction or series of related transactions as the First Dilutive Issuance (a “ Subsequent Dilutive Issuance ”), then and in each such case upon a Subsequent Dilutive Issuance the applicable Preferred Conversion Price shall be reduced to the Preferred Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance.

 

15


(vii) No adjustment in the Preferred Conversion Price of any series of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of 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.

(i) Certificate of Adjustment. In each case of an adjustment or readjustment of the Preferred Conversion Price of one or more series of Preferred Stock pursuant to this Section 5, the Corporation, at its expense, shall, as promptly as reasonably practicable, compute such adjustment or readjustment in accordance with the provisions hereof and shall, as promptly as reasonably practicable upon request at any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of shares of such series of Preferred Stock so requesting at the holder’s address as shown in the Corporation’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Corporation for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Preferred Conversion Price for such series of Preferred Stock at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type and amount, if any, of other property which at the time would be received upon conversion of such series of Preferred Stock, as applicable. Failure to request or provide such notice shall have no effect on any such adjustment.

(j) Notices of Record Date. Upon (i) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Deemed Liquidation Event or other capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger or consolidation of the Corporation with or into any other corporation, or any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, the Corporation shall mail to each holder of shares of Preferred Stock at least ten (10) days prior to the record date specified therein (or such shorter period approved by the holders of at least a majority of the then outstanding shares of Preferred Stock, voting together as a single class on an as if converted to Common Stock basis) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Deemed Liquidation Event, reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Deemed Liquidation Event, reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

 

16


(k) Special Mandatory Conversion.

(i) Special Mandatory Conversion. In the event that a holder of shares of Series B Preferred does not fulfill its obligations under the Series B Purchase Agreement with respect to the purchase at the Second Closing or Third Closing (as applicable) by such holder of its Committed B-2 Shares (as defined in the Purchase Agreement) or its Committed B-3 Shares (as defined in the Purchase Agreement) (as applicable), then, unless such holder has purchased its Committed B-2 Shares and Committed B-3 Shares at an Optional Closing held prior to such Second Closing or Third Closing, each share of Preferred Stock held by such holder shall immediately prior to such Second Closing or Third Closing, automatically, and without further action on the part of such holder, be converted into shares of Common Stock at the rate of one (1) share of Common Stock for every ten (10) shares of Preferred Stock held by such holder. Such conversion is referred to as a “ Special Mandatory Conversion .”

(ii) Procedures. Upon a Special Mandatory Conversion, each holder whose shares of Preferred Stock are converted pursuant to Section 5(k)(i) shall surrender his, her or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 5(k). All rights with respect to the shares of Preferred Stock converted pursuant to Section 5(k)(i), including the rights, if any, to receive notices and vote (other than as required by law as a holder of Common Stock), will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificates for the number of shares of Common Stock into which such shares of Preferred Stock have been converted, and any right to the payment of any declared but unpaid accrued dividends on such shares of Preferred Stock held as of the record date for such dividend. If so required by the Corporation, 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. As soon as practicable after the Special Mandatory Conversion and the surrender of the certificate or certificates for shares of Preferred Stock so converted, the Corporation shall cause to be issued and delivered to such holder, or on his, her or its written order, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5(l) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

(iii) Cancellation of Shares. All certificates evidencing shares of Preferred Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the time of the Special Mandatory Conversion, be deemed to have been retired and cancelled, and the shares of Preferred Stock converted pursuant to Section 5(k)(i) represented thereby shall, from and after the time of the Special Mandatory Conversion, be deemed to have been converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. 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.

 

17


(iv) Automatic Conversion.

(A) Each share of Preferred Stock shall automatically be converted into shares of Common Stock, based on the then-effective applicable Preferred Conversion Price (i) at any time upon the written consent of the holders of (A) between the Series B-1 Original Issue Date and the Second Closing, at least seventy percent (70%) of the then outstanding shares of Preferred Stock, voting as a single class on an as-if-converted to Common Stock basis or (B) following the Second Closing, at least a majority of the then outstanding shares of Preferred Stock, voting as a single class on an as-if-converted to Common Stock basis, or (ii) immediately upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which (x) the per share price is at least three (3) times the Series B-3 Purchase Price (as adjusted for stock splits, dividends, recapitalizations and the like after the filing date hereof), or, in the event that the Third Closing has not yet occurred and the Series B-3 Purchase Price has not been determined, then the per share price is at least five (5) times the Series B-2 Purchase Price (as adjusted for stock splits, dividends, recapitalizations and the like after the filing date hereof), or, in the event that the Second Closing has not yet occurred and the Series B-2 Purchase Price has not been determined, then the per share price is at least five (5) times the Series B-1 Purchase Price (as adjusted for stock splits, dividends, recapitalizations and the like after the filing date hereof) and (y) the gross cash proceeds to the Corporation (before underwriting discounts, commissions and fees) are at least $40,000,000. Upon such automatic conversion, any declared and unpaid dividends shall be paid in accordance with the provisions of Section 5(d).

(B) Upon the occurrence of either of the events specified in Section 5(k)(iv) above, the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided, however , that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Preferred Stock are either delivered to the Corporation or its transfer agent as provided below, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. Upon the occurrence of such automatic conversion of the outstanding shares of Preferred Stock, the holders of such shares of Preferred Stock shall surrender the certificates representing such shares at the office of the Corporation or any transfer agent for the Preferred Stock. Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred, together with

 

18


cash as provided in Section 5(l) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion, and any declared and unpaid dividends on the shares of Preferred Stock shall be paid in accordance with the provisions of Section 5(d). Any shares of Preferred Stock converted pursuant to Section 5(k)(iv)(A) above shall be retired and cancelled, 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.

(l) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of any shares of Preferred Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Corporation shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the fair value of one share of Common Stock (as determined in good faith by the Board) on the date of conversion.

(m) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will 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 purpose.

(n) Notices. Any notice required by the provisions of this Section 5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the 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) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Corporation.

(o) Payment of Taxes. The Corporation will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Preferred Stock, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered.

 

19


  6. N O R EISSUANCE OF P REFERRED S TOCK .

Any shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase, exchange, conversion or otherwise shall thereupon be retired and shall not be reissued.

V.

A. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended.

B. Any repeal or modification of this Article V shall only be prospective and shall not affect the rights of any director under this Article V in effect at the time of the alleged occurrence of any action or omission to act giving rise to liability.

VI.

For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:

A. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board. The number of directors which shall constitute the whole Board shall be fixed by the Board in the manner provided in the Bylaws, subject to any restrictions which may be set forth in this Certificate of Incorporation.

B. The Board is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation; provided however , that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, if the stockholders exercise such power, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation.

C. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

* * * *

FOUR: This Fourth Amended and Restated Certificate of Incorporation has been duly approved in accordance with the provisions of Sections 242 and 245 of the DGCL and has been adopted by the requisite vote of the stockholders of the Corporation, acting by written consent in accordance with Section 228 of the DGCL.

 

20


I N W ITNESS W HEREOF , Applied Genetic Technologies Corporation has caused this Fourth Amended and Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer this 15 th day of November, 2012.

 

A PPLIED G ENETIC T ECHNOLOGIES

C ORPORATION

Signature:  

/s/ Susan B. Washer

Print Name:  

Susan B. Washer

Title:  

President and Chief Executive Officer

 

21

Exhibit 3.2

CERTIFICATE OF AMENDMENT

OF FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF APPLIED GENETIC TECHNOLOGIES CORPORATION

Pursuant to Section 242

of the General Corporation Law of

the State of Delaware

Applied Genetic Technologies Corporation (the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows:

1. The name of the Corporation is Applied Genetic Technologies Corporation.

2. By written consent in lieu of a meeting of the Board of Directors of the Corporation, pursuant to Section 141(f) of the General Corporation Law of the State of Delaware, a resolution was duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth this Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation of the Corporation (the “ Certificate of Amendment ”), declaring this Certificate of Amendment to be in the best interest of the Corporation, and approving this Certificate of Amendment. The stockholders of the Corporation duly approved this Certificate of Amendment by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware. The text of the Certificate of Amendment is as follows:

The Fourth Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by:

 

  1. Deleting Section D.1(b) of Article IV in its entirety and inserting the following in lieu thereof:

(b) As used herein, the term “ Purchase Price shall mean (i) for each share of the Series A-1 Preferred and the Series A-1A Preferred, $0.9658 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series A Purchase Price ”), (ii) for each share of the Series B-1 Preferred, $0.1297 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-1 Purchase Price ”), (iii) for each share of the Series B-2 Preferred, $0.1485 (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-2 Purchase Price ”) and (iv) for each share of the Series B-3 Preferred, the Series B-3 Issue Price (as such term is defined in that certain Series B-1, B-2 and B-3 Preferred Stock Purchase Agreement among the Corporation and the other parties named therein as amended from time to time in effect, a copy of which can be

 

1


obtained from the Corporation at its principal place of business, which, at the time of filing of this Fourth Amended and Restated Certificate of Incorporation, is 11801 Research Drive, Suite D, Alachua, FL 32615 Attn: President (the “ Series B Purchase Agreement ”)) (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof) (the “ Series B-3 Purchase Price ”). Notwithstanding the foregoing, in the event that an Optional Closing for the sale of shares of Series B-3 Preferred occurs prior to the Third Closing (as such term is defined in the Series B Purchase Agreement (the “ Third Closing ”)), then the Series B-3 Purchase Price for such shares shall be the purchase price paid for such shares pursuant to the Series B Purchase Agreement until the occurrence of the Third Closing, at which time the Series B-3 Purchase Price for such shares shall be calculated as described in the foregoing sentence or in the event that the Third Closing does not occur, the Series B-3 Purchase Price for such shares shall be adjusted in accordance with Section 2.6(c) of the Series B Purchase Agreement. The books and records of the Corporation shall reflect the Purchase Price in respect of each outstanding share of Preferred Stock.”

* * * * *

 

2


IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of Fourth Amended and Restated Certificate of Incorporation to be executed on its behalf by Susan B. Washer, its President and Chief Executive Officer on April  10 , 2013.

 

/s/ Susan B. Washer

Susan B. Washer
President & Chief Executive Officer

 

3

Exhibit 3.4

BYLAWS

OF

APPLIED GENETIC TECHNOLOGIES CORPORATION

A DELAWARE CORPORATION


BYLAWS

OF

APPLIED GENETIC TECHNOLOGIES CORPORATION

ARTICLE I

OFFICES

1. Principal Office . The principal office of the Corporation shall be located in Alachua County, Florida or such other place as is designated by the Board of Directors.

2. Registered Office . The registered office of the Corporation required by law to be maintained in the State of Delaware may be, but need not be, identical with the principal office.

3. Other Offices . The Corporation may have offices at such other places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or as the affairs of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

1. Place of Meetings . All meetings of stockholders shall be held at the principal office of the Corporation or at such other place, either within or without the State of Delaware, as shall be designated in the notice of the meeting or agreed upon by the Board of Directors.

2. Annual Meeting . Unless directors are elected by written consent in lieu of an annual meeting, the annual meeting of the stockholders shall be held at the principal office of the Corporation at the date and time designated by the Board of Directors, but no later than 13 months after the last preceding Annual Meeting of Stockholders or Written Consent of Stockholders in lieu thereof, for the purpose of electing Directors of the Corporation and for the transaction of such other business as may be properly brought before the meeting.

3. Substitute Annual Meeting . If the annual meeting shall not be held on the day designated by these Bylaws, a substitute annual meeting may be called in accordance with the provisions of Section 4 of this Article II. A meeting so called shall be designated and treated for all purposes as the annual meeting. The shares represented at such substitute annual meeting, either in person or by proxy, and entitled to vote thereat, shall constitute a quorum for the purpose of such meeting.


4. Special Meetings . Special meetings of the stockholders may be called at any time by the President, the Secretary or the Board of Directors of the Corporation, or by any stockholder pursuant to the written request of the holders of not less than one-tenth (1/10) of all the shares entitled to vote at the meeting.

5. Notice of Meetings .

(a) Written or printed notice stating the time and place of the meeting shall be delivered not less than ten (10) nor more than sixty (60) days before the date thereof, either personally or by mail, by or at the direction of the Board of Directors, President, Secretary or other person calling the meeting, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the stockholder at such stockholder’s address as it appears on the record of stockholders of the Corporation, with postage thereon prepaid.

(b) In the case of an annual or substitute annual meeting, the notice of meeting need not specifically state the business to be transacted thereat unless it is a matter, other than election of Directors, on which the vote of the stockholders is expressly required by the provisions of the Delaware Corporation Law. In the case of a special meeting, the notice of meeting shall specifically state the purpose or purposes for which the meeting is called.

(c) When a meeting is adjourned for thirty (30) days or more, or when a new record date is fixed after the adjournment for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. When a meeting is adjourned for less than thirty (30) days in any one adjournment and a new record date is not fixed, it is not necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which the adjournment is taken.

6. Voting Lists . The Secretary shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders and of the number of shares held by each such stockholder.

 

2


7. Quorum .

(a) Unless otherwise provided by law, the holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. When a quorum is present at the original meeting, any business which might have been transacted at the original meeting may be transacted at an adjourned meeting, even when a quorum is not present. In the absence of a quorum at the opening of any meeting of stockholders, such meeting may be adjourned from time to time by the Board of Directors or the vote of a majority of the shares voting on the motion to adjourn, but no other business may be transacted until and unless a quorum is present. If later a quorum is present at an adjourned meeting, then any business may be transacted which might have been transacted at the original meeting.

(b) The stockholders at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of sufficient stockholders to leave less than a quorum.

8. Voting of Shares .

(a) Unless otherwise provided in the Certificate of Incorporation, each outstanding share having voting rights shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders.

(b) Except in the election of Directors, when a quorum is present at any meeting, the vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter, shall be the act of the stockholders on that matter, unless a vote by a greater number is required by law or by the charter or Bylaws of the Corporation.

(c) Voting on all matters except the election of Directors shall be by voice vote or by a show of hands unless the holders of one-tenth (1/10) of the shares represented at the meeting shall, prior to the voting on any matter, demand a ballot vote on that particular matter.

(d) Shares of its own stock owned by the Corporation, directly or indirectly, through a subsidiary or otherwise, shall not be voted and shall not be counted in determining the total number of shares entitled to vote; except that shares held in a fiduciary capacity may be voted and shall be counted to the extent provided by law.

9. Proxies . Shares may be voted either in person or by one or more agents authorized by a written proxy executed by the stockholder or by such stockholder’s duly authorized attorney-in-fact. A proxy is not valid after the expiration of three years from the date of its execution, unless the person executing it specifies therein the length of time for which it is to continue in force, or limits its use to a particular meeting. Proxies may be provided in any form or manner permitted by applicable law.

 

3


10. Inspectors of Election .

(a) Appointment of Inspectors of Election . In advance of any meeting of stockholders, the Board of Directors may appoint any persons, other than nominees for office, as inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the chairman of any such meeting may appoint inspectors of election at the meeting. The number of inspectors shall be either one or three. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the Board of Directors in advance of the meeting or at the meeting by the person acting as chairman.

(b) Duties of Inspectors . The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all stockholders. The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical.

(c) Vote of Inspectors . If there are three inspectors of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all.

(d) Report of Inspectors . On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge or question or matter determined by them and shall execute a certificate of any fact found by them. Any report or certificate made by them shall be a prima facie evidence of the facts stated therein.

11. Informal Action by Stockholders .

(a) Any action which is required or permitted to be taken at a meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be 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. Such signed and dated consent must be filed with the Secretary of the Corporation to be kept in the Corporate minute book, whether done before or after the action so taken, but in no event later than sixty (60) days after the earliest dated consent delivered in accordance with this section. Delivery made to the Secretary of the Corporation shall be by hand or by certified or registered mail, return receipt requested. When corporate action is taken without a meeting by less than unanimous written consent, prompt notice shall be given to those stockholders who have not consented in writing.

(b) Stockholders may act by written consent to elect directors; provided, however, that, if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

 

4


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

12. Notice by Electronic Transmission . Without limiting the manner by which notice may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the Delaware General Corporation Law, the certificate of incorporation, or the bylaws, shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Electronic transmission shall mean any form of communication, including but not limited to facsimile telecommunication and electronic mail, not directly involving the physical transmission of paper, that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient.

ARTICLE III

DIRECTORS

1. General Powers . The business and affairs of the Corporation shall be managed by the Board of Directors or by such committees as the Board may establish pursuant to these Bylaws.

 

5


2. Number, Term and Qualification . The number of Directors of the Corporation shall be not less than One (1) nor more than Seven (7) as may be fixed or changed from time to time, within the minimum and maximum, by the stockholders or by the Board of Directors. Each Director shall hold office until such Director’s death, resignation, retirement, removal, disqualification, or such Director’s successor is elected and qualifies. Directors need not be residents of the State of Delaware or stockholders of the Corporation.

3. Election of Directors . Except as provided in Section 5 of this Article III and unless directors are elected by written consent in lieu of an annual meeting, the Directors shall be elected at the annual meeting of stockholders. Those persons who receive the highest number of votes shall be deemed to have been elected. Unless otherwise provided in the Certificate of Incorporation, election of Directors shall be by written ballot.

4. Removal . Directors may be removed from office with or without cause by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of Directors. If a director is elected by a voting group of stockholders, only the stockholders of that voting group may participate in the vote to remove him. If any Directors are so removed, new Directors may be elected at the same meeting.

5. Vacancies . A vacancy occurring in the Board of Directors, including, without limitation, a vacancy created by an increase in the authorized number of Directors or resulting from the stockholders’ failure to elect the full authorized number of Directors, may be filled by the Board of Directors or if the Directors remaining in office constitute less than a quorum of the Directors, they may fill the vacancy by the affirmative vote of a majority of all remaining Directors or by the sole remaining Director. If the vacant office was held by a Director elected by a voting group, only the remaining Director or Directors elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy. A Director elected to fill a vacancy shall be elected for the unexpired term of such Director’s predecessor in office. The stockholders may elect a Director at any time to fill any vacancy not filled by the Directors.

6. Compensation . The Board of Directors may provide for the compensation of Directors for their services as such and may provide for the payment of any and all expenses incurred by the Directors in connection with such services.

7. Committees .

(a) The Board of Directors, by resolution adopted by a majority of the number of Directors then in office, may designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. 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 (a) adopting, amending or repealing any bylaw of the Corporation or (b) approving or adopting, or recommending to the stockholders

 

6


any action or matter expressly required by law to be submitted to stockholders for approval. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and make such reports to the Board of Directors as the Board of Directors may request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the Directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these Bylaws for the conduct of its business by the Board of Directors.

(b) Any resolutions adopted or other action taken by any such committee within the scope of the authority delegated to it by the Board of Directors shall be deemed for all purposes to be adopted or taken by the Board of Directors. The designation of any committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility or liability imposed upon it or him by law.

(c) If a committee member is absent or disqualified, the qualified members present at a meeting, even if not a quorum, may unanimously appoint another Board of Directors member to act in the absent or disqualified member’s place.

(d) Regular meetings of any such committee may be held without notice at such time and place as such committee may fix from time to time by resolution. Special meetings of any such committee may be called by any member thereof upon not less than two day’s notice stating the place, date and hour of such meeting, which notice may be given by any usual means of communication. Any member of a committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a committee meeting need not state the business proposed to be transacted at the meeting.

(e) A majority of the members of any such committee shall constitute a quorum for the transaction of business at any meeting thereof, and actions of such committee must be authorized by the affirmative vote of a majority of the members of such committee.

(f) Any member of any such committee may be removed at any time with or without cause by resolution adopted by a majority of the Board of Directors.

(g) Any such committee shall elect a presiding officer from among its members and may fix its own rules of procedure which shall not be inconsistent with these Bylaws. It shall keep regular minutes of its proceedings and report the same to the Board of Directors for its information at the meeting thereof held next after the proceedings shall have been taken.

ARTICLE IV

MEETINGS OF DIRECTORS

1. Regular Meetings . If an annual meeting of the stockholders is convened, a regular meeting of the Board of Directors shall be held immediately after, and at the same place as, the annual meeting of stockholders. In addition, the Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings.

 

7


2. Special Meetings . Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board (if one has been duly elected), the President or any two Directors.

3. Notice of Meetings .

(a) Regular meetings of the Board of Directors may be held without notice.

(b) The person or persons calling a special meeting of the Board of Directors shall, at least two days before the meeting, give notice thereof by any usual means of communication. Such notice or waiver of notice shall specify the business to be transacted at, or the purpose of, the meeting that is called. Notice of an adjourned meeting need not be given if the time and place are fixed at the meeting adjourning and if the period of adjournment does not exceed ten (10) days in any one adjournment.

(c) A Director may waive notice of any meeting. Attendance by a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

4. Quorum . A majority of the Directors in office immediately before the meeting shall constitute a quorum for the transaction of business at any meeting of the Board of Directors.

5. Manner of Acting .

(a) The act of a majority of the Directors then in office shall be the act of the Board of Directors, unless a greater number is required by law, the charter of the Corporation, or a Bylaw adopted by the stockholders.

(b) A Director of the Corporation, who is present at a meeting of the Board of Directors at which action on any corporate matter is taken, shall be presumed to have assented to the action taken unless such Director’s contrary vote is recorded or such Director’s dissent is otherwise entered in the minutes of the meeting or unless he or she shall file such Director’s written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right of dissent shall not apply to a Director who voted in favor of such action.

6. Action By Consent . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may by taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.

 

8


7. Attendance by Telephone . Any one or more Directors or members of a committee may participate in a meeting of the Board or committee by means of a conference telephone or similar communications device which allows all persons participating in the meeting to hear each other, and such participation in the meeting shall be deemed presence in person at such meeting.

ARTICLE V

OFFICERS

1. Number . The officers of the Corporation shall consist of a President, a Secretary, a Treasurer, and such Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers as the Board of Directors may from time to time elect. Any two or more offices, other than that of President and Secretary, may be held by the same person. In no event, however, may an officer act in more than one capacity where action of two or more officers is required.

2. Election and Term . The officers of the Corporation shall be elected by the Board of Directors. Such election may be held at any regular or special meeting of the Board or without a meeting by consent as provided in Article IV, Section 6 of these Bylaws. Each officer shall hold office until such officer’s death, resignation, retirement, removal, disqualification, or such officer’s successor is elected and qualifies.

3. Removal . Any officer or agent elected or appointed by the Board of Directors may be removed by the Board with or without cause; but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

4. Compensation . The compensation of all officers of the Corporation shall be fixed by the Board of Directors.

5. President . The President shall be the chief executive officer of the Corporation and, subject to the control of the Board of Directors, shall supervise and control the management of the Corporation in accordance with these Bylaws. He shall, in the absence of a Chairman of the Board of Directors, preside at all meetings of the Board of Directors and stockholders. He shall sign, with any other proper officer, certificates for shares of the Corporation and any deeds, mortgages, bonds, contracts, or other instruments which may be lawfully executed on behalf of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be delegated by the Board of Directors to some other officer or agent; and, in general, he shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.

6. Vice Presidents . The Vice Presidents, in the order of their appointment, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of that office. In addition, they shall perform such other duties and have such other powers as the President or the Board of Directors shall prescribe. The Board of Directors may designate one or more Vice Presidents to be responsible for certain functions, including, without limitation, Marketing, Finance, Manufacturing and Personnel.

 

9


7. Secretary . The Secretary shall keep accurate records of the acts and proceedings of all meetings of stockholders, Directors and committees. He or she shall give all notices required by law and by these Bylaws. He or she shall have general charge of the corporate books and records and of the corporate seal, and he or she shall affix the corporate seal to any lawfully executed instrument requiring it. He or she shall have general charge of the stock transfer books of the Corporation and shall keep, at the registered or principal office of the Corporation, a record of stockholders showing the name and address of each stockholder and the number and class of the shares held by each. He or she shall sign such instruments as may require his/her signature, and, in general, attest the signature or certify the incumbency or signature of any other officer of the Corporation and shall perform all duties incident to the office of Secretary and such other duties as may be assigned him from time to time by the President or by the Board of Directors.

8. Treasurer . The Treasurer shall have custody of all funds and securities belonging to the Corporation and shall receive, deposit or disburse the same under the direction of the Board of Directors. He or she shall keep full and accurate accounts of the finances of the Corporation in books especially provided for that purpose, which may be consolidated or combined statements of the Corporation and one or more of its subsidiaries as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of cash flows for the year unless that information appears elsewhere in the financial statements. If financial statements are prepared for the Corporation on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. The Treasurer shall, in general, perform all duties incident to his/her office and such other duties as may be assigned to him from time to time by the President or by the Board of Directors.

9. Assistant Secretaries and Treasurers . The Assistant Secretaries and Assistant Treasurers shall, in the absence or disability of the Secretary or the Treasurer, perform the respective duties and exercise the respective powers of those offices, and they shall, in general, perform such other duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the President or by the Board of Directors.

10. Controller and Assistant Controllers . The Controller, if one has been appointed, shall have charge of the accounting affairs of the Corporation and shall have such other powers and perform such other duties as the Board of Directors shall designate. Each Assistant Controller shall have such powers and perform such duties as shall be assigned to them by the Controller or the Board of Directors, and the Assistant Controllers shall exercise the powers of the Controller during that officer’s absence or inability to act.

11. Bonds . The Board of Directors, by resolution, may require any or all officers, agents and employees of the Corporation to give bond to the Corporation, with sufficient sureties, conditioned on the faithful performance of the duties of their respective offices or positions, and to comply with such other conditions as may from time to time be required by the Board of Directors.

 

10


ARTICLE VI

CONTRACTS, LOANS AND DEPOSITS

1. Contracts . The Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument on behalf of the Corporation, and such authority may be general or confined to specific instances.

2. Loans . No loans shall be contracted on behalf of the Corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.

3. Checks and Drafts . All checks, drafts or other orders for the payment of money issued in the name of the Corporation shall be signed by such officer or officers, or agent or agents, of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.

4. Deposits . All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such depository or depositories as the Board of Directors shall direct.

ARTICLE VII

CERTIFICATES FOR SHARES AND OTHER TRANSFERS

1. Certificates for Shares . Certificates representing shares of the Corporation shall be issued, in such form as the Board of Directors shall determine, to every stockholder for the fully paid shares owned by him. These certificates shall be signed by the President or any Vice President or a person who has been designated as the chief executive officer of the Corporation and by the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer and sealed with the seal of the Corporation or a facsimile thereof. The signatures of any such officers upon a certificate may be facsimiles or may be engraved or printed or omitted if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile or other signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer at the date of its issue. The certificates shall be consecutively numbered or otherwise identified; and the name and address of the persons to whom they are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the Corporation.

2. Transfer of Shares . Transfer of shares shall be made on the stock transfer books of the Corporation only upon surrender of the certificates for the shares sought to be transferred by the record holder thereof or by such holder’s duly authorized agent, transferee or legal representative. All certificates surrendered for transfer shall be canceled before new certificates for the transferred shares shall be issued.

 

11


3. Transfer Agent and Registrar . The Board of Directors may appoint one or more transfer agents and one or more registrars of transfer and may require all stock certificates to be signed or countersigned by the transfer agent and registered by the registrar of transfers.

4. Restrictions on Transfer .

(a) If the Corporation has elected Subchapter S status under Section 1362 of the Internal Revenue Code of 1986, as amended, no stockholder or involuntary transferee shall dispose of or transfer any shares of the Corporation which such stockholder now owns or may hereafter acquire if such disposition or transfer would result in the termination of such Subchapter S status, unless such disposition or transfer is consented to by all stockholders of the Corporation. Any such disposition or transfer that does not comply with the terms of this Section 4 shall be void and have no legal force or effect and shall not be recognized on the share transfer books of the Corporation as effective.

(b) No stockholder or involuntary transferee shall dispose of or transfer any shares of the Corporation which such stockholder now owns or may hereafter acquire except as set forth in this Section 4. Any purported transfer or disposition of shares in violation of the terms of this Section 4 shall be void and the Corporation shall not recognize or give any effect to such transaction.

(c) An individual stockholder shall be free to transfer, during such stockholder’s lifetime or by testamentary transfer, any or all of such stockholder’s shares of the Corporation to such stockholder’s spouse, any of such stockholder’s children, grandchildren or direct lineal descendants, whether by blood or by adoption, spouses of such issue, parents, siblings, or direct lineal descendents, whether by blood or by adoption, of such siblings or a trust or family limited partnership for the sole benefit of those persons or any of them, a Section 501(c)(3) organization or a non-profit foundation or other non-profit organization; and a stockholder which is a partnership, corporation or limited liability company shall be free to transfer any or all of its shares of the Corporation to its partners, stockholders or members, respectively, if there is no consideration for such transfer; but, in case of any such transfer, the transferee shall be bound by all the terms of this provision and no further transfer of such shares shall be made by such transferee except back to the stockholder who originally owned them or except in accordance with the provisions of this Section 4 of Article VII.

(d) Any stockholder, or transferee of such stockholder, who wishes to transfer all or any part of such stockholder’s shares of the Corporation (hereinafter “offeror”), other than as permitted in subparagraph (c) above, first shall submit a written offer to sell such shares to the Corporation at the same price per share and upon the same terms and conditions offered by a bona fide prospective purchaser of such shares. Such written offer to the Corporation shall continue to be a binding offer to sell until: (1) rejected by the Corporation; or (2) the expiration of a period of thirty (30) days after delivery of such written offer to the Corporation, whichever shall first occur.

 

12


(e) Every written offer submitted in accordance with the provisions of this Section 4 shall specifically name the person to whom the offeror intends to transfer the shares, the number of shares which such offeror intends so to transfer to each person and the price per share and other terms upon which each intended transfer is to be made. Upon the termination of all such written offers, the offeror shall be free to transfer, for a period of three (3) months thereafter, any unpurchased shares to the persons so named at the price per share and upon the other terms and conditions so named, provided that any such transferee of those shares shall thereafter be bound by all the provisions of these Bylaws.

(f) Every written offer submitted to the Corporation shall be deemed to have been delivered when delivered to the principal office of the Corporation or if and when sent by prepaid certified mail, or delivered by hand to the President of the Corporation at the principal office of the Corporation.

(g) If any consideration to be received by the offeror for the shares offered is property other than cash, then the price per share shall be measured to the extent of the fair market value of such noncash consideration.

(h) The provisions contained herein shall not apply to the pledge of any shares of the Corporation as collateral for a loan but shall apply to the sale or other disposition of shares under any such pledge.

(i) In the event of any conflict between the terms of this Section 4 of Article VII and any written agreement between the Corporation and any stockholder of the Corporation, the terms of such written agreement shall control, and the provisions of this Section shall not be applicable.

(j) The restrictions set forth in this Section 4 shall terminate upon the closing of a public offering of securities of the Corporation registered under the Securities Act of 1933, as amended.

(k) Every certificate representing shares of the Corporation shall bear the following legend prominently displayed:

“The shares represented by this certificate, and the transfer thereof, are subject to the restrictions on transfer provisions of the Bylaws of the Corporation, a copy of which is on file in, and may be examined at, the principal office of the Corporation.”

5. Closing Transfer Books and Fixing Record Date .

(a) For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, such record date 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

 

13


day next preceding the day on which the meeting is held. Such determination of stockholders of record shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b) For the purpose of determining the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, such record date, when no prior action by the Board of Directors is required by this chapter, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is filed with the Secretary of the Corporation. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Delaware Corporation Law, such record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(c) For the purpose of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

6. Lost Certificates . The Board of Directors may authorize the issuance of a new share certificate in place of a certificate claimed to have been lost or destroyed, upon receipt of an affidavit of such fact from the person claiming the loss or destruction. When authorizing such issuance of a new certificate, the Board may require the claimant to give the Corporation a bond in such sum as it may direct to indemnify the Corporation against loss from any claim with respect to the certificate claimed to have been lost or destroyed; or the Board may, by resolution reciting that the circumstances justify such action, authorize the issuance of the new certificate without requiring such a bond.

7. Holder of Record . The Corporation may treat as absolute owner of the shares the person in whose name the shares stand of record on its books just as if that person had full competency, capacity, and authority to exercise all rights of ownership irrespective of any knowledge or notice to the contrary or any description indicating a representative, pledge or other fiduciary relation or any reference to any other instrument or to the rights of any other person appearing upon its record or upon the share certificate; except that any person furnishing to the Corporation proof of his/her appointment as a fiduciary shall be treated as if he or she were a holder of record of the Corporation’s shares.

8. Treasury Shares . Treasury shares of the Corporation shall consist of such shares as have been issued and thereafter acquired but not canceled by the Corporation. Treasury shares shall not carry voting or dividend rights, except rights in share dividends.

 

14


ARTICLE VIII

INDEMNIFICATION AND REIMBURSEMENT

OF DIRECTORS AND OFFICERS

1. Indemnification for Expenses and Liabilities . Any person who at any time serves or has served (i) as a director, officer, employee or agent of the Corporation, (ii) at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, or (iii) at the request of the Corporation as a trustee or administrator under an employee benefit plan, or is called as a witness at a time when he or she has not been made a named defendant or respondent to any Proceeding, shall have a right to be indemnified by the Corporation to the fullest extent from time to time permitted by law against Liability and Expenses in any Proceeding (including without limitation a Proceeding brought by or on behalf of the Corporation itself) arising out of his or her status as such or activities in any of the foregoing capacities.

The Board of Directors of the Corporation shall take all such action as may be necessary and appropriate to authorize the Corporation to pay the indemnification required by this provision, including without limitation, to the extent needed, making a good faith evaluation of the manner in which the claimant for indemnity acted and of the reasonable amount of indemnity due him or her.

Any person who at any time serves or has served in any of the aforesaid capacities for or on behalf of the Corporation shall be deemed to be doing or to have done so in reliance upon, and as consideration for, the rights provided for herein. Any repeal or modification of these indemnification provisions shall not affect any rights or obligations existing at the time of such repeal or modification. The rights provided for herein shall inure to the benefit of the legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from this provision.

The rights granted herein shall not be limited by the provisions contained in Section 145 of the Delaware Corporation Law or any successor to such statute.

2. Advance Payment of Expenses . The Corporation shall (upon receipt of an undertaking by or on behalf of the director, officer, employee or agent involved to repay the Expenses described herein unless it shall ultimately be determined that he or she is entitled to be indemnified by the Corporation against such Expenses) pay Expenses incurred by such director, officer, employee or agent in defending a Proceeding or appearing as a witness at a time when he or she has not been named as a defendant or a respondent with respect thereto in advance of the final disposition of such Proceeding.

3. Insurance . The Corporation shall have the power 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 domestic or foreign corporation, partnership, joint venture, trust or other enterprise or as

 

15


a trustee or administrator under an employee benefit plan) 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.

4. Definitions . The following terms as used in this Article shall have the following meanings. “Proceeding” means any threatened, pending or completed action, suit, or proceeding and any appeal therein (and any inquiry or investigation that could lead to such action, suit, or proceeding), whether civil, criminal, administrative, investigative or arbitrative and whether formal or informal. “Expenses” means expenses of every kind, including counsel fees. “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), reasonable expenses incurred with respect to a Proceeding, and all reasonable expenses incurred in enforcing the indemnification rights provided herein. “Director,” “officer,” “employee” and “agent” include the estate or personal representative of a director, officer, employee or agent. “Corporation” shall include any domestic or foreign predecessor of this Corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.

ARTICLE IX

GENERAL PROVISIONS

1. Dividends . The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and by its charter.

2. Seal . The corporate seal shall be in such form as may be approved from time to time by the Board of Directors. Such seal may be an impression or stamp and may be used by the officers of the Corporation by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced. In addition to any form of seal adopted by the Board of Directors, the officers of the Corporation may use as the corporate seal a seal in the form of a circle containing the name of the Corporation and the state of its incorporation (or an abbreviation thereof) on the circumference and the word “Seal” in the center.

3. Waiver of Notice . Whenever any notice is required to be given to any stockholder or Director under the provisions of the Delaware Corporation Law or under the provisions of the charter or Bylaws of the Corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.

4. Fiscal Year . The fiscal year of the Corporation shall be determined by the Board of Directors.

5. Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other

 

16


information storage device; provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.

6. Amendments . Except as otherwise provided herein, these Bylaws may be amended or repealed and new Bylaws may be adopted by the affirmative vote of stockholders entitled to exercise a majority of voting power of the Corporation, or, if the Certificate of Incorporation of the Corporation so permits, by the affirmative vote of a majority of the Directors then holding office at any regular or special meeting of the Board of Directors or by unanimous written consent.

No Bylaw adopted or amended by the stockholders may be altered or repealed by the Board of Directors, except to the extent that such Bylaw provision expressly authorizes its amendment or repeal by the Board of Directors.

All terms used in these Bylaws shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the context may require.

THIS IS TO CERTIFY that the above Bylaws were duly adopted by the Board of Directors of the Corporation by action taken, without a meeting, effective November 18, 2003.

 

/s/ William W. Hauswirth

 

William W. Hauswirth, Secretary

 

17


FIRST AMENDMENT TO THE

BYLAWS

OF

APPLIED GENETIC TECHNOLOGIES CORPORATION

The Bylaws of Applied Genetic Technologies Corporation, a Delaware corporation are hereby amended as follows:

1. Article III, Section 2 is amended by deleting the word and number “Seven (7)” and replacing it with the word and number “Nine (9).”

Adopted and effective as of April 9 , 2013.

Exhibit 10.2

Agreement No. 2001-09-13B

EXCLUSIVE LICENSE AGREEMENT

WITH SUBLICENSING TERMS

(Alpha-1- Anti-Trypsin UF#184I)

TABLE OF CONTENTS

Section 1. - Definitions

Section 2. - Grant

Section 3. - Consideration

Section 4. - Certain Warranties of UFRF

Section 5. - Record keeping

Section 6. - Patent Prosecution

Section 7. - Term and Termination

Section 8. - Assignability

Section 9. - Enforcement

Section 10. - Product Liability; Conduct of Business

Section 11. - Use of Names

Section 12. - Miscellaneous

Section 13. - Notices

Section 14. - Contract Formation and Authority

Section 15. - United States Government Interests

Section 16. - Acknowledgment and Consent

Exhibit A - Development Report

Exhibit B - Equity Agreement

Exhibit C - Acknowledgment and Consent Regarding Intellectual Property License(s)

This Agreement is made effective the 25th day of September, 2001, (the “Effective Date”) by and between the University of Florida Research Foundation, Inc. (hereinafter called “UFRF”), a nonstock, nonprofit Florida corporation, and Applied Genetic Technologies Corporation (hereinafter called “Licensee” or “AGTC”), a corporation organized and existing under the laws of Florida. Licensee shall include any wholly owned subsidiary of AGTC.

WHEREAS, UFRF owns, or has an undivided joint interest in, certain inventions that are described in the “Licensed Patents” defined below, and UFRF is willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;

WHEREAS, UFRF owns, or has an undivided joint interest in, certain other inventions that are the subject of other exclusive and non-exclusive license agreements entered between UFRF and Licensee on even date herewith and UFRF is willing to grant a license to Licensee under any one or all of the Licensed Patents licensed under the License Agreement Group and Licensee desires a license under all of them;

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, including the good and valuable consideration for the Licensed Patents set forth in Section 3.2 herein, the receipt and adequacy of which are hereby acknowledged by UFRF and by Licensee, the parties covenant and agree as follows:

 

Section 1. Definitions.

 

  1.1 “Licensed Patents” shall refer to and mean all of the following UFRF intellectual property:

 

  1.1.1 the United States patent application entitled [ ** ] and all United States patents and foreign patents and patent applications based on these U.S. patent and patent application;

 

  1.1.2 any extensions, substitutions, renewals, reissues, re-examinations, continuations, or divisionals of or to any application or patents and all patents issuing thereon, and all patent registrations, supplementary protection certificates, or cautionary notices thereof both U.S. and foreign; and

 

  1.1.3 any reissues or re examinations of patents described in 1.1.1 or 1.1.2 above.

 

  1.2 “Licensed Product” and “Licensed Process” shall mean:

 

  1.2.1 In the case of a Licensed Product, any product or part thereof developed by or on behalf of Licensee which:

 

  1.2.1.1 is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which any product is made, used or sold which has not been held invalid, unenforceable, or unpatentable by a final and unappealable decision of a court of competent jurisdiction; or

 

  1.2.1.2 is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which any such process is used or in which any such product is used or sold which has not been held invalid, unenforceable, or unpatentable by a final and unappealable decision of a court of competent jurisdiction.

 

  1.2.2 In the case of a Licensed Process, any process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which such process is practiced.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  1.3 “Net Sales” shall mean, in the case of Licensed Products and/or Licensed Processes that are sold, the cumulative invoice price of Licensed Products and/or Licensed Processes in a form suitable for sale to the retail customer of the Licensed Products and/or Licensed Processes (regardless of uncollectible accounts) less any outbound transportation costs paid or allowed allowances and credits because of returns, or sales taxes. The “Net Sales” for a Licensed Product or Licensed Process that is transferred to a third party for promotional purposes without charge or at a discount shall be the average price to the retail customer of that type of Licensed Product and/or Licensed Process during the applicable calendar quarter.

 

  1.4 “Development Report” shall mean a written account of Licensee’s progress under the Business Plan (defined below) having at least the information specified on Exhibit A to this Agreement, and shall be sent to the address specified on Exhibit A.

 

  1.5 “Licensed Field” shall be all fields of use.

 

  1.6 “Licensed Territory” shall be worldwide.

 

  1.7 “Agreement Year” shall mean that twelve-month period commencing on the anniversary date of the Effective Date of this Agreement, with the first Agreement Year commencing on the Effective Date of this Agreement.

 

  1.8 “Affiliate” means any corporation or other entity which directly or indirectly controls, is controlled by or is under common control with a party to this Agreement. A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than fifty percent (50%) of the outstanding voting stock or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to manage, direct or cause the direction of the management and policies of the corporation or other entity or the power to elect or appoint fifty percent (50%) or more of the members of the governing body of the corporation or other entity. Notwithstanding the foregoing, the term Affiliate shall not include a subsidiary in which a party or its Affiliates own a majority of the ordinary voting power to elect a majority of the board of directors but is restricted from electing such majority by contract or other express restriction, until such time as any such restriction is no longer in effect.

 

  1.9 “Business Plan” shall mean Licensee’s Summary Business Plan of July 2001 describing the development activities that are to be undertaken by the Licensee to bring Licensed Products to the market.

 

  1.10 “License Agreement Group” shall mean the following fully executed license agreements between UFRF and Licensee: 2001-09-13A, 2001-09-13B, 2001-09- 13C, 2001-09-13D, 2001-09-13E and 2001-09-13F.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 2. Grant.

 

  2.1 License.

 

  2.1.1 UFRF hereby grants to Licensee an exclusive license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, use and sell Licensed Products and/or Licensed Processes with the right to sublicense. During the term of this Agreement, UFRF will grant no other commercial licenses in the Licensed Field and the Licensed Territory under the Licensed Patents. However, UFRF reserves to itself and the University of Florida the right to make and use Licensed Products and/or Licensed Processes under the Licensed Patents for research, educational, and clinical purposes, including research for any sponsors, including for-profit sponsors. All sponsored research contemplated under this Section 2.1.1 shall be conducted on the campus of, and in facilities belonging to, the University of Florida, and shall be conducted for non-commercial purposes only. No right or license to Licensed Products and/or Licensed Processes shall be granted or implied to, and no materials will be transferred to, and no confidential information will be disclosed to, said for-profit sponsors. For the purposes of this Section 2.1.1, materials and confidential information shall mean materials and confidential information developed by or belonging solely to AGTC and/or its Sublicensees.

 

  2.1.2 Nothing in this grant is a representation or warranty by UFRF that other co-owner(s) of the Licensed Patents are willing or able to grant comparable rights to Licensee to its undivided joint title to the Licensed Patents or to other patents owned by said co-owners that may be necessary or desirable to Licensee in developing and selling a viable commercial product.

 

  2.2 Sublicense

 

  2.2.1

During the Term and subject to the terms and conditions set forth herein, UFRF hereby grants to the Licensee the right to grant sublicenses to third parties (the “Sublicensees”) under the Licensed Patents in the Licensed Fields and in the Licensed Territory to make, have made, use, sell, and otherwise distribute the Licensed Products and to practice the Licensed Processes. The Licensee shall cause each of the Sublicensees to enter into a “Sublicense Agreement” upon terms and conditions satisfactory to the Licensee; provided that the terms and conditions of each Sublicense Agreement shall not be inconsistent with the terms and conditions of this Agreement. Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF. Notwithstanding the foregoing, the parties hereto agree that certain non-cash consideration would be highly desirable in that it would enhance Licensee’s valuation and/or enhance Licensee’s strategic position in the

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  gene therapy field; therefore UFRF shall not unreasonably withhold such permission. In the event that Licensee requests UFRF’s permission in writing, and UFRF does not respond to such request for permission within thirty (30) days of such request, permission will be deemed given by UFRF. Any agreement granting a Sublicense shall state that the Sublicense is subject to the termination of this Agreement; however, UFRF may enter into a license agreement with such Sublicensee with respect to the Licensed Patents. Licensee shall have the same responsibility for the activities of any Sublicensee as if the activities were directly those of Licensee.

 

  2.2.2 In respect to Sublicenses granted by Licensee under Section 2.2.1, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Products sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments in the manner specified in Section 3.6. Licensee shall provide UFRF with a copy of each sublicense agreement within thirty (30) days of the execution of the sublicense agreement.

 

  2.3 License to UFRF.

To the extent permitted by applicable law, Licensee hereby grants and shall use its best efforts to require its Sublicensee(s) to grant UFRF the right to negotiate for sixty (60) days following disclosure of Improvements (as defined herein) to obtain a nonexclusive, royalty-free, irrevocable, paid-up license to make and use for research, educational, and clinical purposes, including research for any sponsors, including for-profit sponsors, any and all inventions hereafter made by Licensee (or its Sublicensee(s)) to the extent any such inventions are Improvements. “Improvements” shall mean any modification of an invention described in Licensed Patents which, if unlicensed, would infringe one or more claims of the Licensed Patents. Licensee shall provide UFRF with a written, enabling disclosure of each such invention (such as a U.S. patent application), unambiguously identifying it as an invention governed by this paragraph, within six (6) months of filing a patent application thereon. If the parties do not enter into a license agreement, after negotiating in good faith, within sixty (60) days of the date of the disclosure, UFRF’s rights under this Section 2.3 shall be deemed terminated, but only with respect to the invention so disclosed. Any nonexclusive, royalty-free, irrevocable, paid-up license granted to UFRF to make and use Improvements shall specifically exclude the right to sell, import or export Improvements.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 3. Consideration.

 

  3.1 License Issue Fee.

Licensee agrees to pay to UFRF a License Issue Fee of [ ** ] within thirty (30) days of the Effective Date.

 

  3.2 Running Royalty.

In addition to the Section 3.1 License Issue Fee, Licensee agrees to pay to UFRF as earned royalties a royalty calculated as a percentage of Net Sales in accordance with the terms and conditions of this Agreement. The royalty is deemed earned as of the earlier of: (i) the date the Licensed Product and/or Licensed Process is actually sold and paid for; (ii) the date an invoice is sent by Licensee; or (iii) the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. The royalty shall remain fixed while this Agreement is in effect at a rate of [ ** ] of Net Sales. In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 3.2 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is obligated to pay to third parties under such licenses, further provided, however, that the royalties payable to UFRF under this Section 3.2 shall not be reduced to less than [ ** ] of the applicable Net Sales. If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF under any of the license agreements of the License Agreement Group, and which license agreement calls for the payment of royalties at the rate of [ ** ] of Net Sales, duplicative royalties for the sales of such Licensed Product or Licensed Process shall not be owed to UFRF by Licensee. Under such circumstances, the royalty calculation shall be made only once, even though the sale of the Licensed Product or Licensed Process may fall under more than one patent and more than one license agreement.

 

  3.3 Other Payments.

 

  3.3.1 Licensee agrees to pay UFRF Minimum Royalty payments of [ ** ] per year to be paid in equal quarterly installments beginning on September 30, 2002 and every year thereafter for the life of this Agreement.

The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect. The first Minimum Royalty payment shall be due on September 30, 2002 and shall be in the amount of [ ** ]. The Minimum Royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30, September 30, and December 31 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the Minimum Royalties will be applied

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UFRF for other than the same calendar year in which the royalties were earned.

 

  3.3.2 In addition to all other payments required under this Agreement, Licensee agrees to pay UFRF Milestone payments within thirty (30) days of the following events:

 

Payment

  

Event

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF under any of the license agreements of the License Agreement Group, and which license agreement calls for the development milestones and for milestone payments to be made to UFRF as set forth above, duplicative milestone payments shall not be owed to UFRF by Licensee with respect to a given development milestone. Under such circumstances, the milestone payments shall be made only once, even though the development milestone may apply to more than one license agreement.

 

  3.4 Development.

 

  3.4.1 Licensee agrees to and warrants that: (i) it has, or will obtain, the expertise necessary to independently evaluate the inventions of the Licensed Patents; and (ii) within one month following the end of each quarter ending on December 31, March 31, June 30, and September 30 and until the date of first commercial sale of Licensed Products, it will supply UFRF with a written Development Report (see Exhibit A). All development activities and strategies and all aspects of product design and decisions to market and the like are entirely at the discretion of Licensee, and Licensee shall rely entirely on its own expertise with respect thereto. UFRF’s review of Licensee’s Development Report is solely to verify the existence of Licensee’s commitment to development activity and to ensure compliance with Licensee’s obligations to commercialize the inventions of the Licensed Patents, as set forth above.

 

  3.4.2 Licensee agrees to the following development milestones for [ ** ]:

 

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Each of the above-described development milestones shall be completed by Licensee and/or its Sublicensees by the agreed dates or this License may be terminated by UFRF pursuant Section 7.3 of this Agreement.

 

  3.5 Issuance of Equity

As consideration for the rights granted to Licensee by UFRF pertaining to the Licensed Agreement Group, as of the Effective Date, (i) Licensee will issue to UFRF that number of shares of common stock of AGTC equal to [ ** ] of the total number of issued and outstanding shares of AGTC on the Effective Date calculated on a fully diluted basis. The issuance of common stock to UFRF under this Section 3.5 shall be made in accordance with that certain Equity Agreement by and between UFRF and AGTC of even date herewith, a copy of which is attached hereto as Exhibit B and incorporated by reference herein.

 

  3.6 Accounting Payments.

 

  3.6.1 Amounts owing to UFRF under Section 3.2 shall be due and received by UFRF on or before the thirtieth day following the date received by Licensee (such date the payments are due to be received by UFRF being referred to as the “Payment Due Date”). The balance of any amounts which remain unpaid more than thirty (30) days after the Payment Due Date shall accrue interest until paid at the rate of the lesser of one and one-half percent (1.5%) per month or the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays.

 

  3.6.2 Except as otherwise directed, all amounts owing to UFRF under this Agreement shall be paid in U.S. dollars to UFRF at the address provided in Section 13.1. All amounts owing with respect to Net Sales stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation — Value of Foreign Currencies on the day preceding the payment.

 

  3.6.3 A full accounting showing how any amounts payable to UFRF under Sections 3.2 have been calculated shall be submitted to UFRF on the date of each such payment. Such accounting shall be submitted on a form approved by UFRF. In the event Sublicenses have been entered into but no payment is owed to UFRF under Section 3.2, an accounting demonstrating that fact shall be supplied to UFRF.

 

  3.6.4

Any and all income or similar taxes imposed or levied on account of the receipt of payments under this Agreement which are required to be withheld shall be paid by Licensee on behalf of UFRF and shall be paid to the proper taxing authority. Proof of such payment shall be secured, if available, and sent to UFRF by Licensee as evidence of such payment in

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  such form as required by the tax authorities having jurisdiction over Licensee. Such taxes shall be deducted from the payments that would otherwise be remittable by Licensee.

 

  3.7 Capitalization Milestones

Licensee shall raise the amount of [ ** ] or this license may be terminated pursuant to Section 7.3 below.

 

Section 4. Certain Warranties of UFRF.

 

  4.1 UFRF warrants that, except as otherwise provided under Section 15 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  4.1.1 a warranty or representation by UFRF as to the validity or scope of any right included in the Licensed Patents;

 

  4.1.2 a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  4.1.3 an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

  4.1.4 an obligation to furnish any know-how not provided in Licensed Patents or any services other than those specified in this Agreement; or

 

  4.1.5 a warranty or representation by UFRF that it will not grant licenses to others to make, use or sell products not covered by the claims of the Licensed Patents which may be similar and/or compete with products made or sold by Licensee or its Sublicensee(s).

 

  4.2 EXCEPT AS OTHERWISE SET FORTH HEREIN, UFRF MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE OR ITS VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 5. Record keeping.

 

  5.1 Licensee and its Sublicensee(s) shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)’s accounting referred to above, including without limitation inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products and/or Licensed Processes. Such books and records shall be preserved for a period not less than six years after they are created, both during and after the term of this Agreement.

 

  5.2 Licensee and its Sublicensee(s) shall take all steps necessary so that UFRF may, within thirty (30) days of its request, review and copy all of the books and records at a single U.S. location to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting. Such review may be performed by any authorized employee of UFRF as well as by any attorney or registered CPA designated by UFRF, upon reasonable notice and during regular business hours.

 

  5.3 In addition to the remedies provided in Section 7, if a payment deficiency is determined, Licensee and its Sublicensee(s) shall pay the deficiency outstanding within thirty (30) days of receiving written notice thereof, plus interest on outstanding amounts as described in Section 3.6.1.

 

  5.4 If a payment deficiency for a calendar year exceeds [ ** ] of the amounts paid for that year, then Licensee and its Sublicensee(s) shall be responsible for paying UFRF’s out-of-pocket expenses incurred with respect to such review.

 

Section 6. Patent Prosecution

 

  6.1 UFRF shall diligently prosecute and maintain the Licensed Patents using counsel of its choice. UFRF shall provide Licensee with copies of relevant documentation so that Licensee may be informed and apprised of the continuing prosecution of Licensed Patents, and Licensee agrees to keep such information confidential.

 

  6.2 Licensee shall be responsible for and pay [ ** ] for the preparation, filing, prosecution, issuance, and maintenance of the Licensed Patents within thirty (30) days of receipt of an invoice from UFRF. It shall be the responsibility of Licensee to keep UFRF fully apprised of the “small entity” status of Licensee with respect to the U.S. patent laws and with respect to the patent laws of any other countries, if applicable, and to inform UFRF of any changes in such status, within thirty days of any such change.

 

Section 7. Term and Termination.

 

  7.1 The term of this license shall begin on the Effective Date of this Agreement and continue until the earlier of the date that no Licensed Patent remains an enforceable patent or this Agreement is terminated pursuant to this Section 7.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  7.2 Licensee may terminate this Agreement at any time by giving at least ninety (90) days written and unambiguous notice of such termination to UFRF. Such a notice shall be accompanied by a statement of the reasons for termination.

 

  7.3 If Licensee at any time defaults in the timely submission to UFRF of any Development Report or commits any breach of any other covenant herein contained, except for those covenants to which Sections 7.4 and 7.5 apply, and Licensee fails to remedy any such breach or default within sixty (60) days after written notice thereof by UFRF, UFRF may, at its option, terminate this Agreement by giving thirty (30) days notice of termination to Licensee.

 

  7.4 UFRF may immediately terminate this Agreement if amounts due to UFRF as provided in Section 3.6.1 remain unpaid in whole or in part for at least sixty (60) days after the Payment Due Date.

 

  7.5 UFRF may terminate this Agreement upon thirty (30) days written notice in the event Licensee fails to comply with its obligations set forth in Section 16.

 

  7.6 Upon the termination of this Agreement, Licensee shall remain obligated to provide an accounting for and to pay amounts earned up to the date of the termination.

 

Section 8. Assignability.

This Agreement may not be transferred or assigned by Licensee except with the prior written consent of UFRF; provided, however, that Licensee may assign any of its rights under this Agreement in any country to any Affiliates and may delegate its obligations under this Agreement in any country to any Affiliates; provided, however, that such assignment shall not relieve Licensee of its responsibilities for performance of its obligations under this Agreement. Licensee may assign all of its rights and obligations under this Agreement in connection with a merger or similar reorganization or the sale of all or substantially all of the assets and or stock of the Licensee. This Agreement shall survive any such merger or reorganization of Licensee within, into, or such sale of assets and or stock to, another party, and no consent for such merger, reorganization or sale shall be required hereunder. Licensee shall provide UFRF written notice of assignment within thirty (30) days of the effective date of such assignment.

 

Section 9. Enforcement.

UFRF intends to protect Licensed Patents against infringers or otherwise act to eliminate infringement when, in UFRF’s sole judgment, such action may be reasonably necessary, proper, and justified. In the event that Licensee believes there is infringement of any Licensed Patent under this Agreement which is to Licensee’s substantial detriment, Licensee shall provide UFRF with notification and reasonable evidence of such infringement. In the event that UFRF does not act to protect Licensed Patents against infringers or otherwise act to eliminate infringement, Licensee shall be free act on behalf of UFRF to take such actions as Licensee deems necessary to protect its interest in Licensed Patents.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 10. Product Liability; Conduct of Business.

 

  10.1 Licensee and its Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UFRF, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents harmless against all claims and expenses, including legal expenses and reasonable attorneys fees, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever (other than patent infringement claims) resulting from the production, manufacture, sale, use, lease, consumption or advertisement of Licensed Products arising from any right or obligation of Licensee or any Sublicensee hereunder. Notwithstanding the above, UFRF at all times reserves the right to retain counsel of its own to defend UFRF’s, the University of Florida Board of Trustees, the University of Florida’s, and the inventor’s interests.

 

  10.2 Licensee warrants that it now maintains and will continue to maintain liability insurance coverage in the minimum amount of [ ** ] and that such insurance coverage lists UFRF, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents as additional insureds. Within thirty (30) days after the execution of this Agreement and thereafter annually between January 1 and January 31 of each year, Licensee will present evidence to UFRF, that the coverage is being maintained with UFRF, the University of Florida Board of Trustees, the University of Florida, and its inventors listed as additional insureds. In addition, Licensee shall provide UFRF with at least thirty (30) days prior written notice of any change in or cancellation of the insurance coverage.

 

Section 11. Use of Names.

Licensee and its Sublicensee(s) shall not use UFRF’s name, the name of any inventor of Licensed Patents governed by this Agreement, or the name of the University of Florida in any sales promotion, advertising, or any other form of publicity without the prior written approval of UFRF.

 

Section 12. Miscellaneous.

 

  12.1 This Agreement shall be construed exclusively in accordance with the laws of the State of Florida. The parties hereto are independent contractors and not joint venturers or partners.

 

  12.2 Licensee shall insure that it and its Sublicensee(s) apply patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  12.3 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, except as provided for elsewhere in this Section 12, made prior to or at the signing with respect to the subject matter hereof, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

 

  12.4 In the event Licensee contests the validity of any Licensed Patent, Licensee shall continue to pay amounts due to UFRF with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

 

  12.5 Licensee shall not encumber or otherwise grant a security interest in any of the rights granted hereunder to any third party.

 

Section 13. Notices.

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given when actually received as a consequence of any effective method of delivery, including but not limited to hand delivery, or transmission by telecopier, and addressed to the party for whom intended at the address below or at such changed address as the party shall have specified by written notice, provided that any notice of change of address shall be effective only upon actual receipt.

 

  13.1 University of Florida Research Foundation, Inc.

Attn: President

223 Grinter Hall

Gainesville, FL 32611

with a copy to:

Office of Technology Licensing

Attn: Director 308 Walker Hall

Gainesville, Florida 32611

 

  13.2 Applied Genetic Technologies Company

Attention: Chief Executive Officer

12085 Research Drive, Suite 112

Alachua, FL 32615

with a copy to:

Fred D. Hutchinson, Esq.

Hutchinson & Mason, PLLC

3100 Edwards Mill Road, Suite 100

Raleigh, NC 27612

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 14. Contract Formation and Authority.

 

  14.1 No agreement between the parties shall exist unless the duly authorized representative of Licensee and the Director of the Office of Technology Licensing of UFRF have signed this document within thirty (30) days of the Effective Date written on the first page of this Agreement.

 

  14.2 UFRF and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

 

Section 15. United States Government Interests.

It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [ ** ], during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

Section 16. Acknowledgment and Consent.

As soon as practicable, and, in no event, not later than six (6) months after the Effective Date, Licensee shall provide to UFRF an Acknowledgment and Consent Regarding Intellectual Property License(s) in the form attached as Exhibit C, executed by each inventor of the Licensed Patents. Failure to comply with this Section shall be grounds for termination of this Agreement by UFRF pursuant to Section 7.5 herein.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.

 

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

/s/ David L. Day

    Date:   Sept. 24 , 2001
David L. Day      
Director, Office of Technology Licensing      
LICENSEE      
By:  

/s/ Nicholas Muzyczka

    Date:   Sept. 25 , 2001

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Name and Office:  

Nicholas Muzyczka

  CEO AGTC

 

 

 

Reviewed by UFRF’s Attorney:     Reviewed by Licensee’s Attorney

/s/ Leslie H. Knight

   

/s/ Fred D. Hutchison

(name typed)     (name typed)

(Neither attorney shall be deemed a signatory to this Agreement.)

UFRF Ref: UF #- 1841

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


EXHIBIT A

DEVELOPMENT REPORT

When appropriate, indicate estimated start date and finish date for activities.

 

A. Date Development Plan Initiated and Time Period Covered by this Report.

 

B. Development Report (4-8 paragraphs).

 

  1. Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.

 

  2. Activities currently under investigation, i.e., ongoing activities including object and parameters of such activities, when initiated, and projected date of completion.

 

C. Future Development Activities (4-8 paragraphs).

 

  1. Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.

 

  2. Estimated total development time remaining before a product will be commercialized.

 

D. Changes to Initial Development Plan (2-4 paragraphs).

 

  1. Reasons for change.

 

  2. Variables that may cause additional changes.

 

E. Items to be Provided if Applicable:

 

  1. Information relating to Licensed Products that has become publicly available, e.g., published articles, competing products, patents, etc.

 

  2. Development work being performed by third parties, other than Licensee, to include name of third party, reasons for use of third party, planned future uses of third parties including reasons why and type of work.

 

  3. Update of competitive information trends in industry, government compliance (if applicable) and market plan.

 

  4. Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products or the Licensed Patents.

PLEASE SEND DEVELOPMENT REPORTS TO:

University of Florida Research Foundation, Inc.

Attn: David L. Day

223 Grinter Hall

P.O. Box 115500

Gainesville, FL 32611-2037

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


EXHIBIT B

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


EXHIBIT C

ACKNOWLEDGMENT AND CONSENT

REGARDING INTELLECTUAL PROPERTY

I,                     , am a co-inventor of one or more of the patent applications pertaining to certain technologies (the “Technologies” or, singularly, the “Technology”) identified below. I acknowledge and understand that the Technologies are owned by the University of Florida Research Foundation, Inc. (“UFRF”) and that UFRF intends to grant to Applied Genetic Technologies Corporation (“AGTC”) exclusive, worldwide licenses (the “Licenses”) to the Technologies:

[ ** ]

[ ** ]

I acknowledge that the Founders of AGTC are inventors or co-inventors of one or more of the Technologies. I further understand that as compensation for the Licenses, AGTC will issue shares of AGTC stock or will pay a certain sum and issue shares of AGTC stock to UFRF. In addition, AGTC, in the normal course of business, will seek to earn other non-royalty income and realize profits from the use and commercialization of the Technologies. AGTC will be permitted to sublicense the Technologies to third parties. AGTC will have the right to extend any of the Licenses granted to it to its Affiliates, as such term is defined in the License Agreements.

I understand that, pursuant to the University of Florida Intellectual Property Policy (the “Policy”), I am entitled to receive a portion of the “net adjusted income,” as defined in the Policy, from the licensing of the Technologies to AGTC. I understand that the Founders of AGTC who are also inventors of a particular Technology will likewise share in the net adjusted income. However, I hereby acknowledge and consent to AGTC’s right to seek to earn other non-royalty income and realize profits from the use and commercialization of the Technologies and further acknowledge that I have no entitlement to receive any portion of such non-royalty income and profits, even with respect to those particular Technologies for which I am a co-inventor. I further acknowledge and consent that, in accordance with the terms of the Licenses, I may be entitled to receive a lessor portion of royalties in the event one or more of the Technologies is sublicensed by AGTC to a third party.

I have been provided with a copy of the Licenses. I hereby agree to hold all information contained in this Acknowledgment and Consent and in the Licenses confidential (such information collectively referred to as the “Confidential Information”) and that I will not disclose any Confidential Information to any third party without the prior written approval of UFRF. I will not use any of the Confidential Information for any purpose other than my own personal review. Specifically, but without limitation, I will not use any of the Confidential Information for any commercial purpose or development of any products or technology.

The confidentiality and use obligations set forth above apply to all or any part of any Confidential Information provided to me before or after the effective date of this Acknowledgment and Consent except to the extent that the Confidential Information was already available to the public or became so through no fault of mine.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Signed:  

 

Name:   [ ** ]
Title:  

 

Date:  

 

Witness:  

 

Signed:  

 

Name:   [ ** ]
Title:  

 

Date:  

 

Witness:  

 

Signed:  

 

Name:   [ ** ]
Title:  

 

Date:  

 

Witness:  

 

Signed:  

 

Name:   [ ** ]
Title:  

 

Date:  

 

Witness:  

 

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


APPENDIX C

ACKNOWLEDGMENT AND CONSENT

REGARDING INTELLECTUAL PROPERTY

I,                     , am a co-inventor of one or more of the patent applications pertaining to certain technologies (the “Technologies” or, singularly, the “Technology”) identified below. acknowledge and understand that the Technologies are owned by the University of Florida Research Foundation, Inc. (“UFRF”) and that UFRF intends to grant to Applied Genetic Technologies Corporation (“AGTC”) exclusive, worldwide licenses (the “Licenses”) to the Technologies:

[ ** ]

[ ** ]

I acknowledge that the founders of AGTC are inventors or co-inventors of one or more of the Technologies. I further understand that as compensation for the Licenses, AGTC will issue shares of AGTC stock or will pay a certain sum and issue shares of AGTC stock to UFRF. In addition, AGTC, in the normal course of business, will seek to earn other non-royalty income and realize profits from the use and commercialization of the Technologies. AGTC will be permitted to sublicense the Technologies to third parties. AGTC will have the right to extend any of the Licenses granted to it to its affiliates, as such term is defined in the License Agreements.

I understand that, pursuant to the University of Florida Intellectual Property Policy (the “Policy”), I am entitled to receive a portion of the “net adjusted income,” as defined in the Policy, from the licensing of the Technologies to AGTC. I understand that the founders of AGTC who are also inventors of a particular Technology will likewise share in the net adjusted income. However, I hereby acknowledge and consent to AGTC’s right to seek to earn other non-royalty income and realize profits from the use and commercialization of the Technologies and further acknowledge that I have no entitlement to receive any portion of such non-royalty income and profits, even with respect to those particular Technologies for which I am a co-inventor. I further acknowledge and consent that, in accordance with the terms of the Licenses, I may be entitled to receive a lessor portion of royalties in the event one or more of the Technologies is sublicensed by AGTC to a third party.

I have been provided with a copy of the Licenses. I hereby agree to hold all information contained in this Acknowledgment and Consent and in the Licenses confidential (such information collectively referred to as the “Confidential Information”) and that I will not disclose any Confidential Information to any third party without the prior written approval of UFRF. I will not use any of the Confidential Information for any purpose other than my own personal review. Specifically, but without limitation, I will not use any of the Confidential Information for any commercial purpose or development of any products or technology.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


The confidentiality and use obligations set forth above apply to all of any part of any Confidential Information provided to me before or after the effective date of this Acknowledgment and Consent except to the extent that the Confidential Information was already available to the public or became so through no fault of mine.

 

Signed:  

/s/ [ ** ]

Name:   [ **]
Title:  

Associate Professor

Date:  

9/7/00

Witness:  

/s/ Joyce E. Conners

Signed:  

/s/ [ ** ]

Name:   [ ** ]
Title:  

Assoc. Professor

Date:  

8/29/00

Witness:  

/s/ Joyce E. Conners

Signed:  

/s/ [ ** ]

Name:   [ ** ]
Title:  

Research Assistant Professor

Date:  

8/30/00

Witness:  

/s/ Joyce E. Conners

Signed:  

/s/ [ ** ]

Name:   [ **]
Title:  

 

Date:  

9/14/00

Witness:  

/s/ Beth B. Garland

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Exhibit 10.3

RESTATED AMENDMENT TO LICENSE AGREEMENT (B)

This Restated Amendment to License Agreement (this “Restated Amendment”) is made and effective as of January  31 , 2005 (“Effective Date”), by and between the University of Florida Research Foundation, Inc. (“UFRF”), a nonstock, nonprofit Florida corporation, and Applied Genetic Technologies Corporation (“Licensee”), a corporation organized and existing under the laws of the State of Delaware.

WHEREAS, UFRF and Licensee (collectively the “Parties”) entered into that certain patent license agreement known as Agreement No. 2001-09-13B (the “License Agreement”) covering certain Licensed Patents, such License Agreement being dated and effective September 25, 2001; and

WHEREAS, the Parties have several times amended the License Agreement and have agreed to further amend certain terms of the License Agreement as set forth herein and intending for this Restated Amendment to restate all prior amendments and give no further effect to all such prior amendments;

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree to amend the Agreement as follows

AMENDMENT

1. Capitalized Terms. Unless otherwise defined herein, capitalized terms used in this Restated Amendment will have the respective meanings assigned thereto by the provisions of the License Agreement.

2. Prior Amendments. The Parties previously amended the License Agreement as follows: (i) pursuant to the terms of that certain First Amendment to License Agreements dated July 7, 2003, to amend certain terms related to payments and improvements; (ii) pursuant to that certain Second Amendment to License Agreement dated November 24, 2003, to amend certain terms related to due diligence dates; and (iii) pursuant to that certain Fourth Amendment dated November (undated), 2004 to amend certain terms related to royalties. The Parties acknowledge that the Fourth Amendment was mis-numbered and that no other amendments to the License Agreement exist. The Parties acknowledge and agree that upon the execution of this Restated Amendment all prior amendments shall be given no further effect, and that this Restated Amendment shall encompass all applicable amendments to the License Agreement as of the Effective Date.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


3. Amendment to Section 1 of the License Agreement. The following new Section 1.11 is incorporated into the License Agreement:

 

  “1.11. “JHU/UFRF Agreement” shall mean the Standard Exclusive License Agreement With Sublicensing Terms, dated October 7, 2003, among Johns Hopkins University (“JHU”), UFRF and Licensee, as amended by a First Amendment thereto and as further amended from time to time in effect.”

4. Amendment to Section 2.2.2 of the License Agreement. Section 2.2.2 of the License Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

  “2.2.2. In respect to Sublicenses granted by Licensee under Section 2.2.1, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other cash payments in consideration for any rights granted under a Sublicense, and such payments, fees or minimum royalties are not based directly upon the amount or value of Licensed Products sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments in the manner specified in Section 3.6. Licensee shall not receive non-cash consideration for sublicense rights without the written approval of UFRF. Licensee shall provide UFRF with a copy of each sublicense agreement within thirty (30) days of the execution of each such sublicense agreement.”

5. Amendment to Section 2.3 of the License Agreement. Section 2.3 of the License Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

  “2.3.

To the extent permitted by applicable law, Licensee hereby grants and shall use its best efforts to require its Sublicensee(s) to grant UFRF the right to negotiate for sixty (60) days following disclosure of Improvements (as defined herein) to obtain a nonexclusive, royalty-free, irrevocable, paid-up license to make and use for research, educational, and clinical purposes, including research for any sponsors, excluding for-profit sponsors, any and all inventions hereafter made by Licensee (or its Sublicensee(s)) to the extent any such inventions are Improvements. “Improvements” shall mean any modification of an invention described in Licensed Patents which, if unlicensed, would infringe one or more claims of the Licensed Patents. Licensee shall provide UFRF with a written, enabling disclosure of each such invention (such as a U.S. patent application), unambiguously identifying it as an invention governed by this paragraph, within six (6) months of filing a patent application thereon. If the parties do not enter into a license agreement, after negotiating in good faith, within sixty (60) days of the date of the disclosure, UFRF’s rights under this Section 2.3 shall be

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  deemed terminated, but only with respect to the invention so disclosed. Any nonexclusive, royalty-free, irrevocable, paid-up license granted to UFRF to make and use Improvements shall specifically exclude the right to sell, import or export Improvements.”

6. Amendment to Section 3.2 of the License Agreement. Section 3.2 of the License Agreement is hereby deleted in its entirety and the following is substituted in lieu thereof:

 

  “3.2. In addition to the Section 3.1 License Issue Fee, Licensee agrees to pay UFRF as earned royalties a royalty calculated as a percentage of Net Sales in accordance with the terms and conditions of this Agreement. The royalty is deemed earned as of the earlier of: (i) the date the Licensed Product and/or Licensed Process is actually sold and paid for; (ii) the date an invoice is sent by Licensee; or (iii) the date a Licensed Product and/or Licensed Process is transferred to a third party for promotional reasons. The royalty for the License Agreement Group, whether owed to UFRF for itself or to UFRF on behalf of other joint owners such as JHU, shall remain fixed while this Agreement is in effect at a rate of [ ** ] of Net Sales. In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 3.2 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is obligated to pay to third parties under such licenses, further provided, however that the royalties payable to UFRF under this Section 3.2 shall not be reduced to less than [ ** ] of the applicable Net Sales. If a Licensed Product or Licensed Process is covered under another patent of UFRF, whether or not jointly owned, the rights to which have been licensed to Licensee by UFRF or jointly by UFRF and other joint owners such as JHU under any of the license agreements of the License Agreement Group, as amended and from time to time in effect, duplicative royalties for the sales of such Licensed Product or Licensed Process shall not be owed to UFRF or other joint owners such as JHU by Licensee. Under such circumstances, the royalty calculation shall be made only once, even though the sale of the Licensed Product or Licensed Process may fall under more than one patent and more than one license agreement. With respect to the JHU/UFRF Agreement, UFRF acknowledges that it (not Licensee) has the sole obligation to pay JHU.”

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


7. Amendment to Section 3.3.2 of the License Agreement. Section 3.3.2 of the License Agreement is hereby amended to increase the amount of the milestone payment associated with [ ** ] from [ ** ] to [ ** ]. The remaining milestone payments remain unchanged.

8. Amendment to Section 3.4.1 of the License Agreement. Section 3.4.1 of the License Agreement is hereby amended to delete the reference to quarterly Development Reports to be replaced by a reference to biannual Development Reports. Accordingly, the sentence fragment of Section 3.4.1 subpart (ii) is hereby deleted and the following is substituted in lieu thereof:

“(ii) within one (1) month following June 30 and December 31 of every calendar year and continuing until the date of first commercial sale of Licensed Products, it will supply UFRF with a written Development Report (see Exhibit A).”

9. Amendment to Section 3.4.2 of the License Agreement. Section 3.4.2. of the License Agreement is hereby deleted in its entirety and the following provision is substituted in lieu thereof:

 

  “3.4.2. Licensee agrees to the following development milestones for [**]:

 

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

Each of the above-described development milestones shall be completed by Licensee and/or its Sublicensees by the agreed dates or this License may be terminated by UFRF pursuant Section. 7.3 of this Agreement.”

10. Effect of Amendment. The provisions of the License Agreement are hereby amended and modified by the provisions of this Restated Amendment. Any prior written agreement or amendment purporting to amend the terms of the License Agreement shall be given no effect. If any provisions of the License Agreements are materially different from or inconsistent with any of the provisions of this Restated Amendment, the provisions of this Restated Amendment shall control, and the provisions of the License Agreement shall, to the extent of such difference or inconsistency, be deemed to be amended and modified.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


11. Single Agreement. This Restated Amendment and the License Agreement, as amended and modified by the provisions of this Restated Amendment, shall each constitute and be construed as a single agreement.

12. Governing Law. This Restated Amendment shall be governed by and construed in accordance with the substantive laws of the State of Florida.

IN WITNESS WHEREOF, the parties hereto have duly executed this Restated Amendment effective as of the date first written above.

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

By:  

/s/ David L. Day

    Date: January  31 , 2005
  David L. Day    
  Director, Office of Technology Licensing    

APPLIED GENETIC TECHNOLOGIES CORPORATION

 

By:  

/s/ Susan Washer

    Date: January  31 , 2005
  Susan Washer    
  Chief Executive Officer    

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Exhibit 10.4

FIRST AMENDMENT

RESTATED AMENDMENT TO

LICENSE AGREEMENT (B)

(A2124)

This First Amendment after Restated Amendment to License Agreement (this “First Amendment after Restated Amendment”) is made and effective as of November, 28 2007 by and between the University of Florida Research Foundation, Inc (“UFRF”) a non-stock, non-profit Florida corporation and Applied Genetic Technologies Corporation (“Licensee”) a corporation organized and existing under the laws of the State of Delaware.

Whereas , UFRF and Licensee (collectively the “Parties”) entered into that certain patent license agreement known as Agreement No. 2001-09-13B (the “License Agreement”) covering certain licensed patents, such License Agreement being dated and effective September 25, 2001; and

Whereas , the Parties have agreed to amend the agreement as previously restated in the Restated Amendment to License Agreement (B) made and effective January 31, 2005;

NOW, THEREFORE , for and in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree to amend the License Agreement as follows.

 

1. Section 3.3.1

Section 3.3.1, paragraph one , is deleted in its entirety and the following is substituted in lieu thereof:

Licensee agrees to pay UFRF Minimum Royalty payments of [ ** ] per year to be paid in equal quarterly installments beginning on September 30, 2002, ending with the payment on June 30, 2007, and resuming on September 30, 2009, and every year thereafter for the life of this Agreement.

 

2. Section 3.4,2

Section 3.4.2 as amended by the Restated Amendment to License Agreement is deleted in its entirety and the following is substituted in lieu thereof

3.4.2 Licensee agrees to the following development milestones for [**]:

 

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

Each of the above-described development milestones shall be completed by Licensee and/or its Sublicensees by the agreed dates or this License may be terminated by UFRF pursuant to Section 7.3 of this Agreement

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 1 -


Except as hereby amended, all terms and conditions of the original agreement as amended remain unchanged and in fill force and effect.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.

 

APPLIED GENETIC TECHNOLOGIES CORP.    
By  

/s/ Susan B. Washer

    Date: 1/9, 2008
  Susan B. Washer    
  President and CEO    

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

By  

/s/ David L. Day

    Date: 1/16, 2008
  David L. Day    
  Director, Office of Technology Transfer    

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -

Exhibit 10.5

STANDARD EXCLUSIVE LICENSE AGREEMENT

WITH SUBLICENSING TERMS

TABLE OF CONTENTS

Section 1 Definitions

Section 2 Grant

Section 3 Due Diligence

Section 4 Consideration

Section 5 Certain Warranties and Disclaimers of UFRF; Representations by JHU

Section 6 Record keeping

Section 7 Patent Prosecution

Section 8 Infringement and Invalidity

Section 9 Term and Termination

Section 10 Assignability

Section 11 Dispute Resolution Procedures

Section 12 Product Liability; Conduct of Business

Section 13 Use of Names

Section 14 Miscellaneous

Section 15 Notices

Section 16 Contract Formation and Authority

Section 17 United States Government Interests

Appendix A Development Plan

Appendix B Development Report

Appendix C UFRF Royalty Report

Appendix D Equity Agreement

This Agreement is made effective the 7th day of October, 2003, (the “Effective Date”) by and between the University of Florida Research Foundation, Inc. (hereinafter called “UFRF”), a nonstock, nonprofit Florida corporation, Johns Hopkins University (hereinafter “JHU”), a Maryland Corporation, and Applied Genetic Technologies, Inc. and any Affiliates of Applied Genetic Technologies, Inc. (hereinafter called “Licensee”), a corporation organized and existing under the laws of Florida;

WHEREAS, JHU and UFRF (which shall collectively be referred to as “Licensors”) each own undivided rights in certain inventions that are described in the “Licensed Patents” defined below, and Licensors are each willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 1 -


NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

Section 1 Definitions

 

  1.1 “Licensed Patents” shall refer to and mean all of the following Licensors intellectual property:

 

  1.1.1 the United States patent(s)/patent application(s) entitled [ ** ] and all United States patents and foreign patents and patent applications based on this U.S. application;

 

  1.1.2 any extensions, substitutions, renewals, reissues, re-examinations, continuations, or divisionals of or to any application or patents and all patents issuing thereon, and all patent registrations, supplementary protection certificates, or cautionary notices thereof both U.S. and foreign; and

 

  1.1.3 any reissues or re-examinations of patents described in 1.1.1 or 1.1.2 above.

 

  1.2 “Licensed Product” and “Licensed Process” shall mean:

 

  1.2.1 In the case of a Licensed Product, any product or part thereof developed by or on behalf of Licensee that:

 

  (a) is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any product is made, used or sold; or

 

  (b) is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any such process is used or in which any such product is used or sold.

 

  1.2.2 In the case of a Licensed Process, any process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which such process is practiced.

 

  1.3 “Net Sales” shall mean the amount invoiced on sales (regardless of uncollectible accounts) of Licensed Product and/or Licensed Processes after deducting, if not already deducted in the amount invoiced:

 

    Trade and/or quantity discounts

 

    Credits on returns and allowances

 

    Outbound transportation costs paid

The “Net Sales” for a Licensed Product or Licensed Process that is transferred to a third party for promotional purposes without charge or at a discount shall be the average invoiced price to the customer of that type of Licensed Product and/or Licensed Process during the applicable calendar quarter.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


It is understood that Licensed Product may be sold in a combination package, composite or kit containing other non-licensed products or items. In such event, Selling Price, for purposes of determining royalty payments on the combination package, shall be calculated by the following applicable method:

 

  (i) By multiplying the Selling Price of that combination package by the fraction A/A+B, where A is the Selling Price, during the royalty paying period in question, of the Licensed Product when sold separately, and B is the Selling Price, during the royalty paying period in question, of the other components in the combination when sold separately. If no sales of a component occur during a royalty paying period then the production cost of said component shall be used for the purpose of calculating the royalty on a combination product. In no case shall the royalty on a combination product be less than one (1) percent of the Selling Price.

 

  1.4 The term “Affiliate” shall mean: (a) any person or entity which controls at least fifty percent (50%) of the equity or voting stock of the Licensee or (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by the Licensee or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of Licensee or (d) any entity in which any officer, employee, or director is also an officer, employee, or director of Licensee or any person who is an officer, employee or director of Licensee.

 

  1.5 The term “Sublicensee” shall mean any third party, other than an Affiliate, to whom Licensee confers the right to make, use or sell Licensed Product and/or Licensed Processes.

 

  1.6 “Development Plan” shall mean a written report summarizing the development activities that are to be undertaken by the Licensee to bring Licensed Products and/or Licensed Processes to the market. The Development Plan is attached as Appendix A.

 

  1.7 “Development Report” shall mean a written account of Licensee’s progress under the Development Plan having at least the information specified on Appendix B to this Agreement, and shall be sent to the address specified on Appendix B.

 

  1.8 “Licensed Field” shall be all fields of use.

 

  1.9 “Licensed Territory” shall be worldwide.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 3 -


Section 2 Grant

 

  2.1 License.

Licensors hereby grant to Licensee an exclusive license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, use and sell Licensed Products and/or Licensed Processes with the right to sublicense except that Affiliates expressly shall not have the right to sublicense. During the term of this Agreement, Licensors will grant no other commercial licenses in the Licensed Field and the Licensed Territory under the Licensed Patents. However, Licensors reserve to themselves and the University of Florida the right to make and use Licensed Products and/or Licensed Processes under the Licensed Patents for research and educational purposes, including research for any sponsors, including for-profit sponsors. Licensors reserve to themselves and the University of Florida the right to make and use Licensed Products and/or Licensed Processes under the Licensed Patents for clinical purposes, including research for not for profit sponsors and research for Licensee and Sublicensees. All sponsored research contemplated under this Section 2.1 shall be conducted on the campus of, and in facilities belonging to, the University of Florida, or JHU and shall be conducted for non-commercial purposes only. No right or license to Licensed Products and/or Licensed Processes shall be granted or implied to, and no materials will be transferred to, and no confidential information will be disclosed to, said for-profit sponsors. The forgoing notwithstanding, Licensors reserve to themselves and to the University of Florida the right to use the biological materials that might be covered under Licensed Patents solely for their internal, non-commercial research purposes and to meet all federal and applicable state requirements governing the right to transfer biological materials. For the purposes of this Section 2.1, materials and confidential information shall mean materials and confidential information developed by or belonging solely to Licensee and/or its Sublicensees.

 

  2.2 Sublicense.

 

  2.2.1

Licensee may sublicense to others under this Agreement, subject to the terms and conditions of this Paragraph and subject to Licensors prior written approval of the sublicense agreement. Such approval shall not be unreasonably withheld. As a condition to its validity and enforceability, each sublicense agreement shall: (a) incorporate by reference the terms and conditions of this Agreement, (b) be consistent with the terms, conditions and limitations of this Agreement, (c) prohibit Sublicensee’s further sublicense of the rights delivered hereunder, (d) name Licensors as an intended third party beneficiaries of the obligations of Sublicensee without imposition of obligation or liability on the part of Licensors or its Inventors to the Sublicensee, (e) specifically incorporate Sections 5 “Certain Warranties and Disclaimers of UFRF; Representations by JHU”, 12 “Product Liability; Conduct of Business”, 13 “Use of Names”, into the body of the sublicense agreement, and cause the terms used in therein to

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 4 -


  have the same meaning as in this Agreement, and, (f) bear signature from Licensors indicating Licensors’s review and approval of the sublicense agreement. Licensee shall provide to Licensors each proposed sublicense agreement, executed by both Licensee and proposed Sublicensee, for review, approval and signature by Licensors. To the extent that any terms, conditions or limitations of any sublicense agreement are inconsistent with this Agreement, those terms, conditions and limitations are null and void against Licensors, even though Licensors has approved the sublicense in writing. Licensee may grant written, exclusive Sublicenses to third parties. Any agreement granting a Sublicense shall state that the Sublicense is subject to the termination of this Agreement. Licensee shall have the same responsibility for the activities of any Sublicensee or Affiliate as if the activities were directly those of Licensee.

 

  2.2.2 In respect to Sublicenses granted by Licensee under 2.2.1 above, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other cash payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Products sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments in the manner specified in Section 4.5. Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF.

 

  2.2.3 Licensee shall provide Licensors with a copy of each sublicense agreement within thirty (30) days prior to the execution of the sublicense agreement.

 

  2.3 License to Licensors

To the extent permitted by applicable law, Licensee hereby grants and shall use its best efforts to require its Sublicensee(s) to grant Licensors the right to negotiate for sixty (60) days following disclosure of Improvements (as defined herein) to obtain a nonexclusive, royalty-free, irrevocable, paid-up license to make and use for research, educational, and clinical purposes, including research for any sponsors, including for-profit sponsors, any and all inventions hereafter made by Licensee (or its Sublicensee(s)) to the extent any such inventions are Improvements. “Improvements” shall mean any modification of an invention described in Licensed Patents which, if unlicensed, would infringe one or more claims of the Licensed Patents. Licensee shall provide Licensors with a written, enabling disclosure of each such invention (such as a U.S. patent application), unambiguously identifying it as an invention governed by this paragraph, within six (6) months of filing a patent application thereon. If the parties do not enter into a license agreement, after negotiating in good faith, within sixty (60) days of

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 5 -


the date of the disclosure, Licensors’s rights under this Section 2.3 shall be deemed terminated, but only with respect to the invention so disclosed. Any nonexclusive, royalty-free, irrevocable, paid-up license granted to Licensors to make and use Improvements shall specifically exclude the right to sell, import or export Improvements.

Section 3 Due Diligence

 

  3.1 Development.

 

  3.1.1 Licensee agrees to and warrants that: it has, or will obtain, the expertise necessary to independently evaluate the inventions of the Licensed Patents; it will establish and actively and diligently pursue the Development Plan (see Appendix A ) to the end that the inventions of the Licensed Patents will be utilized to provide Licensed Products and/or Licensed Processes for sale in the retail market within the Licensed Field; and until the date of first commercial sale of Licensed Products, it will supply UFRF with a written Development Report annually fifteen (15) days after the end of the calendar year (see Appendix B ). All development activities and strategies and all aspects of product design and decisions to market and the like are entirely at the discretion of Licensee, and Licensee shall rely entirely on its own expertise with respect thereto. UFRF’s review of Licensee’s Development Plan is solely to verify the existence of Licensee’s commitment to development activity and to ensure compliance with Licensee’s obligations to commercialize the inventions of the Licensed Patents, as set forth above, other than those elements of the Development Plan as designated as Due Diligence milestones in 3.1.2 below.

 

  3.1.2 Licensee agrees that [ ** ] or Licensors shall have the right to terminate the Agreement pursuant to Section 9.3 hereto. In addition, Licensee agrees to the following due diligence elements which if not accomplished by the following dates, then Licensors shall have the right to terminate the Agreement pursuant to Section 9.3:

 

  (a) [**]

 

  (b) [**]

 

  (c) [**]

 

  (d) [**]

 

  (e) [**]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 6 -


Section 4 Consideration

 

  4.1 License Issue Fee.

Licensee agrees to pay to UFRF a License Issue Fee of [**] within thirty (30) days of the Effective Date.

 

  4.2 Issuance of Equity.

As further consideration for the rights granted to Licensee by this Agreement, as of the Effective Date, (i) Licensee will issue to each of JHU and UFRF that number of shares of common stock of Licensee equal to [ ** ] of the total number of issued and outstanding shares of Licensee on the Effective Date. The issuance of common stock to Licensors under this Section 4.2 shall be made in accordance with that certain Equity Agreement by and between UFRF and Licensee of even date herewith, a copy of which is attached hereto as Appendix D and incorporated by reference herein. Licensee shall take all actions necessary so that Licensors shall each be issued the number of shares called for in this Agreement and the Equity Agreement attached as Appendix D.

 

  4.3 Running Royalty.

In addition to the Section 4.1 License Issue Fee, Licensee agrees to pay to UFRF as earned royalties a royalty calculated as a percentage of Net Sales in accordance with the terms and conditions of this Agreement. The royalty is deemed earned as of the earlier of the date the Licensed Product and/or Licensed Process is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. The royalty shall remain fixed while this Agreement is in effect at a rate of [ ** ] of Net Sales. In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 4.3 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is obligated to pay to third parties under such licenses, further provided, however, that the royalties payable to UFRF under this Section 4.3 shall not be reduced to less than [ ** ] of the applicable Net Sales.

 

  4.4 Other Payments.

 

  4.4.1 Licensee agrees to pay UFRF Minimum Royalty payments of [ ** ] per year to be paid in equal quarterly installments beginning on September 30, 2003 and every year thereafter for the life of this Agreement.

The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect. The first Minimum Royalty payment shall be due on October 1, 2003 and shall be in the amount of [ ** ] . The Minimum Royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30,

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 7 -


September 30, and December 31 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the Minimum Royalties will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UFRF for other than the same calendar year in which the royalties were earned.

 

  4.4.2 In addition to all other payments required under this Agreement, Licensee agrees to pay UFRF Milestone payments, as follows:

 

Payment

  

Event

[ ** ]    [ ** ]
[ ** ]    [**]
[ ** ]    [**]
[ ** ]    [**]

For purposes of this Section 4.4.2, “Initiation” shall mean enrollment of the first patient.

 

  4.5 Accounting for Payments.

 

  4.5.1 Amounts owing to UFRF under Sections 2.2 and 4.3 shall be paid on a quarterly basis after the amount of Minimum Royalties paid is exceeded, with such amounts due and received by UFRF on or before the thirtieth day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned. The balance of any amounts which remain unpaid more than thirty (30) days after they are due to UFRF shall accrue interest until paid at the rate of the lesser of one and one-half percent (1.5%) per month or the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays. Licensee shall also be responsible for repayment to UFRF of any attorney, collection agency, or other out-of-pocket UFRF expenses required to collect overdue payments due from this Section 4.5.1, Section 6.2 or any other applicable section of this Agreement.

 

  4.5.2 Except as otherwise directed, all amounts owing to UFRF under this Agreement shall be paid in U.S. dollars to UFRF at the following address:

University of Florida Research Foundation, Inc.

219 Grinter Hall

PO Box 115500

Gainesville, Florida  32611-5500

Attention: Business Manager

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 8 -


All royalties owing with respect to Net Sales stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation - Value of Foreign Currencies on the day preceding the payment.

 

  4.5.3 A certified full accounting statement showing how any amounts payable to UFRF under Sections 2.2 and 4.3 have been calculated shall be submitted to UFRF on the date of each such payment. Such accounting shall be on a per-country and product line, model or trade name basis and shall be summarized on the form shown in Appendix C of this Agreement. In the event no payment is owed to UFRF because the amount of Minimum Royalties paid has not been exceeded or otherwise, an accounting demonstrating that fact shall be supplied to UFRF.

 

  4.5.4 Licensors are exempt from paying income taxes under U.S. law. Therefore, all payments due under this Agreement shall be made without deduction for taxes, assessments, or other charges of any kind which may be imposed on UFRF by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to Licensors pursuant to this Agreement. All such taxes, assessments, or other charges shall be assumed by Licensee.

Section 5 Certain Warranties and Disclaimers of UFRF; Representations by JHU

 

  5.1 UFRF warrants that, except as otherwise provided under Section 16.1 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  5.1.1 a warranty or representation by UFRF as to the validity or scope of any right included in the Licensed Patents;

 

  5.1.2 a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  5.1.3 an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

  5.1.4 an obligation to furnish any know-how not provided in Licensed Patents or any services other than those specified in this Agreement; or

 

  5.1.5 a warranty or representation by UFRF that it will not grant licenses to others to make, use or sell products not covered by the claims of the Licensed Patents which may be similar and/or compete with products made or sold by Licensee.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 9 -


  5.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, UFRF MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING. UFRFASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, ITS SUBLICENSEE(S), OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

  5.3 Duties of the Parties. Licensors are not commercial organizations. They are institutes of research and education. Therefore, Licensors have no ability to evaluate the commercial potential of any Licensed Patents or Licensed Processes or other license or rights granted in this Agreement. It is therefore incumbent upon Company to evaluate the rights and products in question, to examine the materials and information provided by Licensors, and to determine for itself the validity of any Licensed Patents or Licensed Processes its freedom to operate, and the value of any Licensed Patents or Licensed Processes or other rights granted

 

  5.4

Representations by JHU. JHU warrants that it has good and marketable title to its interest in the inventions claimed under Licensed Patents with the exception of certain retained rights of the United States Government, which may apply if any part of the JHU research was funded in whole or in part by the United States Government. JHU does not warrant the validity of any patents or that practice under such patents shall be free of infringement. EXCEPT AS EXPRESSLY SET FORTH IN THIS PARAGRAPH 5.4, LICENSEE, LICENSEE’S AFFILIATES AND SUBLICENSEE(S) AGREE THAT THE LICENSED PATENTS ARE PROVIDED “AS IS”, AND THAT JHU MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE PERFORMANCE OF LICENSED PRODUCT(S) AND LICENSED PROCESSES INCLUDING THEIR SAFETY, EFFECTIVENESS, OR COMMERCIAL VIABILITY. JHU DISCLAIMS ALL WARRANTIES WITH REGARD TO PRODUCT(S) AND PROCESSES(S) LICENSED UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ALL WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, JHU ADDITIONALLY DISCLAIMS ALL OBLIGATIONS AND LIABILITIES ON THE PART OF JHU AND INVENTORS, FOR DAMAGES, INCLUDING, BUT NOT LIMITED TO, DIRECT, INDIRECT, SPECIAL, AND CONSEQUENTIAL DAMAGES, ATTORNEYS’ AND EXPERTS’ FEES, AND COURT COSTS (EVEN IF JHU HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, FEES OR COSTS), ARISING OUT OF OR IN CONNECTION WITH THE MANUFACTURE, USE, OR SALE OF THE PRODUCT(S) AND PROCESSES

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 10 -


  LICENSED UNDER THIS AGREEMENT. LICENSEE, LICENSEE’S AFFILIATES AND SUBLICENSEE(S) ASSUME ALL RESPONSIBILITY AND LIABILITY FOR LOSS OR DAMAGE CAUSED BY A PRODUCT AND/OR PROCESS MANUFACTURED, USED, OR SOLD BY LICENSEE, ITS SUBLICENSEE(S) AND AFFILIATED COMPANIES WHICH IS A LICENSED PRODUCT(S) OR LICENSED PROCESSES AS DEFINED IN THIS AGREEMENT.

Section 6 Record keeping

 

  6.1 Licensee and its Sublicensee(s) shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)’s accounting referred to above, including without limitation, inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products and/or Licensed Processes. Such books and records shall be preserved for a period not less than six years after they are created, both during and after the term of this Agreement.

 

  6.2 Licensee and its Sublicensee(s) shall take all steps necessary so that UFRF may, within thirty (30) days of its written request, audit, review and/or copy all of the books and records at a single U.S. location to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting. Such review may be performed by any authorized employees of UFRF as well as by any attorneys and/or accountants designated by UFRF, upon reasonable notice and during regular business hours. If a deficiency with regard to any payment hereunder is determined, Licensee and its Sublicensee(s) shall pay the deficiency within thirty (30) days of receiving notice thereof along with applicable interest as described in Section 4.5.1. If a royalty payment deficiency for a calendar year exceeds [ ** ] of the royalties paid for that year, then Licensee and its Sublicensee(s) shall be responsible for paying UFRF’s out-of-pocket expenses incurred with respect to such review.

 

  6.3 At any time during the term of this agreement, UFRF may request in writing that Licensee verify the calculation of any past payments owed to UFRF through the means of a self-audit. Within ninety (90) days of the request, Licensee shall complete a self-audit of its books and records to verify the accuracy and completeness of the payments owed. Within thirty (30) days of the completion of the self-audit, Licensee shall submit to UFRF a report detailing the findings of the self-audit and the manner in which it was conducted in order to verify the accuracy and completeness of the payments owed. If Licensee has determined through its self-audit that there is any payment deficiency, Licensee shall pay UFRF the deficiency along with applicable interest under Section 4.5.1 with the submission of the self-audit report to UFRF.

Section 7 Patent Prosecution

 

  7.1

UFRF shall diligently prosecute and maintain the Licensed Patents using counsel of its choice. UFRF shall provide Licensee with copies of all patent

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 11 -


  applications amendments, and other filings with the United States Patent and Trademark Office and foreign patent offices. UFRF will also provide Licensee with copies of office actions and other communications received by UFRF from the United States Patent and Trademark Office and foreign patent offices relating to Licensed Patents. Licensee agrees to keep such information confidential.

 

  7.2 Licensee shall be responsible for and pay [ ** ] for the preparation, filing, prosecution, issuance, and maintenance of the Licensed Patents within thirty (30) days of receipt of an invoice from UFRF. It shall be the responsibility of Licensee to keep UFRF fully apprised of the “small entity” status of Licensee with respect to the U.S. patent laws and with respect to the patent laws of any other countries, if applicable, and to inform UFRF of any changes in such status, within thirty days of any such change.

Section 8 Infringement and Invalidity

 

  8.1 Licensee shall inform Licensors promptly in writing of any alleged infringement of the Licensed Patents by a third party and of any available evidence thereof.

 

  8.2 During the term of this Agreement, Licensors shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Licensed Patents. If Licensors prosecutes any such infringement, Licensee agrees that Licensors may include Licensee as a co-plaintiff in any such suit, without expense to Licensee.

 

  8.3 If within six (6) months after having been notified of any alleged infringement, Licensors shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if Licensors shall notify Licensee at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Licensed Patents, and Licensee may, for such purposes, use the name of Licensors as party plaintiff. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of Licensors, which consent shall not unreasonably. Licensee shall indemnify Licensors against any order for costs that may be made against Licensors in such proceedings.

 

  8.4 In the event that Licensee shall undertake the enforcement by litigation and/or defense of the Licensed Patents by litigation, any recovery of damages by Licensee for any such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of Licensee relating to the suit, and next toward reimbursement of Licensors for any legal fees and unreimbursed expenses. The balance remaining from any such recovery shall be [ ** ].

 

  8.5

In any infringement suit that either party may institute to enforce the Licensed Patents pursuant to this Agreement, the other party hereto shall, at the request and

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 12 -


  expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

 

  8.6 In the event a declaratory judgment action alleging invalidity or noninfringement of any of the Licensed Patents shall be brought against Licensee, Licensors, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense.

 

  8.7 In the event Licensee contests the validity of any Licensed Patents, Licensee shall continue to pay royalties and make other payments pursuant to this Agreement with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

Section 9 Term and Termination

 

  9.1 The term of this license shall begin on the Effective Date of this Agreement and continue until the earlier of the date that no Licensed Patent remains an enforceable patent or the payment of earned royalties under Section 4.3, once begun, ceases for more than three (3) calendar quarters.

 

  9.2 Licensee may terminate this Agreement at any time by giving at least ninety (90) days written notice of such termination to Licensors. Such a notice shall be accompanied by a statement of the reasons for termination.

 

  9.3 Licensors may terminate this Agreement by giving Licensee at least sixty (60) days written notice if [ ** ] does not occur on or before the date specified in Section 3.1.2.

 

  9.4 If Licensee at any time defaults in the timely payment of any monies due to Licensors or the timely submission to Licensors of any Development Report, fails to actively pursue the Development Plan, or commits any breach of any other covenant herein contained, and Licensee fails to remedy any such breach or default within sixty (60) days after written notice thereof by Licensors, Licensors may, at its option, immediately terminate this Agreement by giving notice of termination to Licensee.

 

  9.5 Licensors may immediately terminate this Agreement upon the occurrence of the second separate default by Licensee within any consecutive three-year period for failure to pay royalties, patent or any other expenses when due.

 

  9.6 If Licensee shall cease to carry on its business pertaining to Licensed Patents, this Agreement shall terminate upon thirty (30) days notice by Licensors.

 

  9.7

Upon the termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 13 -


  effective date of such termination. Licensee shall remain obligated to provide an accounting for and to pay royalties earned to the date of termination, and any Minimum Royalties shall be prorated as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that Licensee shall remain obligated to provide an accounting for and to pay running royalties thereon.

Section 10 Assignability

This Agreement may not be transferred or assigned by Licensee except with the prior written consent of Licensors.

Section 11 Product Liability; Conduct of Business

 

  11.1 Licensee and its Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and each of their directors, officers, employees, and agents, and the inventors of the Licensed Patents, regardless of whether such inventors are employed by the University of Florida at the time of the claim, harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, whether arising from a third party claim or resulting from UFRF’s enforcing this indemnification clause against Licensee, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever (other than patent infringement claims) resulting from the production, manufacture, sale, use, lease, consumption, marketing, or advertisement of Licensed Products or Licensed Process(es) or arising from any right or obligation of Licensee hereunder. Notwithstanding the above, UFRF at all times reserves the right to retain counsel of its own to defend UFRF’s, the Florida Board of Governors’, the University of Florida Board of Trustees’, the University of Florida’s, and the inventor’s interests.

 

  11.2 Licensee warrants that it now maintains and will continue to maintain liability insurance coverage appropriate to the risk involved in producing, manufacturing, selling, marketing, using, leasing, consuming, or advertising the products subject to this Agreement and that such insurance coverage lists UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents as additional insureds. Within thirty (30) days after the execution of this Agreement and thereafter annually between January 1 and January 31 of each year, Licensee will present evidence to UFRF that the coverage is being maintained with UFRF, the University of Florida, and its inventors listed as additional insureds. In addition, Licensee shall provide UFRF with at least thirty (30) days prior written notice of any change in or cancellation of the insurance coverage.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 14 -


  11.3 Product Liability. Prior to initial human testing or first commercial sale of any Licensed Products and Licensed Processes as the case may be in any particular country, Licensee shall establish and maintain, in each country in which Licensee, an Affiliates of Licensee or Sublicensee(s) shall test or sell Licensed Products or Licensed Processes, product liability or other appropriate insurance coverage in the minimum amount of [ ** ] per claim and will annually present evidence to JHU that such coverage is being maintained. Upon JHU’s request, Licensee will furnish JHU with a Certificate of Insurance of each product liability insurance policy obtained. JHU shall be listed as an additional insured in Licensee’s said insurance policies. If such Product Liability insurance is underwritten on a ‘claims made’ basis, Licensee agrees that any change in underwriters during the term of this Agreement will require the purchase of ‘prior acts’ coverage to ensure that coverage will be continuous throughout the term of this Agreement.

 

  11.4 INDEMNIFICATION JHU and Drs. [ ** ] who are employees of JHU (hereinafter “Inventors”) will have no legal liability exposure to third parties if JHU does not license the Licensed Products and Licensed Processes, and any royalties JHU and the Inventors may receive is not adequate compensation for such legal liability exposure. Therefore, JHU requires Licensee to protect JHU and Inventors from such exposure to the same manner and extent to which insurance, if available, would protect JHU and Inventors. Furthermore, JHU and the Inventors will not, under the provisions of this Agreement or otherwise, have control over the manner in which Licensee or its Affiliates or its Sublicensees or those operating for its account or third parties who purchase Licensed Products and Licensed Processes from any of the foregoing entities, develop, manufacture, market or practice the inventions of Licensed Products and Licensed Processes. Therefore, Licensee, Affiliates and Sublicensees shall indemnify, defend with counsel reasonably acceptable to JHU, and hold JHU, The Johns Hopkins Health Systems, their present and former trustees, officers, Inventors of Licensed Patents, agents, faculty, employees and students harmless as against any judgments, fees, expenses, or other costs arising from or incidental to any product liability or other lawsuit, claim, demand or other action brought as a consequence of the practice of said inventions by any of the foregoing entities, whether or not JHU or said Inventors, either jointly or severally, is named as a party defendant in any such lawsuit and whether or not JHU or the Inventors are alleged to be negligent or otherwise responsible for any injuries to persons or property. Practice of the inventions covered by Licensed Products and Licensed Processes, by an Affiliate or an agent or a Sublicensee or a third party on behalf of or for the account of Licensee or by a third party who purchases Licensed Products and Licensed Processes from Licensee, shall be considered Licensee’s practice of said inventions for purposes of this Paragraph. The obligation of Licensee to defend and indemnify as set out in this Paragraph shall survive the termination of this Agreement, shall continue even after assignment of rights and responsibilities to an affiliate or sublicensee, and shall not be limited by any other limitation of liability elsewhere in this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 15 -


Section 12 Use of Names

Licensee and its Sublicensee(s) shall not use the names of UFRF, or of the University of Florida, nor of any of either institution’s employees, agents, or affiliates, nor the name of any inventor of Licensed Patents, nor any adaptation of such names, in any sales promotion, advertising, or any other form of publicity without the prior written approval of UFRF in each case, except that Licensee may state that it has received a license from UFRF under one or more or the patents and/or applications comprising the Licensed Patents.

Licensee, Affiliates and Sublicensees shall not use the name of The Johns Hopkins University or The Johns Hopkins Health System or any of its constituent parts, such as the Johns Hopkins Hospital or any contraction thereof or the name of Inventors in any advertising, promotional, sales literature or fundraising documents without prior written consent from an authorized representative of JHU. Licensee, Affiliates and Sublicensees shall allow at least seven (7) business days notice of any proposed public disclosure for JHU’s review and comment or to provide written consent.

Section 13 Miscellaneous

 

  13.1 This Agreement shall be construed in accordance with the internal laws of the State of Florida

 

  13.2 The parties hereto are independent contractors and not joint venturers or partners.

 

  13.3 Licensee shall insure that it applies patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement.

 

  13.4 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

Licensee shall not encumber or otherwise grant a security interest in any of the rights granted hereunder to any third party.

 

  13.5

Successors and Assigns. Neither this Agreement nor any of the rights or obligations created herein, except for the right to receive any remuneration

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 16 -


  hereunder, may be assigned by either party, in whole or in part, without the prior written consent of the other party, except that either party shall be free to assign this Agreement in connection with any sale of substantially all of its assets without the consent of the other. Such assignment shall be subject to Licensors approval, which approval shall not be unreasonably withheld. This Agreement shall bind and inure to the benefit of the successors and permitted assigns of the parties hereto.

 

  13.6 Notice of Claim. Each party shall give the other or its representative immediate notice of any suit or action filed, or prompt notice of any claim made, against them arising out of the performance of this Agreement or arising out of the practice of the inventions licensed hereunder.

 

  13.7 Further Assurances. Each party shall, at any time, and from time to time, prior to or after the Effective Date of this Agreement, at reasonable request of the other party, execute and deliver to the other such instruments and documents and shall take such actions as may be required to more effectively carry out the terms of this Agreement.

 

  13.8 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party hereto, shall impair any such right, power or remedy to such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or in any similar breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

  13.9 Survival. All representations, warranties, covenants and agreements made herein and which by their express terms or by implication are to be performed after the execution and/or termination hereof, or are prospective in nature, shall survive such execution and/or termination, as the case may be. This shall include Section 4.5, Section 5, Section 6, Section 7.1, Section 9, Section 11, Section 12, this Section 13.9.

 

  13.10 No Third Party Beneficiaries. Nothing in this Agreement shall be construed as giving any person, firm, corporation or other entity, other than the parties hereto and their successors and permitted assigns, any right, remedy or claim under or in respect of this Agreement or any provision hereof.

 

  13.11 Headings. Article headings are for convenient reference and not a part of this Agreement. All Appendix are incorporated herein by this reference.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 17 -


  13.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which when taken together shall be deemed but one instrument.

 

  13.13 Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Contract Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of such items may require a license from the cognizant agency of the U.S. Government or written assurances by Licensee that it shall not export such items to certain foreign countries without prior approval of such agency. UFRF neither represents that a license is or is not required or that, if required, it shall be issued.

Section 14 Notices

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given

 

    when delivered personally,

 

    if sent by facsimile transmission, when receipt thereof is acknowledged at the facsimile number of the recipient as set forth below,

 

    the second day following the day on which the notice has been delivered prepaid to a national air courier service, or

 

    five (5) business days following deposit in the U.S. mail if sent certified mail, return receipt requested:

 

  14.1 If to JHU:

Licensing and Technology Development

Johns Hopkins University

100 N. Charles Street

5th Floor

Baltimore, MD, 21201

Attn: Director

 

  14.2 If to the University of Florida Research Foundation, Inc.:

President

University of Florida Research Foundation, Inc.

223 Grinter Hall

University of Florida

Post Office Box 115500

Gainesville, FL 32611-5500

Facsimile Number: 352-846-0491

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 18 -


with a copy to:

Office of Technology Licensing

Attn: Director

308 Walker Hall

University of Florida

Post Office Box 115500

Gainesville, Florida 32611-5500

Facsimile Number: 352-392-6600

 

  14.3 If to Licensee:

Applied Genetic Technologies Company

Attention: Chief Executive Officer

12085 Research Drive, Suite 112

Alachua, FL 32615

with a copy to:

Fred D. Hutchinson, Esq.

Hutchinson & Mason, PLLC

3100 Edwards Mill Road, Suite 100

Raleigh, NC 27612

Section 15 Contract Formation and Authority

 

  15.1 No agreement between the parties shall exist unless the duly authorized representative of Licensee and the Director of the Office of Technology Transfer of UFRF and the Associate Provost and Assistant Dean for Licensing and Technology Development of JHU have signed this document within thirty (30) days of the Effective Date written on the first page of this Agreement.

 

  15.2 UFRF and JHU and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

 

  15.3 Force Majeure.

No default, delay, or failure to perform on the part of Licensee or Licensors shall be considered a default, delay or failure to perform otherwise chargeable hereunder, if such default, delay or failure to perform is due to causes beyond either party’s reasonable control including, but not limited to: strikes, lockouts, or inactions of governmental authorities, epidemics, war, embargoes, fire, earthquake, acts of God, or default of common carrier. In the event of such default, delay or failure to perform, any date or times by which either party is otherwise scheduled to perform shall be extended automatically for a period of time equal in duration to the time lost by reason of the excused default, delay or failure to perform.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 19 -


Section 16 United States Government Interests

 

  16.1 It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [ ** ]during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

  16.2 Licensee agrees that for Licensed Products covered by the Licensed Patents that are subject to the non-exclusive royalty-free license to the United States Government, said Licensed Products will be manufactured substantially in the United States. Licensee further agrees that it shall abide by all the requirements and limitations of U.S. Code, Title 35, Chapter 18, and implementing regulations thereof, for all patent applications and patents invented in whole or in part with federal money.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.

JOHNS HOPKINS UNIVERSITY

 

/s/ William P. Tew

  Date: October 7, 2003
William P. Tew, Ph.D.  
Associate Provost and Assistant Dean
Licensing and Technology Development

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

/s/ David L. Day

  Date: October 1, 2003
David L. Day  
Director, Office of Technology Transfer

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 20 -


APPLIED GENETIC TECHNOLOGIES, INC.

 

By:  

/s/ Susan B. Washer

   Date: October 1, 2003
Susan B. Washer, President   

 

 

Reviewed by UFRF’s Attorney:        Reviewed by Licensee’s Attorney

 

                                    
    (name typed)        (name typed)

(Neither attorney shall be deemed a signatory to this Agreement.)

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 21 -


Appendix A

Development Plan

A development plan of the scope outlined below shall be submitted to UFRF by Licensee prior to the execution of this agreement. In general, the plan should provide UFRF with a summary overview of the activities that Licensee believes are necessary to bring products to the marketplace.

I. Development Program

A. Development activities to be undertaken

(Please break activities into subunits with the date of completion of major milestones)

1.

2.

3.

4.

B. Estimated total development time

II. Governmental Approval

A. Types of submissions required

B. Government agency, e.g., FDA, EPA, etc.

III. Proposed Market Approach

IV. Competitive Information

A. Potential competitors

B. Potential competitive devices/compositions

C. Known competitor’s plans, developments, technical achievements

D. Anticipated date of product launch

Total Length : approximately 2-3 pages

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 22 -


Appendix B

Development Report

When appropriate, indicate estimated start date and finish date for activities.

I. Date Development Plan Initiated and Time Period Covered by this Report.

II. Development Report (4-8 paragraphs).

 

  A. Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.

 

  B. Activities currently under investigation, i.e., ongoing activities including object and parameters of such.

III. Future Development Activities (4-8 paragraphs).

 

  A. Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.

 

  B. Estimated total development time remaining before a product will be commercialized.

IV. Changes to Initial Development Plan (2-4 paragraphs).

 

  A. Reasons for change.

 

  B. Variables that may cause additional changes.

V. Items to be Provided if Applicable:

 

  A. Information relating to Licensed Products that has become publicly available, e.g., published articles, competing products, patents, etc.

 

  B. Development work being performed by third parties, other than Licensee, to include name of third party.

 

  C. Update of competitive information trends in industry, government compliance (if applicable) and market plan.

 

  D. Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products or the Licensed Patents.

PLEASE SEND DEVELOPMENT REPORTS TO:

University of Florida Research Foundation, Inc.

Attn: Director

308 Walker Hall

P.O. Box 115500

Gainesville, FL 32611-5500

Facsimile: 352-392-6600

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 23 -


Appendix C

UFRF Royalty Report

Licensee:                           Agreement:             

Inventor:                            P#:   P            

Period Covered: From:              Through:             

Prepared By                           Date:             

Approved By:                          Date:             

If license covers several major product lines, please prepare a separate report

for each line. Then combine all product lines into a summary report.

 

      Report Type:     ¨   Single Product Line Report:  

 

                                  ¨   Multiproduct Summary Report.     Page 1 of                      Pages
                                  ¨    Product Line Detail.   Line:  

                              

  Tradename:  

                     

  Page:  

                     

Report Currency:   ¨   U. S. Dollars         ¨    Other  

 

 

     Gross    * Less:    Net    Royalty    Period Royalty Amount
Country    Sales    Allowances    Sales    Rate    This Year    Last Year

U.S.A.

                 

Canada

                 

Europe :

                 

Japan

                 

Other :

                 

TOTAL:

                 

 

Total Royalty:  

 

   Conversion Rate:  

 

   Royalty in U.S. Dollars:  

$

The following royalty forecast is non-binding and for UFRF’s internal planning purposes only:

Royalty Forecast Under This Agreement: Next Quarter:                        Q2:                         Q3:                        Q4:                          

* On a separate page, please indicate the reasons for returns or other adjustments if significant.

Also note any unusual occurrences that affected royalty amounts during this period.

To assist UFRF’s forecasting, please comment on any significant expected trends in sales volume.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 24 -


Appendix D

Equity Agreement

TABLE OF CONTENTS

 

Section 1 Definitions
Section 2 Issuance of Shares to JHU and UFRF; Closing Deliveries
Section 3 Representations and Warranties
Section 4 Miscellaneous Covenants
Section 5 Termination
Section 6 Assignability
Section 7 Miscellaneous
Section 8 Notices
Section 9 Integration
Exhibit A Definitions In Equity Agreement
Exhibit B Articles of Incorporation and Bylaws
Exhibit C Stock Restrictions
Exhibit D Financial Statements
Exhibit E List of Stockholders and Optionholders
Exhibit F Form of Opinion

THIS EQUITY AGREEMENT (the “Agreement”) is made effective the     day of October, 2003 by and between Johns Hopkins University, a Maryland Corporation (hereinafter called “JHU”), and the University of Florida Research Foundation, a nonstock, nonprofit Florida corporation (hereinafter “UFRF”) , (collectively “Licensors”)and Applied Genetic Technologies, Inc. (hereinafter called “Licensee” or “AGTC”), a corporation organized and existing under the laws of Florida.

WHEREAS, JHU, UFRF and Licensee have entered into certain License Agreement with respect to certain inventions owned by Licensors;

WHEREAS, as an accommodation to Licensee, Licensors are willing to accept shares of common stock of Licensee (the “Shares”) in lieu of charging Licensee certain fees under the License Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

Section 1 Definitions

For the purpose of this Agreement, the Exhibit A definitions shall apply. Capitalized terms used and not otherwise defined herein shall have the meanings assigned thereto in the License Agreements.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Section 2 Issuance of Shares to Licensors; Closing Deliveries

 

  2.1 Issuance of Shares

 

  2.1.1 On the Effective Date of the License Agreements, Licensee shall issue to UFRF [ ** ] Shares, being equal to [ ** ] of the total number of issued and outstanding Shares of AGTC on the Effective Date calculated on a fully diluted basis, and Licensee shall deliver, or cause to be delivered, to UFRF a stock certificate, duly signed by appropriate officers of Licensee and issued in UFRF’s name, representing all of the Shares required to be issued to UFRF.

 

  2.1.2 On the Effective Date of the License Agreements, Licensee shall issue to JHU [ ** ], being equal to [ ** ] of the total number of issued and outstanding Shares of AGTC on the Effective Date calculated on a fully diluted basis, and Licensee shall deliver, or cause to be delivered, to JHU a stock certificate, duly signed by appropriate officers of Licensee and issued in JHU’s name, representing all of the Shares required to be issued to JHU.

 

  2.1.3 All Shares shall be fully-paid and non-assessable upon their issuance to Licensors. JHU’s and UFRF’s execution of this Agreement and the License Agreements shall be deemed full consideration for the issuance of the Shares, and no additional consideration for such Shares shall be due from Licensors. No Shares shall be subject to any restrictions on their transfer other than the restrictions specified in Exhibit C hereto.

 

  2.1.4 JHU and UFRF shall each be responsible for providing the appropriate information concerning stock certificate issuance to Applied Genetic Technologies Corporation, or any other future licensees of the Inventions, as appropriate.

 

  2.2 Closing Deliveries

On the Effective Date, in addition to the certificates evidencing the Shares, Licensee shall deliver to JHU and UFRF the following:

 

  2.2.1 a certificate from Licensee, dated as of the Effective Date and signed by the Secretary or an Assistant Secretary of Licensee, certifying that the attached copies of the Certificate of Incorporation, Bylaws of Licensee, and resolutions of the Board of Directors of Licensee approving the License Agreements, this Agreement and the transactions contemplated thereby, are all true, complete and correct and that such resolutions remain unamended and in full force and effect.

 

  2.2.2 an opinion of Fred D. Hutchinson, Esq., counsel to Licensee, dated as of the Effective Date and substantially in the form of Exhibit F hereto.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 2 of 11


Section 3 Representations and Warranties

 

  3.1 Representations and Warranties by Licensee

Licensee represents and warrants to Licensors that:

 

  3.1.1 Licensee is a duly organized and validly existing corporation under the laws of the State of Florida with adequate power and authority to conduct the business in which it is now engaged or currently proposed to be engaged, and Licensee is duly qualified to do business as a foreign corporation and is in good standing in such other states or jurisdictions as is necessary to enable it to carry on its business or own its properties.

 

  3.1.2 There are no actions, suits, or proceedings pending or threatened against or affecting Licensee, its officers or directors in their capacity as such, its properties, or its patents in any court or before any governmental or administrative agency, which can have any material adverse effect on the business as now conducted or as currently proposed to be conducted, on the properties, the financial condition, or income of Licensee, or the transactions contemplated by this Agreement or the License Agreements and Licensee is not in default under any order or judgment of any court or governmental or administrative agency.

 

  3.1.3 Licensee is not a party to any agreement or instrument, or subject to any charter, bylaw, or other corporate restrictions materially adversely affecting its business and operations, present or prospective, or its property, assets, or condition, financial or otherwise.

 

  3.1.4 Licensee is not in default or breach in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any bond, debenture, note, or other evidence of indebtedness or any contract or other agreement of Licensee.

 

  3.1.5 This Agreement has been duly authorized, executed, and delivered on behalf of Licensee and constitutes the valid and binding agreement of Licensee, enforceable in accordance with its terms, and Licensee has full power and lawful authority to issue, sell, and repurchase the Shares on the terms and conditions herein set forth.

 

  3.1.6 Consummation of the transactions contemplated by this Agreement in compliance with provisions of this Agreement will not result in any breach of any of the terms, conditions, or provisions of, or constitute a default under, or result in the creation of any lien, charge, or encumbrance on, any property or assets of Licensee pursuant to any indenture, mortgage, deed of trust, agreement, corporate charter, bylaws, contract, or other instrument to which Licensee is a party or by which Licensee may be bound or any law, rule, regulation, qualification, license, order or judgment applicable to Licensee or any of its property.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 3 of 11


  3.1.7 Licensee is in compliance with all federal, state and local environmental laws and there are no conditions currently existing or contemplated which are likely to subject Licensee to damages, penalties, injunctive relief, removal costs, remedial costs or cleanup costs under any such laws or assertions thereof.

 

  3.1.8 Attached hereto as Exhibit B and hereby made a part hereof are the Articles of Incorporation (including any amendments thereto) and Bylaws (including any amendments thereto) of Licensee in effect on the date hereof.

 

  3.1.9 Pursuant to its Articles of Incorporation, Licensee is authorized to issue 21,290,965 Shares, of which 20,604,160 shares are Common Stock, $0.001 par value per share, and of which 686,805 shares are Preferred Stock, $0.001 par value per share of which 18,364,810 Shares are issued and outstanding. All issued and outstanding Shares are, and the Shares issuable to Licensors will be, validly issued, fully paid and nonassessable, and are not subject to any preemptive rights. There are no other authorized or outstanding Equity Securities of any class, kind, or character, and there are no outstanding subscriptions, options, warrants, or other agreements, or commitments obligating Licensee to issue any additional shares of its capital stock of any class, or any options or rights with respect thereto, or any securities convertible into any shares of stock of any class. No person has any preemptive rights, rights of first refusal, “tag along” rights, rights of co-sale or any similar rights with respect to the issuance of the Shares contemplated hereby.

 

  3.1.10 Attached hereto as Exhibit C and hereby made a part hereof is a list of all restrictions on the transfer of any Shares or other securities of Licensee and all agreements between any shareholders or convertible debt holders of Licensee regarding the valuation, voting or transfer of any Shares or other securities of Licensee.

 

  3.1.11 Attached hereto as Exhibit D and hereby made a part hereof are the unaudited Financial Statements of Licensee for the year ended July 31, 2003. These financial statements are true and complete and are in accordance with the books and records of Licensee. As of the date of the most recent financial statements provided to Licensors under this Agreement, Licensee has no material liabilities, absolute or contingent, that are not reflected in such financial statements except obligations incurred in the ordinary course of business and the License Agreements.

 

  3.1.12

Since the date of the most recent financial statements provided to Licensors under this Agreement, there has been no: (a) material adverse

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 4 of 11


  change in the condition, financial or otherwise, of Licensee other than changes in the ordinary course of business; (b) damage or loss, whether or not covered by insurance, materially and adversely affecting Licensee’s properties or business taken as a whole; and (c) declaration or setting aside, or payment of any dividend or other distribution in respect of the stock of Licensee or any direct or indirect redemption, purchase or other acquisition of such shares.

 

  3.1.13 Licensee has timely filed all tax returns and reports required to be filed by it. Licensee has timely paid all taxes, interest and penalties required to be paid pursuant to said returns or otherwise required to be paid by it.

 

  3.1.14 Attached hereto as Exhibit E is a true and complete record of (i) issued and outstanding Shares as of the Effective Date and the holders thereof, and (ii) Shares issuable under options, warrants or other convertible equity or debt instruments outstanding as of the Effective Date, whether vested or non-vested, restricted or unrestricted, the holders thereof, the exercise price or conversion price thereof and an outline of all other material terms with respect thereto.

 

  3.2 Representations and Warranties by Licensors

Licensors represent and warrant to Licensee that:

 

  3.2.1 Licensors are acquiring the Shares for investment for their own accounts and not with a view to resale or distribution within the meaning of the Securities Act, and Licensors do not intend to divide their participation with others or to resell or otherwise dispose of all or any part of the Shares without registration under the Securities Act, except to Licensee or unless and until it determines at some future date that changed circumstances, not now in its contemplation, make such disposition advisable.

 

  3.2.2 This Agreement has been duly authorized, executed, and delivered on behalf of Licensors and constitutes the valid and binding agreement of Licensors, enforceable in accordance with its terms, and Licensors both have full power and lawful authority to acquire the Shares on the terms and conditions herein set forth.

 

  3.3 Survival and Timing of Warranties

The warranties and representation made in this Section 3 shall survive the closing of any issuance of shares to JHU or UFRF. The warranties and representations made in this Section 3 shall be true and correct as of the date of this Agreement and as of the date the Shares are issued to Licensors.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 5 of 11


Section 4 Miscellaneous Covenants

 

  4.1 Financial Statements and Other Information

As long as JHU or UFRF own any Equity Securities, Licensee shall promptly provide to those of the two institutions owning shares at that time such Financial Agreements, amendments to or restatements of its Articles of Incorporation or Bylaws, stock transfer restrictions and agreements among shareholders with respect to the valuation, transfer or voting of Shares and amendments thereto as may be effected from time to time, and such other information respecting the business, affairs, and financial condition of Licensee as the two institutions owning shares at that time may reasonably request. Financial Statements shall be provided within the time that such Financial Statements are required to be provided to holders of preferred stock of Licensee. Licensors’s representatives may visit and inspect any of the properties, books and information of Licensee, upon reasonable notice, during business hours and in a manner not disruptive to the business of the Licensee.

 

  4.2 Issuance of Shares/Options to Affiliates/Founders

Licensee shall not issue any Equity Securities (including Shares) to any of the shareholders of Licensee listed on Exhibit A attached hereto (the “Founders”), Affiliate thereof or Affiliate of Licensee for less than the fair market value of that security. Licensee shall have the burden of proving that the consideration to be paid for any such Equity Securities equals the fair market value of such Equity Securities issued.

 

  4.3 Piggyback Registration Rights

Licensors shall be granted the same incidental or piggyback registration rights that are granted to the purchasers of Series A Preferred Stock of Licensee and shall be made a party to the registration rights agreement with the holders of such Series A Preferred Stock.

 

  4.4 Rule 144 Reporting

With a view to making available to Licensors the benefits of certain rules and regulations of the Commission which may permit Licensors to sell securities of Licensee to the public without registration, Licensee agrees to:

 

  4.4.1 Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times following the effective date of the first registration under the Securities Act filed by Licensee for an offering of its securities to the general public;

 

  4.4.2 Use its best efforts to file with the Commission in a timely manner all reports and other documents required of Licensee under the Securities Act and the Exchange Act at any time following registration of any of its securities under the Securities Act or Exchange Act; and

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 6 of 11


  4.4.3 So long as JHU or UFRF owns any Shares, furnish to the institutions owning shares at that time forthwith upon request a written statement by Licensee as to its compliance with the reporting requirements of Rule 144 (at any time following the effective date of the first registration statement filed by Licensee for an offering of its securities to the general public), and of the Securities Act and the Exchange Act following registration of any of its securities under the Securities Act or Exchange Act, a copy of the most recent annual or quarterly report of Licensee, and such other reports and documents so filed as Licensors may reasonably request in availing itself of any rule or regulation of the Commission allowing Licensors to sell any such securities without registration.

 

  4.5 Transfer or Assignment of Registration Rights

The rights to cause Licensee to register the securities granted to Licensors hereunder may be transferred or assigned by Licensors to a transferee or assignee of any of Licensors’s Shares; provided, however, that such transfer or assignment of Shares was permitted under this Agreement.

Section 5 Termination

 

  5.1 Unless terminated sooner by either party as provided below, this Agreement shall terminate on the date that, with respect to each institution, after having been issued Shares hereunder, no longer owns any Equity Securities. If this Agreement terminates automatically as provided in this Section 5.1, the License shall remain in effect according to the terms specified therein.

 

  5.2 If Licensee at any time fails to issue Shares to either Licensors on a timely basis, or otherwise commits a material breach of this Agreement, or if any of the representations or warranties made by Licensee are untrue in any material respect as of any date on which they are required to be true and correct, and Licensee fails to remedy any such breach or default within thirty (30) days after written notice thereof by Licensors, Licensors may, at its option, terminate either this Agreement, the License , or all of them.

Section 6 Assignability

Except as set forth in Section 4.1, neither party may assign its rights or obligations under this Agreement, except that Licensee may assign this Agreement in connection with the sale of all or substantially all of the assets or stock of the Licensee, whether by merger, acquisition or otherwise, if the successor assumes all of the Licensee’s obligations hereunder.

Section 7 Miscellaneous

This Agreement shall be construed exclusively in accordance with the internal laws of the State of Florida.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 7 of 11


Section 8 Notices

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given at the earlier of the time when actually received as a consequence of any effective method of delivery, including but not limited to hand delivery, transmission by telecopier, or delivery by a professional courier service or the time when sent by certified or registered mail addressed to the party for whom intended at the address below or at such changed address as the party shall have specified by written notice, provided that any notice of change of address shall be effective only upon actual receipt:

To JHU:

Director

Licensing and Technology Development

Johns Hopkins University

100 N. Charles Street

5th Floor

Baltimore, MD, 21201

to UFRF:

University of Florida Research Foundation, Inc.

219 Grinter Hall

PO Box 115500

Gainesville, Florida 32611-5500

Attention: President

with a copy to:

Office of Technology Licensing

University of Florida

3rd Floor Walker Hall

PO Box 115500

Gainesville, Florida 32611-5500

Attention: Director

to Licensee:

Applied Genetic Technologies Company

Attention: Chief Executive Officer

12085 Research Drive, Suite 112

Alachua, FL 32615

with a copy to:

Fred D. Hutchinson, Esq.

Hutchinson & Mason, PLLC

3100 Edwards Mill Road, Suite 100

Raleigh, NC 27612

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 8 of 11


Section 9 Integration

This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, except as provided for elsewhere in this Section 9, made prior to or at the signing with respect to the subject matter hereof, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.

JOHNS HOPKINS UNIVERSITY

 

/s/ William P. Tew

  Date: October 7, 2003
William P. Tew, Ph.D.  
Associate Provost and Assistant Dean
Licensing and Technology Development

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

/s/ David L. Day

  Date: October 1, 2003
David L. Day  
Director, Office of Technology Transfer

APPLIED GENETIC TECHNOLOGIES, INC.

 

By:  

/s/ Susan B. Washer

   Date: October 1, 2003
Susan B. Washer, President   

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 9 of 11


Exhibit A

Definitions In Equity Agreement

 

(1) “Shares” shall mean shares of Licensee’s common stock, $.01 par value per share.

 

(2) “License Agreement” shall mean the license agreement entered into between Licensors and Licensee of even date herewith.

 

(3) “Affiliate” shall mean any person who is related by blood or marriage to any person or entity who owns more than twenty percent of the issued and outstanding shares of Licensee or to any officer, director, or employee of Licensee or any entity in which any such person has a direct or indirect beneficial ownership interest or for which any such person serves as a director, officer or employee.

 

(4) “Financial Statements” shall mean a balance sheet, and the related statements of earnings, stockholders’ equity and cash flow as of the end of the last fiscal year that has been completed when the statements are to be provided to Licensors and a balance sheet and income statement as of the end of the last fiscal quarter, which financial statements shall be in the form and delivered at the time that such financial statements are delivered to holders of preferred stock of Licensee. Financial Statements shall be true and complete and prepared in accordance with the books and records of Licensee and with generally accepted accounting principles.

 

(5) “Equity Securities” shall mean the Shares, any other capital stock of Licensee (including preferred shares), and any securities of Licensee that are convertible into capital stock of Licensee or that carry a right to subscribe to or acquire capital stock of Licensee.

 

(6) “Register,” “Registered,” and “Registration” shall refer to a registration effected by preparing a filing a Registration Statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such Registration Statement.

 

(7) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Securities and Exchange Commission issued under such act, as they each may, from time to time, be in effect.

 

(8) “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

(9) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 10 of 11


Exhibit B

Articles of Incorporation and Bylaws

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 11 of 11

Exhibit 10.6

FIRST AMENDMENT TO THE STANDARD EXCLUSIVE LICENSE AGREEMENT WITH SUBLICENSING TERMS

This First Amendment to the Standard Exclusive License Agreement With Sublicensing Terms (the “ JHU/UFRF Agreement ”), dated October 7, 2003, is made as of November     , 2004 (“ First Amendment Date ”), by and between the University of Florida Research Foundation, Inc. (“ UFRF ”) and Johns Hopkins University (“ JHU ”) on the one hand, and Applied Genetic Technologies Corporation, Inc. (“ Licensee ”) on the other.

WHEREAS, AGTC is entering a collaboration agreement, as of the date hereof effective with this First Amendment, with Genzyme Corporation with a form of option license (collectively, the “ Genzyme Collaboration Agreement ”), whereby AGTC will sublicense to Genzyme the technology licensed to AGTC under the JHU/UFRF Agreement for the development of products for ocular neovascularization and other indications;

WHEREAS, UFRF, JHU, and AGTC (collectively, the “ Parties ”) have agreed to amend certain terms of the JHU/UFRF Agreement;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1. Licensee will pay UFRF a fee of [ ** ] (“ Amendment Fee ”) within 30 days after the First Amendment Date.

2. Section 2.2.2 is hereby deleted and replaced by the following:

“In respect to Sublicenses granted by Licensee under 2.2.1 above, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other cash payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Products sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments in the manner specified in Section 4.5, provided, however, that such payment obligation shall not apply to any performance payments, credits, gross or net revenues or gross or net profits received from third parties, or to monies received from third parties for license royalties or for marketing or distribution of Licensed Products; and further provided that, with respect to milestone payments received from third parties, Licensee shall pay UFRF the greater of (i) the amount owed to UFRF pursuant to Section 4.4.2 and (ii) [ ** ] of the amount received from the third party. For example, if Licensee receives a $2,000,000 payment from a third party for [ ** ], Licensee will owe UFRF a payment of [** ], and Licensee will not owe UFRF the [ ** ] payment specified in Section 4.4.2. This example and others are shown in Exhibit A. Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF, except that such provision shall not apply to any Sublicense granted to Genzyme under the Genzyme Collaboration Agreement.”

3. Section 3.1.2(d) (regarding certain due diligence elements) is hereby deleted.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 1 of 6


4. Section 4.3 is hereby deleted and replaced by the following:

“In addition to the Amendment Fee and the Section 4.1 License Issue Fee, Licensee agrees to pay to UFRF as earned royalties a royalty calculated as a percentage of Net Sales in accordance with the terms and conditions of this Agreement. The royalty is deemed earned as of the earlier of the date the Licensed Product and/or Licensed Process is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. The royalty shall include a base royalty which shall remain fixed while this Agreement is in effect at a rate of [ ** ] of Net Sales (“ Base Royalty ”), and, other than under the Genzyme Collaboration Agreement, an additional royalty of [ ** ] of any Net Royalty received by AGTC. For purposes of this Section 4.3, “Net Royalty” means an amount equal to: (A) the dollar amount of royalties received by AGTC from third parties for Net Sales by such third parties, minus (B) the dollar amount of royalties paid by AGTC to UFRF pursuant to the Base Royalty for such Net Sales, minus (C) a dollar amount equal to [ ** ] of such Net Sales. Notwithstanding the foregoing, except for royalties arising under the Genzyme Collaboration Agreement, in the event that the royalty payable to UFRF in any calendar quarter [ ** ] of the Net Royalty in such quarter, then such royalty owed to UFRF will be [ ** ]. In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 4.3 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is obligated to pay to third parties under such licenses, further provided, however, that the royalty payable to UFRF under this Section 4.3 shall not be reduced to [ ** ] of AGTC’s Net Sales.”

5. Section 4.4.1 is hereby deleted and replaced by the following, effective January 1, 2005:

“Licensee agrees to pay UFRF minimum royalties of [ ** ] per year (“ Minimum Royalty ”) to be paid in equal quarterly installments thereafter for the life of this Agreement.

The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect. The first Minimum Royalty payment shall be due on December 31, 2004 and shall be in the amount of [ ** ]. The Minimum Royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30, September 30, and December 31 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the Minimum Royalty will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UFRF for other than the same calendar year in which the royalties were earned.”

6. Section 4.4.2 is hereby deleted and replaced by the following:

“In addition to all other payments required under this Agreement, subject to Section 2.2.2, Licensee agrees to pay UFRF milestone payments, as follows:

 

Payment

  

Event

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 2 of 6


For purposes of this Section 4.4.2, “Initiation” shall mean enrollment of the first patient.”

7. Section 9.7 is hereby deleted and replaced by the following:

“Upon the termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination. Licensee shall remain obligated to provide an accounting for and to pay royalties earned to the date of termination, and any Minimum Royalties shall be prorated as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that Licensee shall remain obligated to provide an accounting for and to pay running royalties thereon as would have been required under this Agreement prior to its termination.”

8. Section 4.5.1 is hereby deleted and replaced by the following:

“Amounts owing to UFRF under Sections 2.2 and 4.3 shall be paid on a quarterly basis after the amount of Minimum Royalty paid is exceeded, with such amounts due and received by UFRF on or before the thirtieth day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned. The balance of any amounts which remain unpaid more than thirty (30) days after they are due to UFRF shall accrue interest until paid at the rate of the lesser of one and one-half percent (1.5%) per month or the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays. Licensee shall also be responsible for repayment to UFRF of any attorney, collection agency, or other out-of-pocket UFRF expenses required to collect overdue payments due from this Section 4.5.1, Section 6.2 or any other applicable section of this Agreement.”

9. Section 5.3 is hereby deleted and replaced by the following:

“Duties of the Parties. Licensors are not commercial organizations. They are institutes of research and education. Therefore, Licensors have no ability to evaluate the commercial potential of any Licensed Patents or Licensed Processes or other license or rights granted in this Agreement it is therefore incumbent upon Licensee to evaluate the rights and products in question, to examine the materials and information provided by Licensors, and to determine tor itself the validity of any Licensed Patents or Licensed Processes its freedom to operate, and the value of any Licensed Patents or Licensed Processes or other rights granted.”

10. Section 8.3 is hereby deleted and replaced by the following:

“If within six (6) months after having been notified of any alleged infringement, Licensors shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if Licensors shall notify Licensee at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Licensed Patents, and Licensee may, for such purposes, use the name of Licensors as party plaintiff. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of Licensors, which consent shall not unreasonably be withheld, Licensee shall indemnify Licensors against any order for costs that may be made against Licensors in such proceedings.”

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 3 of 6


11. Section 8.6 is hereby deleted and replaced by the following:

“In the event a declaratory judgment action alleging invalidity or noninfringement of any of the Licensed Patents shall be brought against Licensee, Licensors, at their option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at their own expense.”

12. Section 11.4 is hereby deleted and replaced by the following:

“INDEMNIFICATION JHU and Drs. [ ** ] who are employees of JHU (hereinafter “Inventors”) will have no legal liability exposure to third parties if JHU does not license the Licensed Products and Licensed Processes, and any royalties JHU and the Inventors may receive is not adequate compensation for such legal liability exposure. Therefore, JHU requires Licensee to protect JHU and Inventors from such exposure to the same manner and extent to which insurance, if available, would protect JHU and Inventors. Furthermore, JHU and the Inventors will not, under the provisions of this Agreement or otherwise, have control over the manner in which Licensee or its Affiliates or its Sublicensees or those operating for its account or third parties who purchase Licensed Products and Licensed Processes from any of the foregoing entities, develop, manufacture, market or practice the inventions of Licensed Products and Licensed Processes. Therefore, Licensee, Affiliates and Sublicensees shall indemnify, defend with counsel reasonably acceptable to JHU, and hold JHU, The Johns Hopkins Health Systems, their present and former trustees, officers, Inventors of Licensed Patents, agents, faculty, employees and students harmless as against any judgments, fees, expenses, or other costs arising from or incidental to any product liability or other lawsuit, claim, demand or other action brought as a consequence of the practice of said inventions by any of the foregoing entities, whether or not JHU or said Inventors, either jointly or severally, is named as a party defendant in any such lawsuit and whether or not JHU or the Inventors are alleged to be negligent or otherwise responsible for any injuries to persons or property. Practice of the inventions covered by Licensed Products and Licensed Processes, by an Affiliate or an agent or a Sublicensee or a third party on behalf of or for the account of Licensee or by a third party who purchases Licensed Products and Licensed Processes from Licensee, shall be considered Licensee’s practice of said inventions for purposes of this Paragraph. The obligation of Licensee to defend and indemnify as set out in this Paragraph shall survive the termination of this Agreement, shall continue even after assignment of rights and responsibilities to an Affiliate or Sublicensee, and shall not be limited by any other limitation of liability elsewhere in this Agreement.”

(Signature Page Follows)

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 4 of 6


IN WITNESS WHEREOF, the Parties hereto have duly executed this First Amendment to the Standard Exclusive License Agreement With Sublicensing Terms,

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:  

/s/ Susan B. Washer

  Sue Washer
  President
UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.
By:  

/s/ David L. Day

  David L. Day
  Director, Office of Technology Licensing
JOHNS HOPKINS UNIVERSITY
By:  

/s/ R. Keith Baker

  R. Keith Baker, Ph.D., MBA
  Senior Director, Licensing and Technology Development

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 5 of 6


Exhibit A

Example 1: Amounts owed under Sections 2.2.2 and 4.4.2 for payments received under Genzyme Collaboration Agreement

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 6 of 6

Exhibit 10.7

SECOND AMENDMENT

To

STANDARD EXCLUSIVE LICENSE AGREEMENT WITH SUBLICENSING TERMS

(A3288)

This Second Amendment to the Standard Exclusive License Agreement With Sublicensing Terms (also known as Agreement A3288), dated October 7, 2003 and amended as of November 2004 (the “ License Agreement ”) is made as of this 25th day February, 2009 by and among Applied Genetic Technologies Corporation, a Delaware corporation (“ AGTC ”), the University of Florida Research Foundation, Inc., a non-stock, non-profit Florida corporation (“ UFRF ”) and Johns Hopkins University, a Maryland corporation (“ JHU ”).

WHEREAS, AGTC, UFRF and JHU (collectively, the “ Parties ”) have agreed to amend certain terms of the License Agreement;

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree to amend the License Agreement as follows;

1. The first sentence in Section 3.1.2 is hereby amended by deleting [ ** ] and inserting [ ** ] in its place, so that the first sentence in Section 3.1.2 now reads “Licensee agrees that [ ** ] shall occur on or before [ ** ] or Licensors shall have the right to terminate the Agreement pursuant to Section 9.3 hereto”

2. Section 3.1.2(e) is hereby amended by deleting [**] and inserting [ ** ] in its place , so that Section 3.1.2(e) now reads “[ ** ]”.

Except as hereby amended, all terms and conditions of the original License Agreement remain unchanged and in full force and effect.

In Witness Whereof , the Parties have caused these presents to be executed in duplicate as of the day and year above written.

 

APPLIED GENETIC

TECHNOLOGIES CORPORATION

   

UNIVERSITY OF FLORIDA

RESEARCH FOUNDATION

By:  

/s/ Susan B. Washer

      By:  

/s/ David L. Day

  Susan B. Washer         David L. Day
  President and CEO         Director
          Office of Technology Licensing
        JOHNS HOPKINS UNIVERSITY
        By:  

/s/ Wesley D. Blakeslee

          Name:   Wesley D. Blakeslee
          Title:   Executive Director

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 1 of 1

Exhibit 10.8

NON-EXCLUSIVE LICENSE AGREEMENT

WITH SUBLICENSING TERMS

TABLE OF CONTENTS

 

Section 1.

 

Definitions

     2   

Section 2.

 

Grant

     5   

Section 3.

 

Consideration

     8   

Section 4.

 

Certain Warranties of UABRF and Licensee

     11   

Section 5.

 

Record keeping

     12   

Section 6.

 

Patent Prosecution and Infringement

     13   

Section 7.

 

Term and Termination

     13   

Section 8.

 

Assignability

     15   

Section 9.

 

US Government Interests

     15   

Section 10.

 

Product Liability; Conduct of Business

     15   

Section 11.

 

Use of Names

     16   

Section 12.

 

Miscellaneous

     16   

Section 13.

 

Confidentiality

     18   

Section 14.

 

Governmental Markings

     19   

Section 15.

 

Export Compliance

     20   

Section 16.

 

Notices

     21   

Section 17.

 

Contract Formation and Authority

     21   

APPENDIX A

       22   

APPENDIX B

       23   

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


This Agreement is made effective the 19 th day of January 2006 (hereinafter “Effective Date”) by and between The UAB Research Foundation (hereinafter “UABRF”), a nonstock, nonprofit Alabama corporation having an office at 701 20 th Street South, Birmingham, AL 35294 USA and AGTC (hereinafter “Licensee”), a corporation organized and existing under the laws of Delaware and having a principal office at 12085 Research Drive, Alachua, Florida 32615 .

WHEREAS, UABRF owns certain inventions that are described in the “Licensed Patents” defined below, and UABRF is willing to grant a non-exclusive license to Licensee under the Licensed Patents and Licensee desires such a license;

Whereas, Licensee is engaged in the development of gene delivery based products. Licensee desires to evaluate and use in its business and sublicense the inventions contained in the Licensed Patents;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

 

Section 1. Definitions

“Affiliate” shall mean, with respect to a person or entity, any other person or entity controlling or controlled by under common control with such person or entity. For the purposes of this definition, the term “control” means possession of the power to direct or cause the direction of management and policies whether through ownership of voting securities, by contract or otherwise. In the case of a corporation, the direct or indirect ownership of more than fifty percent (50%) of its outstanding voting shares shall in any event be deemed to confer control, it being understood that the direct or indirect ownership of a lesser percentage of such shares shall not necessarily preclude the existence of control.

“BLA” shall mean the document(s) filed with any regulatory agency, including but not limited to, the United States Food and Drug Administration that requests approval to market and/or commercialize in any way a Licensed Product with specific claims and/or indications. Approval of a BLA shall be the date of any written correspondence received from a regulatory agency allowing for such commercialization.

“Combination Product” shall mean a Licensed Product that is sold with another product or component, including, but not limited to, a drug, biologic, drug delivery approach or medical device (for example, a catheter).

“Combination Product Selling Price” to be used for the purpose of calculating royalties payable with respect to Combination Products must be determined by multiplying the Selling Price of the Combination Product by the percentage value of the Licensed Product comprising a component contained in the Combination Product, such percentage value being determined by dividing the current market value of the Licensed Product comprising a Component Product by a sum of the separate current market values of each of the Component Products which are contained in the Combination Product. The current market value of each of the Component Products must be for a quantity comparable to that contained in the Combination Product and of the same class, purity and potency. When no current market value is available for a Component Product, a reasonable hypothetical market value for such Component Product based upon the

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


allocation of the same proportions of costs, reasonable overhead and profit (all of which must be determined on the basis of generally accepted accounting principles) as are or should be allocated to similar Component Products and having an ascertainable market value. Market values will be proposed by the Licensee(s) to UAB, who shall in good faith, determine the final market value hereunder.

“Consideration Election” shall mean the written choice made by the Licensee or by a Sublicensee of the specific terms of either Consideration Structure I or Consideration Structure II for each Licensed Product under Section 3. Consideration Election is a permanent decision for a particular Licensed Product, and cannot be changed even in the event of a subsequent Sublicense or related License being signed including that Licensed Product without the prior written consent of UABRF and adjusting the payments owed under Section 3, as required herein.

“Contractor” means a third party corporation, person, or entity under written agreement (“Contract”) with Licensee or with a Sublicensee

 

  a. who, for non-royalty based payment(s), undertakes on the behalf of Licensee or Sublicense to manufacture products embodying or made in accordance with the Licensed Patents (collectively, “Contract Work”), and

 

  b. which party shall not, after termination of the Contract, receive subsequent rights to the Licensed Patents under this Agreement and

 

  c. from whom Licensee or Sublicensee receives no payments for entering such Contract

 

  d. and/or from whom Licensee or Sublicensee receives full ownership to all results, materials, or Licensed Products obtained from the Contract Work.

“Development Report” shall mean a written account of the status of the Licensed Products under this Agreement having at least the information specified on Appendix A to this Agreement, and shall be sent to the address specified on Appendix A.

“IND” shall mean the document(s) filed with any regulatory agency, including but not limited to the United States Food and Drug Administration, which sets out the protocol for the initial use of a Licensed Product in human clinical testing.

“Licensed Field” shall be limited to the field of human gene therapy using recombinant adeno-associated viruses (rAAV) vectors. The Licensed Field excludes the use of the Licensed Patents to make a combination vector containing viral vectors in addition to rAAV for direct administrations to humans or animals, or the use of the Licensed Patents for ex-vivo gene therapy in which additional viral vectors to rAAV are incorporated into a human cell and that cell administered as a human or animal therapy.

“Licensed Patents” shall mean the United States patent [**] and any reissues or re-examinations of the patent.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 3 -


“Licensed Product” shall mean any product or part thereof developed by or on behalf of Licensee which:

 

  a. is covered or is manufactured in whole or in part by, or relies on in any way, an issued and unexpired claim contained in the Licensed Patents.

 

  b. and consists of a therapeutic gene construct that is used to treat a disease state (e.g., AIDS), or replace or regulate a specific genetic disorder (e.g., alpha-l-antitrypsin deficiency) in a human. Should associated expression vectors or other similar elements of the product be changed in the course of development, those changes are not construed for this Agreement as a separate Licensed Product.

 

  c. and may be in any of the following stages: research, pre-clinical development, in human clinical testing, or being actively sold or otherwise commercialized.

“Licensed Research Products” shall mean any product or part thereof developed by or on behalf of Licensee which:

 

  a. is covered or is manufactured in whole or in part by, or relies on in any way, an issued and unexpired claim contained in the Licensed Patents, and

 

  b. is in research, but prior to the start of formal preclinical studies, the results of which preclinical studies would be filed in an IND, and

 

  c. may not have a therapeutic gene for which the Licensee or its Sublicensee(s) intends to commercialize, but is being used to test related methods and technologies for recombinant AAV products, or contains a marker or research tool gene, or which is used for other general research purposes.

“Licensed Territory” shall mean the United States, however, Licensed Products manufactured in whole or in part using the Licensed Patents in the United States, and sold outside the United States will be considered Licensed Products for the purposes of this Agreement.

“Related recombinant adeno-associated virus (rAAV) technology” is technology owned or controlled by the Licensee to create a therapy using a therapeutic gene construct.

“Selling Price” shall mean, in the case of Licensed Products that are sold or transferred by the Licensee or its Sublicensees (other than to an Affiliate or Sublicensee), the invoice price of Licensed Products (regardless of uncollectible accounts) less the following:

 

  a. customary trade, quantity, or cash discounts to non-affiliated customers to the extent actually allowed and taken;

 

  b. amounts actually repaid or credited by reason of rejection, return, recall, government rebate, or retroactive price reduction to the extent actually allowed and taken;

 

  c. to the extent separately stated on purchase orders, invoices or other documents of sale, any taxes, duties or other governmental charges levied on the production, sale, transportation, delivery or use of a License Product which is paid by or on behalf of Licensee; excluding national, state, or local taxes based on income, and

 

  d. outbound transportation costs to non-Affiliates prepaid or allowed and costs of insurance in transit.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 4 -


The Selling Price for a Licensed Product that is transferred to a third party for promotional purposes without charge or at a discount shall be the average price of that type of Licensed Product during the applicable calendar quarter. The Selling Price for a Licensed Product that is produced for a third party or sold to a third party under a per sale contract and/or lump sum contract will be the per sale contract price or the lump sum contract price, as the case may be, or any consideration received for product provided less any of the costs listed in a, b, c and d above. The transfer of any Licensed Products by the Licensee or one of its Affiliates or Sublicensee (other than a distributor) to an Affiliate of Sublicensee of such transferring party shall not be considered a sale, with the exception of clinical material manufactured on behalf of an Affiliate or Sublicensee for clinical trials or other research. Clinical trial or commercial material produced by the Licensee for its Sublicensee, as if the Licensee was acting as a contract manufacturing organization, and for which the Licensee receives payment from the Affiliate or Sublicensee for manufacturing shall be treated as a third party sale.

“Sublicense” means any exchange for value, any transfer of rights to the Licensed Patent for any consideration, including but not limited to cash, promissory notes, equity, upfront payments, milestone payments, royalties, manufacturing contracts, distribution contracts, sponsored research contracts, any collaborative arrangements, partnerships, or joint ventures, received or entered into by Licensee with respect to any transfer of any right, whether present, future or contingent, to make, manufacture, use, practice, distribute, or otherwise sell any Licensed Products and Licensed Processes to any third party (hereinafter Sublicensee) a product originally conceived or acquired by the Licensee and that may or may not be in development by the Licensee. This applies to any agreements the Licensee may have already in effect as of the Effective Date of this Agreement to which a Sublicense will be added, or new agreements effective during the term of this Agreement.

“UAB” shall mean the Board of Trustees, directors, officers, students, agents, contractors, and employees of the University of Alabama at Birmingham.

 

Section 2. Grant.

 

2.1 License . Subject to the payment of the license fee and royalties provided in Section 3 hereof and the fulfillment of the other terms and conditions of this Agreement, UABRF hereby grants to Licensee a non-exclusive license, limited to the Licensed Field under the Licensed Patents to make, have made, use, sell, and import Licensed Products. The license granted herein is a non-exclusive license and as such, UABRF reserves the right to license the Licensed Patents to any third party as well as to itself and to UAB.

 

2.2 Sublicense .

 

  a.

Licensee may grant written, nonexclusive Sublicenses to third parties. Licensee shall have the same responsibility for the activities of any Sublicensee as if the activities were

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 5 -


  directly those of Licensee. Notwithstanding any provision herein to the contrary, any Sublicense granted by Licensee shall be subject and subordinate to, and consistent with, the terms and conditions of this Agreement, and shall provide that any such Sublicensee shall not further Sublicense except on terms consistent with this Section 2.2. Even if Licensee enters into Sublicenses, Licensee remains primarily liable to UABRF for all of Licensee’s duties and obligations contained herein, and in the event of any act or omission of a Sublicensee that would be a breach of its Sublicense, Licensee shall be liable for the performance of its duties and obligations under this Agreement in respect of those matters as to which such breach by Sublicensee has occurred.

 

  b. Each Sublicense will contain a right of termination by Licensee in the event that the Sublicensee breaches the payment obligations affecting UABRF or any other material terms and conditions of the Sublicense that would constitute a breach of the terms and conditions of this Agreement if such acts were performed by Licensee (a “Sublicensee Breach”). In the event of a Sublicensee Breach, and if after a reasonable opportunity to cure, not greater than 60 days, as provided in any such Sublicensee’s Sublicense, such Sublicensee fails to cure such Sublicensee Breach, then Licensee will terminate the Sublicense unless UABRF agrees in writing that such Sublicense need not be terminated. Such Sublicensee Breach together with the termination of a Sublicensee’s Sublicense will not affect the term of Licensee’s license hereunder or the Sublicense of any non-breaching Sublicensee.

 

  c. Each Sublicense will include termination language consistent with Section 7 of this Agreement.

 

  d. With respect to Sublicenses granted by Licensee under Section 2.2, Licensee shall pay to UABRF [ ** ] of all consideration without limitation, licensee fees, license maintenance fees, milestone payments, success fees, payments for pre-clinical and clinical material manufactured by the Licensee. The Licensee may exclude from that [**] consideration any research and development payments, including development costs for manufacturing scale-up, paid to reimburse the documented costs of development. [**]. All payments due with respect to Sublicenses are due to UAB RF within thirty (30) days of the execution date of the sublicense. However, if the Licensee owes the same type of consideration to a third party for a gene in order to make, use or sell a Licensed Product, that third party sublicensing income amount will be [**] will be paid to UABRF and the remainder retained by the Licensee. In no case, will UABRF receive less than [**] of the consideration received by Licensee for the Sublicense. For clarity,

 

  i. the cash value of equity payments made to the Licensee solely in conjunction with a Sublicense is not excluded from this consideration for the Sublicense, unless a portion of that equity payment is designated for use in research and development, and

 

  ii. in the case of milestone payments made by a Sublicensee for which milestone payments are due in Section 3, UABRF will receive the milestone due from the Licensee plus [ ** ].

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 6 -


  iii. Any materials manufactured by the Licensee for the Sublicensee under a Sublicense agreement will be treated as if the material was made by a Contractor, any payments made for those materials included in the consideration of the Sublicense.

 

  iv. [ ** ]

 

  e. If the Licensee grants a Sublicense

 

  i. in combination with a sublicense to the Licensee’s Related rAAV Technology,

 

  ii. is not tied to a gene for which the Licensee has any financial or other interest, and

 

  iii. is not to a Sublicensee for which there is any other business or collaborative relationship between the Licensee and the Sublicensee, either prior to date of execution of the Sublicense or after the signing of the Sublicense, beyond a License to Related rAAV Technology, and

 

  iv. the Licensee does not manufacture materials of any kind using the Licensed Patents for that Sublicensee, and

 

  v. does not participate in any meaningful way in the further pre-clinical or clinical development or commercialization of the Sublicensee’s Licensed Product

 

  vi. and is essentially a pass-through of the terms and conditions herein

then the [ ** ] consideration requirement of Section 2.2d will be waived by UABRF. [ ** ]

 

  f. Sublicenses may be granted to Contractors without consideration due to UABRF only to the extent necessary for such Contractor to perform its obligations with respect to Contract Work solely for the Licensee or for a Sublicensee, provided however, that all rights under this Section 2 terminate concurrent with termination of the corresponding Contract.

 

  g. Licensee shall provide UABRF with a copy of each Sublicense within thirty (30) days of the execution of such Sublicense Agreement. UABRF’s receipt of such Sublicense will not constitute a waiver of any of UABRF’s rights or Licensee’s obligations under this Agreement. Each such Sublicense agreement shall be treated as the Confidential Information of Licensee.

 

  h. In no event shall Sublicensees have the right to grant any further sublicenses to Licensed Patents without the prior written consent of UABRF, provided, however, that Sublicensees shall have the right to enter Contracts with Contractors.

 

  i.

Any Sublicensee shall pay to UABRF the same royalties on Sublicensee’s net sales, milestones, and other payments due under this Agreement as if they had licensed from UABRF directly as defined herein. Any payments paid by a Sublicensee to UABRF shall

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 7 -


  completely satisfy Licensee’s requirement to pay such payment to UABRF, and no duplicate royalties or duplicate milestones on Selling Price shall be owed by Licensee to UABRF, with the exception of the [ ** ] consideration owed under Section 2.2d.

 

  j. UABRF shall continue to grant Nonexclusive Licenses such that at any point, the Licensee and a potential Sublicensee can determine the appropriate relationship for each Licensed Product or Licensed Research Products.

 

Section 3. Consideration.

 

3.1 The Consideration Election must be made by the Licensee within thirty (30) days of the Effective Date of this Agreement for any Licensed Product in development by the Licensee as of the Effective Date.

 

  a. For any new Licensed Products that the Licensee initiates after the first thirty (30) days of the Effective Date of this Agreement, Consideration Election must be made by notification in writing to UABRF within thirty (30) days of the time that Licensee initiates the research or development of that Licensed Product. Any payments due under this Section 3 for any new Licensed Product will considered immediately due.

 

  b. UABRF, at its sole discretion, reserves the right to require under a Development Report sufficient and reasonable information directly from a Sublicensee prior to the signing of the Sublicense under the terms of Section 2, including but not limited to scientific data, solely to determine the point in time that a Sublicensee first utilized in whole or in part the Licensed Patents in the research, development, or commercialization of a Licensed Product or as used in Licensed Research Products. Any information UABRF receives under the preceding sentence is Confidential Information and subject to Section 13.

 

3.2 Licensee agrees that it will supply UABRF with a written Development Report on an annual basis (see Appendix A) for all Licensed Products. All development activities and strategies, and all aspects of product design and decisions to market and the like are entirely at the discretion of Licensee, and Licensee shall rely entirely on its own expertise with respect thereto. UABRF’s review of Licensee’s Development Report is solely to verify the existence of Licensee’s activities under this License Agreement and to ensure compliance with Licensee’s obligations as set forth herein.

 

3.3 Licensee agrees to pay to UABRF a one-time, non-refundable License Issue Fee of [ ** ] within thirty (30) days of the Effective Date.

 

3.4 In addition to the Section 3.3 License Issue Fee, Licensee agrees to pay to UABRF as earned royalties a royalty calculated as a percentage of the Selling Price in accordance with the terms and conditions of this Agreement. The royalty is deemed earned as of the earlier of the date the Licensed Product is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. The amount of the royalty due is:

 

  a. Under Consideration Structure I: [ ** ] of the Selling Price

 

  b. Under Consideration Structure II: [ ** ] of the Selling Price

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 8 -


For clarity, no royalty shall be due for any Licensed Product manufactured by a Contractor under Contract. If a Licensee, however, performs commercial contract manufacturing services for its Sublicensee, royalties are due on the cost of the Selling Price of that contract manufactured material.

 

3.5 If Licensee owes to one or more third parties royalties or similar payments on sales of Licensed Products, Licensee may offset all such payments made to such third party(ies) against royalties due to Licensor on sales of Licensed Products, provided that in no event shall the royalties due to Licensor be reduced to less than [ ** ] of the amount of the royalty due in Section 3.4.

 

3.6 When Licensed Product is sold as a Combination Product, at no time will running royalties on Combination Products payable to Licensee be less than [ ** ] of the Selling Price of the Licensed Product under Consideration II, and [ ** ] under Consideration I.

 

3.7 If, in order to support underserved markets, the Licensee opts to provide product completely free of charge, the Licensee (or its Sublicensees) can request in writing that UABRF forego royalties on those Licensed Products. Such requests must include verification that the licensors of any other third-party licenses required to produce, manufacture, distribute, and provide the Licensed Product are also foregoing royalties. UABRF will not unreasonably withhold its written approval of the elimination of royalties due on these Licensed Products. The Licensee will report the amounts of those Licensed Products manufactured and provided in the Royalty report under Section 3.14.

 

3.8 Licensee agrees to pay UABRF an annual minimum royalty payment (“Minimum Royalty”). The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect, and shall be paid in quarterly installments on December 31, March 31, June 30, and September 30 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties and milestones for that calendar year. It is understood that the Minimum Royalties will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UABRF for other than the same calendar year in which the royalties were earned. The Minimum Royalty that begins as of the Effective Date of this Agreement are as follows:

 

  a. If Consideration Structure I is elected: [ ** ].

 

  b. If Consideration Structure II is elected: [ ** ].

 

3.10 Licensee agrees to pay UABRF non-refundable Milestone payments, as follows:

 

  a. If Consideration Structure I is elected:

 

  (1) [ ** ]

 

  (2) [ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 9 -


  (3) [ ** ]

 

  (4) [ ** ].

 

  b. If Consideration Structure II is elected:

 

  (1) [ ** ]

 

  (2) [ ** ]

 

  (3) [ ** ]

 

  (4) [ ** ]

In the case of Milestone Payments that are paid by a Sublicense to Licensee, Licensee shall pay to UABRF the milestone due under this Section 3.10, and in addition that portion of the Milestone pursuant to Section 2.2. No duplicate milestone payments shall to be due to UABRF. If a Licensee makes a particular milestone payment for a Licensed Product hereunder, no such milestone payment will be owed for any improvements made to the Licensed Product.

 

3.11 If the U.S. Food and Drug Administration (or similar regulatory agency) allows combination or elimination of certain steps in development (i.e., because of population size, a [ ** ]), at UABRF’s sole discretion, milestones will be combined such that all payments due prior to [ ** ] are paid as if those studies were performed. For clarity, if on [ ** ] if Consideration Structure II is elected, the Licensee performs [ ** ].

 

3.12 For any License granted after the Effective Date of the first Nonexclusive License to the Licensed Patents, UAB RF reserves the right, at its sole discretion, to require that a new Licensee pay under this Section 3, minimum royalties and milestones on each Licensed Product from the time at which the Licensed Patents were first applied to the research or development of a Licensed Product.

 

3.13 Amounts owed to UABRF under Sections 2 and 3 shall be paid on a quarterly basis after the amount of Minimum Royalties paid is exceeded, with such amounts due and received by UABRF on or before the thirtieth day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned.

 

3.14 Except as otherwise directed, all amounts owed to UABRF under this Agreement shall be paid in U.S. dollars to UABRF at the address provided in Section 16. All royalties owed with respect to Selling Prices stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation—Value of Foreign Currencies on the day preceding the payment.

 

  a. A full accounting showing how any amounts payable to UABRF under Sections 2 and this Section 3 have been calculated shall be submitted to UABRF on the date of each such payment. Such accounting shall be on a per-country and per product, product line, model, or trade name basis and shall be summarized on the form shown in Appendix B of this Agreement. In the event no payment is owed to UABRF because the amount of Minimum Royalties paid has not been exceeded or otherwise, an accounting demonstrating that fact shall be supplied to UABRF.

 

  b. UABRF is exempt from paying income taxes under U.S. law. Therefore, all payments due under this Agreement shall be made without deduction for taxes, assessments, or other charges of any kind that may be imposed on UABRF by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to UABRF pursuant to this Agreement. All such taxes, assessments, or other charges shall be assumed by Licensee.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 10 -


3.15 Any payments by the Licensee or its Sublicensee(s) that are not paid on or before the date such payments are due under this Agreement shall bear interest, to the extent permitted by law, at two percentage points above the Prime Rate of interest as reported in the Wall Street Journal on the date payment is due, with interest calculated based on the number of days that payment is delinquent. However, in no event shall this interest provision be construed as a grant of permission for any payment delays.

 

3.16 Licensed Research Products shall be required to pay [ ** ] per calendar year for all Licensed Research Products being practiced.

 

3.17 Should at any point in time prior to or within three years of the start of commercialization, the use of the Licensed Patents for a Licensed Product elected under Consideration Structure II be ended, and a different technology used in place of the Licensed Patents, the Licensee or its Sublicensee shall notify UABRF in writing, and pay UABRF amounts due as if the Licensee of its Sublicensee had elected Consideration I on that Licensed Product. Such payments will be made within thirty (30) days of the termination of the use of the Licensed Patents for that particular Licensed Products.

 

Section 4. Certain Warranties of UABRF and Licensee.

 

4.1 UABRF warrants that, except as otherwise provided under Section 15 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents and has the right to grant the non-exclusive licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  a. a warranty or representation by UABRF as to the validity or scope of any right included in the Licensed Patents;

 

  b. a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  c. an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

  d. an obligation to furnish any know-how not provided in Licensed Patents or any services other than those specified in this Agreement; or

 

4.2

UABRF MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 11 -


  LICENSEE, ITS SUBLICENSEE(S) OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

4.3 Licensee represents and warrants to UABRF that all corporate action on the part of Licensee, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of this Agreement and (ii) the performance of all obligations of Licensee hereunder has been taken and this Agreement constitutes the legal and binding obligation of Licensee, enforceable against Licensee in accordance with its terms. The execution of this Agreement and the performance of the transactions contemplated by this Agreement by Licensee does and will not conflict with or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or require a consent under it organizational documents (as amended or restated to date) or any agreement or other instrument to which Licensee is a party or by which it or any of its property is bound.

 

Section 5. Record keeping.

 

5.1 Licensee and its Sublicensee(s) shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)’s accounting referred to above, including without limitation inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products. Such books and records shall be preserved for a period not less than six years after they are created, both during and after the term of this Agreement.

 

5.2 Licensee and its Sublicensee(s) shall take all steps reasonably necessary so that UABRF may, at its own expense, within thirty (30) days of its request, review and copy appropriate information of the books and records relating to the Licensed Products at a single U.S. location to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting. Such review may be performed by any authorized employee of UABRF as well as by any attorney or registered CPA designated by UABRF, upon reasonable notice and during regular business hours, but such review may be conducted no more than once per calendar year.

 

5.3 If a royalty payment deficiency is determined, Licensee, or as applicable, and its Sublicensee(s) shall pay the undisputed royalty deficiency outstanding within thirty (30) days of receiving written notice thereof, plus interest on undisputed outstanding amounts as described in Section 3.5.1.

 

5.4 If a royalty payment deficiency for a calendar year exceeds [**] of the royalties paid for that year, then Licensee and its Sublicensee(s) shall be responsible for paying UABRF’s reasonable out-of-pocket expenses incurred with respect to such review.

 

5.5 Any disputed royalty payments shall be considered a breach of this Agreement, and will be managed under Section 7. Should these undisputed amounts be resolved in UABRF’s favor, any amounts due must be paid within 30 days, including interest calculated at a rate of the prevailing U.S. prime interest rate plus two percent (2%) as reported in the Wall Street Journal on the date at which the payment is determined to be due.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 12 -


Section 6. Patent Prosecution and Infringement

 

6.1 UABRF shall be responsible for the prosecution and maintenance of the Licensed Patents using counsel of its choice. UABRF shall provide Licensee with copies of relevant documentation so that Licensee may be informed and apprised of the continuing prosecution of Licensed Patents. Licensee shall have the right to comment on such continuing prosecution, and such comments shall not be unreasonably denied for inclusion in UABRF prosecution and maintenance. Licensee agrees to keep such patent information Confidential.

 

6.2 UABRF shall retain full ownership and title to the Licensed Patents.

 

6.3 UABRF intends to protect Licensed Patents against infringers or otherwise act to eliminate infringement when, in UABRF’s sole judgment, such action may be reasonably necessary, proper, and justified.

 

6.4 In the event that Licensee learns of infringement of potential commercial significance of any patent licensed under this Agreement, it will provide UABRF with (i) written notice of such infringement, and (ii) any evidence of such infringement available to it (the “Infringement Notice”). Any Infringement Notice will be considered Confidential Information as described herein. UABRF shall have the right to terminate this Agreement immediately if the Licensee notifies a third party of infringement or puts such third party on notice of the existence of any Patent Rights without first obtaining the written consent of UABRF. Both UABRF and Licensee, and as applicable, its Sublicensee(s) will use their best efforts to reasonably cooperate with each other to terminate such infringement without litigation.

 

6.5 The Licensee retains the right to bring suit against an infringer for infringement of its own patents that may be Sublicensed with the Licensed Patents (“Related Suit”). Should Licensee request that UABRF be named as a party in a Related Suit, or should Licensee seek inclusion of the Licensed Patents under a Related Suit, Licensee must obtain prior written consent of UABRF. All costs for UABRF’s participation in a Related Suit will be borne by the Licensee.

 

6.6 Any agreement made by Licensee for purposes of settling litigation in a Related Suit or other dispute that includes a Sublicense shall comply with the requirements of this Agreement.

 

Section 7. Term and Termination.

 

7.1 The term of this License shall begin on the Effective Date of this Agreement and continue until no Licensed Patent remains an enforceable patent, or unless terminated earlier as provided herein.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 13 -


7.2 Licensee may terminate this Agreement at any time by giving at least sixty (60) days written and unambiguous notice of such termination to UABRF. Such notice shall be accompanied by a statement of the reasons for termination.

 

7.3 If Licensee at any time defaults in the timely payment of any monies due to UABRF or the timely submission to UABRF of any Development Report, or commits any breach of any representation, warranty or other covenant herein contained, and Licensee fails to remedy any such breach or default within ninety (90) days after written notice thereof by UABRF, UABRF may, at its option, terminate this Agreement by giving thirty (30) days notice of termination to Licensee.

 

7.4 UABRF may terminate this Agreement upon the occurrence of the third separate default by Licensee within any consecutive two-year period for failure to pay Royalties or Other Payments under Section 3 when due by giving sixty (60) days notice of termination to Licensee.

 

7.5 To the extent permitted by law, if Licensee shall become insolvent or shall suspend business without a successor or shall file a voluntary petition or answer admitting the jurisdiction of the court and the material allegations thereof or shall consent to an involuntary petition pursuant to or purporting to be pursuant to any reorganization or insolvency law of any jurisdiction or shall make an assignment for the benefit of creditors, or shall apply for or consent to the appointment of a receiver or trustee of a substantial part of its property, and such proceedings are not dismissed within one-hundred and twenty (120) days of filing, then, to the extent permitted by law, UABRF may thereafter immediately terminate this Agreement by giving written notice of termination to Licensee. This Agreement and all of each party’s right, obligations, and licenses hereunder shall terminate upon receipt of such notice, except with respect to all accrued and unpaid fees under Section 3, if applicable, incurred prior to the date of termination and except as provided in Section 7.7 herein. Licensee shall notify UABRF in writing within forty-five (45) days after the filing of any petition, answer, consent, assignment, application or other document evidencing the conditions set forth in herein.

 

7.6 Upon the termination of this Agreement, Licensee shall remain obligated to provide an accounting for and to pay royalties earned up to the date of the termination.

 

7.7 If this Agreement is terminated for any reason:

 

  a. except in the case of termination under Section 7.1, Licensee will immediately cease use of the Licensed Patents, except as permitted in [c] below;

 

  b. nothing in this Agreement will be construed to release either party from any obligation that matured prior to the effective date of termination; and

 

  c. after the effective date of termination, Licensee and Sublicensees may sell all Licensed Product(s) and parts thereof that it has on hand at the effective date of termination; provided , however , that the Royalty and Other Payment of Section 3 obligations under this Agreement and any Sublicensee Agreements will continue until all Licensed Product(s) have been sold.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 14 -


  d. the applicable provisions of Sections 10, (Product Liability; Conduct of Business), 11 (Use of Name), 12 (Miscellaneous), 13 (Confidentiality), and 15 (Export Compliance) will survive any termination or expiration of this Agreement.

 

  e. all Sublicenses upon Termination will be assigned to UABRF, and all Sublicensees notified as such in writing by the Licensee. UABRF will have no greater duties or lesser rights under such Sublicenses than UABRF has under this Agreement. In the event of said termination, UABRF, at its sole discretion, can modify the terms of the Sublicenses to ensure that any terms of this Agreement not explicitly included in the Sublicenses continuing are modified accordingly. Sublicensee termination following assignment to UABRF shall be managed by the terms of the assigned agreements.

 

Section 8. Assignability.

This Agreement may not be transferred or assigned by Licensee except with the prior written consent of UABRF provided, however, that the Licensee may transfer and assign this Agreement without consent of UABRF in connection with a merger, acquisition, consolidation, reorganization, or sale of substantially all assets of the Licensee pertaining to this Agreement.

 

Section 9. US Government Interests.

It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [ ** ] , during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

Section 10. Product Liability; Conduct of Business.

 

10.1

Licensee and its Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UABRF and UAB and the inventors of the Licensed Patents (each an “Indemnified Party”) harmless against all claims and expenses, including legal expenses and reasonable attorneys fees, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever (other than patent infringement claims) resulting from the production, manufacture, sale, use, lease, consumption or advertisement of Licensed Products arising from any right or obligation of Licensee or any Sublicensee hereunder or for Licensee or any Sublicensee(s) breach of terms and conditions herein or of any Sublicense, except to the extent that such claims are due to the gross negligence or willful misconduct of an Indemnified Party. Notwithstanding the above, UABRF at all times reserves the right to retain counsel of its own to defend UABRF’s, UAB’s, and the inventors’ interests. UABRF agrees to promptly notify Licensee in writing of any such claim and Licensee shall manage and control, at its own expense, the defense of such claim and its settlement. Licensee agrees not to settle any such claim against UABRF without UABRF’s written consent where

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 15 -


  such settlement would include any admission of liability on the part of UABRF, where the settlement would impose any restriction on the conduct by UABRF of any of its activities, or where the settlement would not include an unconditional release of UABRF from all liability for claims that are the subject matter of such claim.

 

10.2 Licensee warrants that it will acquire and maintain liability insurance coverage appropriate to the risk involved in developing and marketing the Licensed Products subject to this Agreement, and that such insurance coverage lists UABRF, UAB, and the inventors of the Licensed Patents as additional insureds. Within sixty (60) days after the execution of this Agreement, and annually thereafter, Licensee will present evidence to UABRF, that the appropriate coverage has been obtained and is being maintained with UABRF, UAB, and its inventors listed as additional insureds. In addition, Licensee shall provide UABRF with written notice within thirty (30) days of any material change in or cancellation of the insurance coverage.

 

10.3 Licensee will maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during (i) the period that any Licensed Products developed pursuant to this Agreement are being commercially distributed or Sold by Licensee, or any Sublicensee; and (ii) for five (5) years after such period.

 

10.4 Coverage must be maintained with a reputable and financially secure insurance carrier, with ratings of at least A- as rated by AM Best. Insurance will be written to cover claims incurred, discovered, manifested or made during or after the expiration of this Agreement. All insurance of Licensee will be primary coverage; insurance of UABRF and UAB will be excess and noncontributory.

 

Section 11. Use of Names.

 

11.1 Licensee and its Sublicensee(s) shall not use UABRF’s name, the name of any inventor of Licensed Patents governed by this Agreement, or the name of UAB in any sales promotion, advertising, or any other form of publicity without the prior written approval of UABRF, except as required by law.

 

11.2 Should the Licensee be required by regulatory or legal requirements to disclose the existence of this Agreement, any of the terms herein, or the names of the UABRF or UAB, UABRF shall have thirty (30) days to review (i) redaction of terms, including but not limited to royalty rates, and milestone or other payments, and (ii) the manner in which the names of UABRF or UAB are used.

 

Section 12. Miscellaneous.

 

12.1

This Agreement shall be construed in accordance with the internal laws of the State of Alabama. If any provisions of this Agreement are or shall come into conflict with the laws or regulations of any jurisdiction or any governmental entity having jurisdiction over the parties or this Agreement or held invalid or unenforceable for any reason, those provisions shall be deemed automatically deleted, if such deletion is allowed by relevant law, and the remaining terms and conditions of this Agreement shall remain in full force and effect. If such a deletion is not so allowed or if such a deletion leaves terms thereby

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 16 -


  made clearly illogical or inappropriate in effect, the parties agree to substitute new terms as similar in effect to the present terms of this Agreement as may be allowed under the applicable laws and regulations. Any written consent required under this Agreement shall not be unreasonably delayed or withheld.

 

12.2 Licensee shall insure that it and its Sublicensee(s) apply patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement. LICENSEE agrees to mark the Licensed Products sold in the United States with all applicable United States patent numbers. All Licensed Products shipped to or sold in other countries shall be marked in such manner as to conform with the patent laws and practice of the country of manufacture or sale.

 

12.3 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties made prior to or at the signing hereof, whether orally or in writing, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

 

12.4 In the event Licensee contests the validity of any Licensed Patents, Licensee shall continue to pay royalties with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

 

12.5 Except as provided herein for Sublicenses, Licensee shall not encumber or otherwise grant a security interest in any of the rights granted hereunder to any third party.

 

12.6 Nothing contained herein shall be interpreted as creating any relationship between the parties hereto except as specifically set forth herein and it is understood and agreed that the parties hereto are and shall remain independent contractors, that neither party hereto shall be considered the agent, partner, or joint venturer of the other for any purpose and that neither party shall be responsible for or have any liability for the acts, actions, or failures to act of the other party. Nothing in this Agreement or the performance of the parties under this Agreement shall constitute (or be deemed to constitute in law or in equity) a partnership, agency, distributorship, fiduciary, employment or joint venture relationship between the parties. The parties are not affiliated and neither has any right or authority to bind the other in any way.

 

12.7 This Agreement may be amended, supplemented or otherwise modified only by means of a written instrument signed by both parties. None of the terms of this Agreement can be waived except by the written consent of the party waiving compliance.

 

12.8 Neither party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, flood, war, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 17 -


12.9 Subject to Section 12.11, neither party will be liable to each other for any loss profit, expectation, punitive or other indirect, special, consequential, or other damages whatsoever, in connection with any claim arising out of or related to this Agreement whether grounded in tort (including negligence), strict liability, contract, or otherwise.

 

12.10 Licensee will at all times comply, through insurance or self-insurance, with all statutory workers’ compensation and employers’ liability requirements covering all employees with respect to activities performed under this Agreement.

 

12.11 If UABRF amends, supplements, or modifies any third party Non-Exclusive Licenses to the Licensed Patents, then UABRF shall notify the Licensee of such amendments in writing. UABRF shall offer such fully amended agreement to the Licensee in its totality. Licensee shall have the right, but not the obligation, to execute said amended Agreement in its totality. With respect to any financial obligations of Licensee under the amended Agreement, Licensee shall be obligated to pay to UABRF the amount, if any, that would have been due to UABRF under the financial terms of the amended Agreement retroactively as of the effective date of the original agreement.

 

Section 13. Confidentiality.

 

13.1 Any disclosure of Confidential Information is made in the strictest confidence. Each party will make all reasonable efforts to ensure the protection, confidentiality and security of any Confidential Information in its possession, such efforts to be no less than the degree of care employed by such party to preserve and safeguard its own confidential information. Except as provided herein, Confidential Information will be transmitted in writing and clearly marked “Confidential”, “Proprietary” or similarly, or if disclosed orally will be reduced to writing by the disclosing party, clearly marked “Confidential,” “Proprietary” or similarly, and transmitted to the receiving party in accordance with Section 16 (Notices) within thirty (30) days of oral disclosure. Disclosures by the Inventors to Licensee may be oral in nature, and not subject to the thirty (30) day written requirement. The reports, plans, and other correspondence provided pursuant to this Agreement shall be treated as Licensee’s Confidential Information, and will be marked as such by the Licensee. The provisions of this Section 13 shall not apply to any Confidential Information which:

 

  a. was known or used by the receiving party prior to its date of disclosure to the receiving party;

 

  b. either before or after the date of the disclosure to the receiving party, is lawfully disclosed to the receiving party by sources other than the disclosing party rightfully in possession of the Confidential Information;

 

  c. either before or after the date of the disclosure to the receiving party, becomes published or generally known to the public through no fault on the party of the receiving party;

 

  d. is independently developed by or for the receiving party without reference to or reliance upon the Confidential Information; or

 

  e. is required to be disclosed by the receiving party to comply with applicable laws or government regulations, provided that the receiving party provides prior written notice of such disclosure to the disclosing party and takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 18 -


13.2 Each party to this Agreement may disclose the Confidential Information of the other to its own employees as necessary to fulfill its obligations or to exercise its rights under this Agreement; provided , however , that such employees will have agreed to be bound by the terms of this Agreement or have entered into an agreement of similar scope and obligations to protect the Confidential Information of such party or of third parties in such party’s possession. In no event will either party disclose Confidential Information of the other party to third parties without the written consent of the other party; provided , however , that Licensee may disclose Confidential Information of UABRF to its consultants, other non-employees retained because of their standing and expertise in the area, and customers or potential customers; and to other parties in connection with a potential business transaction or relationship (e.g., sublicense, merger, acquisition, investment,) provided further, that such consultant, non-employee, customers or potential customers, or other entities have executed a written non-disclosure and non-use agreement containing terms and conditions at least as strict as those contained in this Agreement.

 

13.3 Except as provided herein, either party will use any Confidential Information of the other (or of Sublicensees) for any reason other than in connection with such party’s practice or exercise of the rights or obligations under this Agreement without the prior written consent of the other party.

 

13.4 Subject to the exceptions listed below, the parties’ obligations under this Section 13 will survive termination of this Agreement for a period of five (5) years.

 

13.5 Each party’s obligation of confidence hereunder will be fulfilled by using at least the same degree of care with the Confidential Information as such party uses to protect its own confidential information.

 

13.6 The placement of a copyright notice on any Confidential Information will not be construed to mean that such information has been published and will not release a party from its obligation of confidentiality hereunder.

 

13.7 The terms of this Agreement shall be treated as the Confidential Information of both UABRF and the Licensee [and Sublicensee(s)].

 

Section 14. Governmental Markings.

 

14.1

Licensee must legibly mark all products, where feasible, sold under this Agreement with patent notice appropriate under Title 35, United States Code, including an obligation that Licensed Products sold or produced in the United States be “manufactured substantially in the United States.” Licensee will take all reasonable action necessary on its part as licensee to enable UABRF to satisfy its obligations to the U.S. Government under Title

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 19 -


  35. If Licensee reasonably desires an exception to the government requirement of substantial manufacture in the United States then UABRF shall reasonably cooperate with Licensee in obtaining such exception.

 

14.2 Licensee will be responsible for obtaining all necessary governmental approvals for the development, production, distribution, sale, and use of any Licensed Products, at Licensee’s expense, including, without limitation, any safety studies. Licensee will have sole responsibility for any warning labels, packaging and instructions as to the use, and for the quality control for any Licensed Products.

 

14.3 Licensee agrees to register this Agreement with any governmental agency that requires such registration; and Licensee will pay all costs and legal fees in connection with such registration. Licensee will assure that all foreign laws affecting this Agreement or the sale of Licensed Products are fully satisfied. Licensee will notify UABRF no fewer than thirty (30) days prior to any such registration, such that UABRF, at its sole discretion, can redact terms where possible from this Agreement prior to its registration, as permitted by law.

 

Section 15. Export Compliance.

Licensee understands that the Arms Export Control Act (AECA), including its implementing International Traffic In Arms Regulations (ITAR) and the Export Administration Act (EAA), including its Export Administration Regulations (EAR), are some (but not all) of the laws and regulations that comprise the U.S. export laws and regulations. Licensee further understands that the U.S. export laws and regulations include (but are not limited to): (1) ITAR and EAR product/service/data-specific requirements; (2) ITAR and EAR ultimate destination-specific requirements; (3) ITAR and EAR end user-specific requirements; (4) ITAR and EAR end use-specific requirements; (5) Foreign Corrupt Practices Act; and (6) anti-boycott laws and regulations. Licensee will comply with all then-current applicable export laws and regulations of the U.S. Government (and other applicable U.S. laws and regulations) pertaining to the Licensed Patents and Licensed Products (including any associated products, items, articles, computer software, media, services, technical data, and other information). Licensee certifies that it will not, directly or indirectly, export (including any deemed export), nor re-export (including any deemed re-export) the Licensed Patents (including any associated products, items, articles, computer software, media, services, technical data, and other information) in violation of U.S. export laws and regulations or other applicable U.S. laws and regulations. Licensee will include an appropriate provision in its agreements with its authorized Sublicensees to assure that these parties comply with all then-current applicable U.S. export laws and regulations and other applicable U.S. laws and regulations.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 20 -


Section 16. Notices.

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given at the earlier of the time when actually received as a consequence of any effective method of delivery, including but not limited to hand delivery, transmission by telecopier, addressed to the party for whom intended at the address below or at such changed address as the party shall have specified by written notice, provided that any notice of change of address shall be effective only upon actual receipt.

 

     The UAB Research Foundation
     Attn: Chief Executive Office
     AB 1120G
     1530 3 rd Avenue South
     Birmingham, AL 35294
Licensee      Chief Executive Officer
     AGTC
     12085 Research Drive, Suite 110
     Alachua, FL 32615

 

Section 17. Contract Formation and Authority.

 

17.1 No agreement between the parties shall exist unless the duly authorized representative of Licensee and the Chief Executive Officer of UABRF have signed this document within thirty (30) days of the Effective Date written on the first page of this Agreement.

 

17.2 UABRF and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below.

 

The UAB RESEARCH FOUNDATION    

/s/ Illegible

    Date: 12/23, 2005
Chief Executive Officer    
LICENSEE    

/s/ Susan B. Washer

    Date: 1/12/06, 2005
Name and Office:  

Susan B. Washer, President & CEO

   

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 21 -


APPENDIX A

DEVELOPMENT REPORT

 

Date:  

 

Licensee  

 

 

No.

  

Name of

Licensed

Product

  

Gene targeted for

delivery

and disease state

  

Stage of research/

development

  

Anticipated next milestone

and approximate date

1            
2            
3            
4            
           

 

For Each Sublicensee:
Sublicensee Name:  

 

 

No.

  

Name of

Licensed

Product

  

Gene targeted for

delivery

and disease state

  

Stage of research/

development

  

Anticipated next milestone

and approximate date

1            
2            
3            
4            
           

PLEASE SEND DEVELOPMENT REPORTS TO:

The UAB Research Foundation

Attn.: Chief Executive Officer

AB 1120G

1530 3 rd Avenue South

Birmingham, AL 35294

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 22 -


APPENDIX B

UABRF ROYALTY REPORT

 

Licensee:  

 

     Agreement No.:   

 

 
Inventor:  

 

   IPD #s:   

 

 
Period Covered:   From:  

  /    / 2005    

  Through:  

  /    / 2005

 
Prepared By:  

 

    Date:  

 

Approved By:  

 

    Date:  

 

If license covers several major product lines, please prepare a separate report

for each line. Then combine all product lines into a summary report.

 

Report Type:   

  Single Product Line Report:

  

 

   Multiproduct Summary Report. Page 1 of              Pages
   Product Line Detail. Line:              Trade name:                                          Page:             

 

Report Currency: U. S. Dollars         Other  

 

 

     Gross
Sales
   * Less:
Allowances
   Net
Sales
   Royalty
Rate
   Period Royalty Amount

Country

               This Year    Last Year

U.S.A

                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
  

 

  

 

  

 

  

 

  

 

  

 

TOTAL:

                 
  

 

  

 

  

 

  

 

  

 

  

 

Total Royalty:                                            Conversion Rate:                Royalty in U.S. Dollars: $        

The following royalty forecast is non-binding and for UABRF’s internal planning purposes only:

Royalty Forecast Under This Agreement: Next Quarter:      Q2:      Q3:      Q4:     

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 23 -

Exhibit 10.9

STANDARD EXCLUSIVE LICENSE AGREEMENT

WITH KNOW HOW - Agreement No: A11361

PROMOTER TECHNOLOGY LICENSE

TABLE OF CONTENTS

 

  

Section 1 Definitions

  
  

Section 2 Grant

  
  

Section 3 Due Diligence

  
  

Section 4 Payments

  
  

Section 5 Certain Warranties and Disclaimers of UFRF

  

Section 6 Record Keeping

  
  

Section 7 Patent Prosecution

  
  

Section 8 Infringement and Invalidity

  
  

Section 9 Term and Termination

  
  

Section 10 Assignability

  
  

Section 11 Dispute Resolution Procedures

  
  

Section 12 Product Liability; Conduct of Business

  

Section 13 Use of Names

  
  

Section 14 Miscellaneous

  
  

Section 15 Notices

  
  

Section 16 Contract Formation and Authority

  

Section 17 United States Government Interests

  

Section 18 Confidentiality

  
  

Section 19 University Rules and Regulations

  
  

Schedule 1 - Patents and Patent Applications

  

Appendix A - Development Plan

  
  

Appendix B - Development Report

  
  

Appendix C - UFRF Royalty Report

  
  

Appendix D - Milestones

  

This Agreement is made effective the 18th day of September, 2012, (the “Effective Date”) by and between the University of Florida Research Foundation, Inc. (hereinafter called “UFRF”), a nonstock, nonprofit Florida corporation, and Applied Genetic Technologies Corporation (hereinafter called “Licensee”), a small entity corporation organized and existing under the laws of Delaware;

WHEREAS, UFRF owns certain inventions that are described in the “Licensed Patents” defined below, and UFRF is willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 1 -


NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

 

Section 1 Definitions

 

  1.1 “Licensed Patents” means all of the following UFRF intellectual property:

 

  1.1.1 the patent(s)/patent application(s) identified on Schedule 1 hereto;

 

  1.1.2 any and all United States and foreign patent applications claiming priority to any of the patent(s) and patent application(s) identified on Schedule 1, and

 

  1.1.3 any and all patents issuing from the patent applications identified in Section 1.1.1 and 1.1.2, including, but not limited to, letters patents, patents of addition, divisionals, reissues, re-examinations, extensions, restorations, and supplementary protection certificates;

all to the extent owned or controlled by the University of Florida.

 

  1.2 “Licensed Product” and “Licensed Process” means:

 

  1.2.1 In the case of a Licensed Product, any product or part thereof, on a country-by-country basis, developed by or on behalf of Licensee, that:

 

  (a) is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which such product is made, used or sold; or

 

  (b) is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any such process is used or in which any such product is used or sold;

 

  (c) incorporates, utilizes, or was developed utilizing Know-How or which is manufactured using Know-How;

 

  1.2.2 In the case of a Licensed Process, any process, on a country-by-country basis:

 

  (a) which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which such process is practiced.

 

  (b) which incorporates, utilizes, or was developed utilizing, Know-How

 

  1.3 “Net Sales” means the total dollar amount invoiced on sales of Licensed Products and/or Licensed Processes by licensee, sublicensee or affiliates. Total amount invoiced may include only promotional discounts allowed in amounts customary in the trade.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


  1.4 “Affiliate” means: (a) any person or entity which controls at least fifty percent (50%) of the equity or voting stock of the Licensee (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by the Licensee or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of Licensee.

 

  1.5 “Patent Challenge” means a challenge to the validity, patentability, enforceability and/or non-infringement of any of the Licensed Patents or otherwise opposing any of the Licensed Patents.

 

  1.6 “Sublicense” means, directly or indirectly, to sublicense, grant any other right with respect to, or agree not to assert, any right licensed to Licensee under this Agreement.

 

  1.7 “Sublicensee” means any third party to whom Licensee grants a Sublicense.

 

  1.8 “Development Plan” means a written report summarizing the development activities that are to be undertaken by the Licensee to bring Licensed Products and/or Licensed Processes to the market. The Development Plan is attached as Appendix A.

 

  1.9 “Development Report” means a written account of Licensee’s progress under the Development Plan having at least the information specified on Appendix B to this Agreement, and shall he sent to the address specified on Appendix B.

 

  1.10 “Licensed Field” shall be limited to the field of Ophthalmology.

 

  1.11 “Licensed Territory” shall be worldwide.

 

  1.12 “Investigator” means [ ** ] while employed by the University of Florida.

 

  1.13 “Know-How” means unpatented, technology and/or information that was developed by the Investigator, including without limitation methods, processes, techniques, compounds, cell lines, materials, sequences, drawings, indications, data, results of tests, or studies, plans, and expertise, whether patentable or not, which relates specifically to the Licensed Patents and existing on the date hereof, only to the extent wholly owned and controlled by UFRF, and is necessary to exercise the Licensed Patents, except that, Know-How shall not include the Licensed Patents.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 3 -


Section 2 Grant

 

  2.1 License

 

  2.1.1 License under Licensed Patents

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty-bearing, exclusive license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, have made, develop, use, lease, import, export, offer to sell, sell and have sold Licensed Products and Licensed Processes. UFRF reserves to itself and the University of Florida the right under the Licensed Patents to make, have made, develop, import and use Licensed Products and Licensed Processes solely for their internal, research, clinical (including, but not limited to patient care at Shands Teaching Hospital and University of Florida patient care facilities) and educational purposes. In addition, UFRF reserves to itself, as well as to the University of Florida and to all non-profit research institutions, the right to use materials that might be covered under Licensed Patents solely for their internal research, educational, and clinical purposes and to meet all applicable governmental requirements governing the ability to transfer materials.

 

  2.1.2 License under Licensed Know-How

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty-bearing, non-exclusive license, limited to the Licensed Field and the Licensed Territory, under the Know-How to make, have made, develop, use, lease, import, export, offer to sell, sell and have sold Licensed Products and Licensed Processes.

UFRF shall deliver the Know-How to Licensee promptly following execution of this Agreement in a manner and form as mutually agreed between the parties. UFRF and Licensee acknowledge and agree that all direct derivatives and modifications to the promoter gene sequence as provided by UFRF created by Licensee shall be the properly of UFRF and shall be considered Know-How; provided, however that all other materials, substances, modifications, cell lines, derivations, progeny created, developed or produced by Licensee as a result of Licensee’s research or use of the Know-How shall be the property of Licensee, including the intellectual property rights associated therewith.

 

  2.2 Sublicense

 

  2.2.1

Licensee may grant written Sublicenses to third parties. However, Licensee shall notify UFRF of the initiation of license negotiations with all potential Sublicensees. Any agreement granting a Sublicense shall state that the Sublicense is subject to the terms and conditions of this Agreement and to the termination of this Agreement. Licensee shall have

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 4 -


  the same responsibility for the activities of any Sublicensee or Affiliate as if the activities were directly those of Licensee. Licensee shall also include provisions in all sublicenses to provide that in the event that Sublicensee brings a Patent Challenge against UFRF or assists another party in bringing a Patent Challenge against UFRF (except as required under a court order or subpoena) then Licensee may terminate the Sublicense within thirty (30) days.

 

  2.2.2 In respect to Sublicenses granted by Licensee under 2.2.1 above, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products or Licensed Processes sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Processes sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments within thirty (30) days of receipt of any such fees from Sublicensee; provided, however, that Licensee shall not be obligated to make payment under this Section with respect to (a) amounts paid to Licensee to reimburse Licensee for patent costs paid by Licensee pursuant to Section 7; (b) equity investments in Licensee by a sublicensee up to the amount of the fair market value of the equity purchased on the date of the investment; and (c) reimbursement received by Licensee for actual future research and development costs for research or development to be performed by Licensee (together with subcontractors if applicable) and such cost designated for the development of a Licensed Product or Licensed Process. Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF.

If Licensee or any of its Affiliates brings a Patent Challenge against UFRF, or (ii) Licensee or any of its Affiliates assists another party in bringing a Patent Challenge against UFRF (except as required under it court order or subpoena), and (iii) UFRF does not choose to exercise its rights to terminate this Agreement pursuant to Section 9.3 then, in the event that such a Patent Challenge is successful, Licensee will have no right to recoup any consideration, including royalties, paid during the period of challenge. In the event that a Patent Challenge is unsuccessful, Licensee shall reimburse UFRF for all reasonable legal fees and expenses incurred in its defense against the Patent Challenge.

 

  2.2.3 Licensee shall provide UFRF with a final unredacted copy of each sublicense agreement and any agreement which transfers intellectual property rights granted hereunder, within thirty (30) days after the execution of the sublicense agreement and further agrees to forward to UFRF annually a copy of such reports received by Licensee from its Sublicensees pertinent to the payments under said sublicense agreements.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 5 -


  2.2.4 In the event that UFRF notifies Licensee in writing of a third party’s interest in a market or territory which Licensee is not addressing or intending to address, as evidenced by diligent developmental plan provided to UFRF after thirty (30) days of UFRF notification to Licensee of the third party interest, at the time of receipt of the notice and at UFRF’s request, Licensee shall enter into good faith discussions with such third party with respect to a Sublicense.

 

Section 3 Due Diligence

 

  3.1 Development

 

  3.1.1 Licensee agrees to and warrants that:

 

  (a) it has, or will obtain, the expertise necessity to independently evaluate the inventions of the Licensed Patents;

 

  (b) it will establish and actively and diligently pursue the Development Plan (see Appendix A) to the end that the inventions of the Licensed Patents will be utilized to provide Licensed Products and/or Licensed Processes for sale in the retail market within the Licensed Field;

 

  (c) it will diligently develop markets for Licensed Products and Licensed Processes; and

 

  (d) until the date of first commercial sale of Licensed Products or Licensed Processes, it will supply UFRF with a written Development Report annually fifteen (15) days after the end of the calendar year (see Appendix B).

UFRF’s review of Licensee’s Development Plan and Development Report is solely to verify the existence of Licensee’s commitment to development activity and to ensure compliance with Licensee’s obligations to commercialize the inventions of the Licensed Patents, as set forth above.

 

  3.1.2 Licensee agrees that [ ** ] shall occur on or before [ ** ] of this Agreement or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3 hereto. In addition, Licensee will meet the milestones shown in Appendix D or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3. Licensee will notify UFRF in writing as each milestone is met.

 

  3.2

Upon written request by Licensee to negotiate extensions of the date of first commercial sale or any milestones or due dates set forth in Appendix D, such

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 6 -


  request to be received by UFRF no less than ninety (90) days prior to any of the due dates subject of such request, set forth in this Section 3.1.3, such request fully describing Licensee’s diligent efforts to achieve the milestone required to be met by such due date, UFRF shall consider in good faith such requests. Upon granting such request, UFRF and Licensee shall negotiate such extensions in good faith.

 

  3.3 University of Florida policies may require approval of clinical trials at the University of Florida and involving technology invented at the University. Accordingly, Licensee will notify UFRF prior to commencing any clinical trials at the University of Florida or its affiliated medical facilities.

 

Section 4 Payments

 

  4.1 License Issue Fee

Licensee agrees to pay to UFRF a license issue fee of [ ** ], within thirty (30) days of the Effective Date.

 

  4.2 Royalty

Royalty on Licensed Patents: Licensee agrees to pay to UFRF as earned royalties a royalty calculated as a percentage of Net Sales. The royalty is deemed earned as of the earlier of the date the Licensed Product and/or Licensed Process is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. Licensee shall pay to UFRF royalties as follows:

(i) [ ** ] for Net Sales of Licensed Products, for each Licensed Product, on a country-by-country basis, that is (a) covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which such Licensed Product is made, imported, exported, used or sold or (b) is manufactured using a Licensed Process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which such Licensed Process is used. For clarification, only one royalty shall be due with respect to the same unit of Licensed Product.

(ii) [ ** ] for Net Sales of Licensed Processes, for each Licensed Process, on a country-by-country basis, that is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in the country in which such process is practiced.

(iii) [ ** ] or Net Sales of Licensed Products, for each product, on a country-by-country basis, that is sold during a period of regulatory exclusivity for such product in the country in which such product is sold.

(iv) [ ** ] for Net Sales of all other Licensed Products and Licensed Processes.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 7 -


(v) In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 4.3 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is pays to third parties under such licenses, further provided, however that the royalties payable to UFRF under this Section 4.3 shall not be reduced to less than [ ** ] of the applicable Net Sales.

(vi) If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to the Licensee by UFRF under any other license agreement and which license agreement calls for the payment of royalties, duplicate royalties for the sales of such Licensed Products or Licensed Process shall not be owed to UFRF by Licensee. Under such circumstances, the royalty calculation shall be made only once, even though the sale of the Licensed Product or Licensed Process may fall under more than one patent and more than one license agreement. If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF, Licensee shall pay only the greatest of the applicable royalty rates.

Royalties are payable for the longer of [ ** ]. Royalties are payable based on the highest applicable rate calculated per this section and such royalties based on Licensed Patents and Know-How shall not be additive.

Amounts owing to UFRF under Sections 4.3 shall be paid on a quarterly basis after the amount of minimum royalties paid is exceeded, with such amounts due and received by UFRF on or before the thirtieth (30th) day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned.

 

  4.3 Minimum Royalty

Licensee agrees to pay UFRF minimum royalty payments, as follows:

 

Payment

  

Year

[**]    [**]

and every year thereafter, for the life of this Agreement.

The minimum royalty shall be paid in advance on a quarterly basis on March 31, June 30, September 30, and December 31 for the following quarters, for each year in which this Agreement is in effect. The first minimum royalty payment shall be due on December 31 st , 2012 and shall be in the amount of [ ** ]. Any minimum royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the minimum royalties will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual minimum royalty due UFRF for other than the same calendar year in which the royalties were earned.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 8 -


  4.4 Milestone Payments

Licensee agrees to pay UFRF milestone payments within thirty (30) days of the first achievement of such milestone, as follows:

 

Payment

  

Event

[** ]    [ **]
[** ]    [ **]
[** ]    [ **]
[** ]    [ **]
[** ]    [ **]

If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF and which license agreement calls for milestone payments for the same milestone event to be paid to UFRF as set forth above, duplicative milestone payments shall not be owed to UFRF by Licensee with respect to a given Licensed Product or Licensed Process. Under such circumstances, the milestone payments shall be made only once, even though the development milestone may apply to more than one license. The greater of the applicable milestone shall be paid.

 

  4.5 Sublicense Fees

Licensee shall pay sublicense fees to UFRF per Section 2.2.2 of this Agreement within thirty days (30) of the receipt of any such fees from Sublicensee.

 

  4.6 Accounting for Payments

 

  4.6.1 Any amounts which remain unpaid after the date they are due to UFRF under this Section 4, Section 7, Section 2 or any other section of this Agreement shall accrue interest from the due date at the rate equal to the lesser of (i) one and one-half percent (1.5%) per month or (ii) the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays. Licensee shall also be responsible for repayment to UFRF of any attorney, collection agency, or other out-of-pocket UFRF expenses required to collect overdue payments due from this Section 4, Section 7, Section 2 or any other applicable section of this Agreement.

 

  4.6.2 Except as otherwise directed, all amounts owing to UFRF under this Agreement shall be paid in U.S. dollars to UFRF at the following address:

University of Florida Research Foundation, Inc.

223 Grinter Hall

PO Box 115500

Gainesville, Florida 32611-5500

Attention: Business Manager

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 9 -


All monies owing stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation-Value of Foreign Currencies on the day preceding the payment due date.

A certified full accounting statement showing how any amounts payable to UFRF under Section 4.2 have been calculated shall be submitted to UFRF on the date of each such payment. Such accounting statements shall contain a written representation signed by an executive officer of Licensee that states that the statements are true, accurate, and fairly represent all amounts payable to UFRF pursuant to this Agreement. Such accounting shall be on a per-country and product line, model or trade name basis and shall be summarized on the form shown in Appendix C — UFRF Royalty Report of this Agreement.

In the event no payment is owed to UFRF because the amount of minimum royalties paid has not been exceeded or otherwise, an accounting demonstrating that fact shall be supplied to UFRF.

UFRF is exempt from paying income taxes under U.S. law. Therefore, all payments due under this Agreement shall be made without deduction for taxes, assessments, or other charges of any kind which may be imposed on UFRF by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to UFRF pursuant to this Agreement. All such taxes, assessments, or other charges shall be assumed by Licensee.

 

Section 5 Certain Warranties and Disclaimers of UFRF

 

  5.1 UFRF warrants that, except as otherwise provided under Section 17.1 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  5.1.1 a warranty or representation by UFRF as to the validity or scope of any right included in the Licensed Patents;

 

  5.1.2 a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  5.1.3 an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 10 -


  5.1.4 an obligation to furnish any services other than those specified in this Agreement; or

 

  5.1.5 a warranty or representation by UFRF that it will not grant licenses to others to make, use or sell products not covered by the claims of the Licensed Patents which may be similar and/or compete with products made or said by Licensee.

 

  5.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, UFRF MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING. UFRF ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, ITS SUBLICENSEE(S), OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

Section 6 Record Keeping

 

  6.1 Licensee and its Sublicensee(s) shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)’s accounting referred to above, including without limitation, inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products and/or Licensed Processes. Such books and records shall be preserved for a period not less than six years after they are created or as required by federal law, both during and after the term of this Agreement.

 

  6.2 Licensee and its Sublicensee shall take all steps necessary so that UFRF may, within thirty (30) days of its written request, audit, review and/or copy all of the books and records at a single U.S. location to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting. Such review may be performed by any authorized employees of UFRF as well as by any attorneys and/or accountants designated by UFRF, upon reasonable notice and during regular business hours. If a deficiency with regard to any payment hereunder is determined, Licensee and its Sublicensee(s) shall pay the deficiency within thirty (30) days of receiving notice thereof along with applicable interest as described in Section 4.6.1. If a royalty payment deficiency for a calendar year exceeds [**] of the royalties paid for that year, then Licensee and its Sublicensees shall be responsible for paying UFRF’s out-of-pocket expenses incurred with respect to such review.

 

  6.3

At any time during the term of this agreement, UFRF may request in writing that Licensee verify the calculation of any past payments owed to UFRF through the

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 11 -


  means of a self-audit. Within ninety (90) days of the request, Licensee shall complete a self-audit of its books and records to verify the accuracy and completeness of the payments owed. Within thirty (30) days of the completion of the self-audit, Licensee shall submit to UFRF a report detailing the findings of the self-audit and the manner in which it was conducted in order to verify the accuracy and completeness of the payments owed. If Licensee has determined through its self-audit that there is any payment deficiency, Licensee shall pay UFRF the deficiency along with applicable interest under Section 4.6.1 with the submission of the self-audit report to UFRF.

 

Section 7 Patent Prosecution

 

  7.1 UFRF shall prosecute and maintain the Licensed Patents using counsel of its choice. UFRF shall provide Licensee with copies of all documents sent to and received from the United States Patent and Trademark Office and foreign patent offices relating to Licensed Patents. Licensee agrees to keep such information confidential.

 

  7.2 Licensee shall pay to UFRF the sum of [**], within thirty (30) days of the Effective Date to reimburse any and all expenses associated with preparation, filing, prosecution, issuance, maintenance, defense, and reporting of the Licensed Patents incurred prior to the Effective Date.

 

  7.3 Licensee shall be responsible for and pay [ ** ] incurred by UFRF related to the preparation, filing, prosecution (including interferences (as approved by Licensee, such approval not to be unreasonably withheld and provided that Licensee shall have ten (10) business days following UFRF’s notice of its intent to file an interference in which to notify UFRF if it does not approve such filing. In the event that Licensee does not respond to the approval request within the ten (10 days) of such request, permission will be deemed given by Licensee and the Licensee shall be responsible for the costs)), issuance, maintenance, defense (including oppositions) and reporting of the Licensed Patents subsequent to and separate of those expenses cited in Section 7.2 within thirty (30) days of receipt of an invoice from UFRF. It shall be the responsibility of Licensee to keep UFRF fully apprised of the “small entity” status of Licensee and all Sublicensees with respect to the U.S. patent laws and with respect to the patent laws of any other countries, if applicable, and to inform UFRF of any changes in writing of such status, within thirty (30) days of any such change. In the case of foreign patent protection, if Licensee gives sixty (60) days’ notice that it intends to decline to reimburse UFRF for patent expenses for any Licensed Patent in any particular country, then the license granted hereunder respecting such Licensed Patent in such country shall terminate after such sixty (60) days and Licensee relinquishes the right to commercialize Licensed Products in the specified country.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 12 -


Section 8 Infringement and Invalidity

 

  8.1 Licensee shall inform UFRF promptly in writing of any alleged infringement of the Licensed Patents by a third party and of any available evidence thereof,

 

  8.2 During the term of this Agreement, UFRF shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Licensed Patents. If UFRF prosecutes any such infringement, Licensee agrees that UFRF may include Licensee as a co-plaintiff in any such suit, without expense to Licensee.

 

  8.3 If within six (6) months after having been notified of any alleged infringement, UFRF shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought an infringement action against the alleged infringer, or if UFRF shall notify Licensee at any time prior thereto of its intention not to bring suit against the alleged infringer, then, and in those events only, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Licensed Patents, and Licensee may, for such purposes, use the name of UFRF as party plaintiff. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of UFRF, which consent shall not be unreasonably withheld. Licensee shall indemnify UFRF against any order for costs that may be made against UFRF in such proceedings.

 

  8.4 In the event that a declaratory judgment action is brought against UFRF or Licensee by a third party alleging invalidity, unpatentability, unenforceability, or non-infringement of the Licensed Patents, UFRF, at its option, shall have the right within twenty (20) days after commencement of such action to take over the sole defense of the action at its own expense. If UFRF does not exercise this right, and assuming that Licensee is the sole licensee of the Licensed Patents, Licensee shall be responsible for the sole defense of the action at Licensee’s sole expense, subject to Sections 8.5 and 8.6.

 

  8.5 In the event that Licensee shall undertake the enforcement by litigation and/or defense of the Licensed Patents by litigation, UFRF shall have the right, but not the obligation, to voluntarily join such litigation, represented by its own counsel at its own expense. In the event that Licensee shall undertake the enforcement by litigation and/or defense of the Licensed Patents by litigation, any recovery of damages by Licensee for any such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of Licensee relating to the suit, and next toward reimbursement of UFRF for any legal fees, and unreimbursed expenses. The balance remaining from any such recovery shall be [ ** ].

 

  8.6 In any suit in which either party is involved to enforce or defend the Licensed Patents pursuant to this Agreement, the other party hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 13 -


  8.7 In the event Licensee contests the validity of any Licensed Patents, unless and until this Agreement terminates or expires, Licensee shall continue to pay royalties and make other payments pursuant to this Agreement with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

 

Section 9 Term and Termination

 

  9.1 The term of this license shall begin on the Effective Date of this Agreement and continue until the later of the date that no Licensed Patent remains an enforceable patent and the date on which Licensee’s obligation to pay royalties expires pursuant to Section 4.3 above.

 

  9.2 Licensee may terminate this Agreement at any time by giving at least sixty (60) days written notice of such termination to UFRF. Such a notice shall he accompanied by a statement of the reasons for termination.

 

  9.3 UFRF may terminate this Agreement by giving Licensee at least sixty (60) days written notice if Licensee:

 

  9.3.1 is delinquent on any report or payment

 

  9.3.2 is not diligently developing and commercializing Licensed Products and Licensed Processes

 

  9.3.3 is in breach of any provision of this Agreement

 

  9.3.4 provides any false report

 

  9.3.5 goes into bankruptcy, liquidation or has a receiver appointed to control any assets

 

  9.3.6 violates any laws or regulations of applicable government entities; or

 

  9.3.7 shall cease to canny on its business pertaining to Licensed Patents.

 

  9.3.8 If Licensee or any of its Affiliates brings a Patent Challenge against UFRF, or assists others in bringing a Patent Challenge against UFRF (except as required under a court order or subpoena), then UFRF may immediately terminate this Agreement and/or the license granted hereunder. If a Sublicensee brings a Patent Challenge or assists another party in bringing a Patent Challenge (except as required under a court order or subpoena), then UFRF may send a written demand to Licensee to terminate such sublicense. If Licensee fails to so terminate such sublicense within sixty (60) days after UFRF’s demand, UFRF may immediately terminate this Agreement and/or the license granted hereunder.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 14 -


  9.3.9 if payments of earned royalties under Section 4.2 once begun ceases for more than two (2) calendar quarters.

Termination under this Section 9.3 will take effect sixty (60) days after written notice by UFRF unless Licensee remedies the problem in that sixty (60) day period.

 

  9.4 UFRF may immediately terminate this Agreement upon the occurrence of the second separate default by Licensee within any consecutive three-year period for failure to pay royalties, patent or any other expenses when due.

 

  9.5 Upon the termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination. Licensee shall remain obligated to provide an accounting for and to pay royalties earned to the date of termination, and any minimum royalties shall be prorated as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that Licensee shall remain obligated to provide an accounting for and to pay running royalties thereon.

 

Section 10 Assignability

 

  10.1 This Agreement may not be transferred or assigned by Licensee except with the prior written consent of UFRF, which shall not be unreasonably withheld; and provided that Licensee may assign any of its rights under this Agreement in any country to any Affiliates and may delegate its obligations under this Agreement in any country to any Affiliates; provided, however, that such assignment shall not relieve Licensee of its responsibilities for performance of its obligations under this Agreement. Licensee may assign all of its rights and obligations under this Agreement in connection with a merger or similar reorganization or the sale of all or substantially all of the assets and or stock of the Licensee. This Agreement shall survive any such merger or reorganization of Licensee within, into, or such sale of assets and/or stock to, another party, and no consent for such merger, reorganization or sale shall be required hereunder. Licensee shall provide UFRF written notice of assignment within thirty (30) days of the effective date of such assignment. Any attempted assignment in contravention of this Section 10.1 shall be null and void and shall constitute a material breach of this Agreement.

 

  10.2 The new assignee shall assume all responsibilities under this Agreement and must agree in writing to UFRF to be bound by this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 15 -


Section 11 Dispute Resolution Procedures

 

  11.1 Mandatory Procedures

In the event either party intends to file a lawsuit against the other with respect to any matter in connection with this Agreement, compliance with the procedures set forth in this Section shall be a condition precedent to the filing of such lawsuit, other than for injunctive relief. Either party may terminate this Agreement as provided in this Agreement without following the procedures set forth in this section.

 

  11.1.1 When a party intends to invoke the procedures set forth in this section, written notice shall be provided to the other party. Within thirty (30) days of the date of such notice, the parties agree that representatives designated by the parties shall meet at mutually agreeable times and engage in good faith negotiations at a mutually convenient location to resolve such dispute.

 

  11.1.2 If the parties fail to meet within the time period set forth in Section 11.1.1 above or if either party subsequently determines that negotiations between the representatives of the parties are at an impasse, the party declaring that the negotiations are at an impasse shall give notice to the other party stating with particularity the issues that remain in dispute.

 

  11.1.3 Not more than fifteen (15) days after the giving of such notice of issues, each party shall deliver to the other party a list of the names and addresses of at least three individuals, any one of whom would be acceptable as a neutral advisor in the dispute (the “Neutral Advisor”) to the party delivering the list. Any individual proposed as a Neutral Advisor shall have experience in determining, mediating, evaluating, or trying intellectual property litigation and shall not be affiliated with the party that is proposing such individual.

 

  11.1.4 Within ten (10) days after delivery of such lists, the parties shall agree on a Neutral Advisor. If they are unable to so agree within that time, within five (5) days, they shall each select one individual from the lists. Within five (5) days, the individuals so selected shall meet and appoint a third individual from the lists to serve as the Neutral Advisor. Within thirty (30) days after the selection of a Neutral Advisor:

 

  (a) The parties shall each provide a written statement of the issues in dispute to the Neutral Advisor.

 

  (b)

The parties shall meet with the Neutral Advisor in Gainesville, Florida on a date and time established by the Neutral Advisor. The meeting must be attended by persons authorized to make final decisions on behalf of each party with respect to the dispute. At the meeting, each party shall make a presentation with respect to its position concerning the dispute. The Neutral Advisor will then discuss the issues separately with each party and attempt to resolve all issues in the dispute. At the meeting, the parties will enter into

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 16 -


  a written settlement agreement with respect to all issues that are resolved. Such settlement agreement shall be final and binding with respect to such resolved issues and may not be the subject of any lawsuit between the parties, other than a suit for enforcement of the settlement agreement.

 

  11.1.5 The expenses of the neutral advisor shall be shared by the parties equally. All other out-of-pocket costs and expenses for the alternative dispute resolution procedure required under this Section shall be paid by the party incurring the same.

 

  11.1.6 Positions taken and statements made during this alternative dispute resolution procedure shall be deemed settlement negotiations and shall not be admissible for any purpose in any subsequent proceeding.

 

  11.2 Failure to Resolve Dispute

If any issue is not resolved at the meeting with the Neutral Advisor, either party may file appropriate administrative or judicial proceedings with respect to the issue that remains in dispute. No new issues may be included in the lawsuit without the mandatory procedures set forth in this section having first been followed.

 

  11.3 Survival.

The provisions of this Section shall survive termination of this Agreement.

 

Section 12 Product Liability; Conduct of Business

 

  12.1 Licensee and its Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and each of their directors, officers, employees, and agents, and the inventors of the Licensed Patents, regardless of whether such inventors are employed by the University of Florida at the time of the claim, harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, whether arising from a third party claim or resulting from UFRF’s enforcing this indemnification clause against Licensee, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the development, production, manufacture, sale, use, lease, consumption, marketing, or advertisement of Licensed Products or Licensed Process(es) or arising from any right or obligation of Licensee hereunder. Notwithstanding the above, UFRF at all times reserves the right to retain counsel of its own to defend UFRF’s, the Florida Board of Governors’, the University of Florida Board of Trustees’, the University of Florida’s, and the inventor’s interests.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 17 -


  12.2 Licensee warrants that it now maintains and will continue to maintain liability insurance coverage appropriate to the risk involved in development, producing, manufacturing, clinical trials, selling, marketing, using, leasing, consuming, or advertising the products subject to this Agreement and that such insurance coverage lists UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents as additional insureds. Within ninety (90) days after the execution of this Agreement and thereafter annually between January 1 and January 31 of each year, Licensee will present evidence to UFRF that the coverage is being maintained with UFRF, the University of Florida, and its inventors listed as additional insureds. In addition, Licensee shall provide UFRF with at least thirty (30) days prior written notice of any change in or cancellation of the insurance coverage.

 

Section 13 Use of Names

Licensee and its Sublicensee(s) shall not use the names of UFRF, or of the University of Florida, nor of any of either institution’s employees, agents, or affiliates, nor the name of any inventor of Licensed Patents, nor any adaptation of such names, in any promotional, advertising or marketing materials or any other similar form of publicity, or to suggest any endorsement by such entities or individuals, without the prior written approval of UFRF in each case.

 

Section 14 Miscellaneous

 

  14.1 This Agreement shall be construed in accordance with the internal laws of the State of Florida.

 

  14.2 The parties hereto are independent contractors and not joint venturers or partners.

 

  14.3 Licensee shall ensure that it applies patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement.

 

  14.4 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

 

  14.5 Licensee shall not encumber or otherwise grant a security interest in any of the rights granted hereunder to any third party.

 

  14.6

Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 18 -


  Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of such items may require a license from the cognizant agency of the U.S Government or written assurances by Licensee that it shall not export such items to certain foreign countries and/or foreign persons without prior approval of such agency. UFRF neither represents that a license is or is not required or that, if required, it shall be issued.

 

  14.7 Licensee is responsible for any and all wire/bank fees associated with all payments due to UFRF pursuant to this agreement.

 

  14.8 Survival

The provisions of this Section shall survive termination of this Agreement. Upon termination of the Agreement for any reason, the following sections of the License Agreement will remain in force as non-cancelable obligations:

 

     Section 6      Record Keeping
     Section 9      Requirement to pay royalties on sale of Licensed Products made, and in process, at the time of License Agreement termination
     Section 12      Product Liability; Conduct of Business
     Section 13      Use of Names
     Section 18      Confidentiality

 

Section 15 Notices

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given

 

    when delivered personally, or

 

    if sent by facsimile transmission, when receipt thereof is acknowledged at the facsimile number of the recipient as set forth below, or

 

    the second day following the day on which the notice has been delivered prepaid to a courier service, or

 

    five (5) business days following deposit in the U.S. mail if sent certified mail, (return receipt acknowledgement is not required to certify delivery).

 

  15.1 If to the University of Florida Research Foundation, Inc.:

President

University of Florida Research Foundation, Inc.

223 Grinter Hall

University of Florida

Post Office Box 115500

Gainesville, FL 32611-5500

Facsimile Number: 352-846-0505

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 19 -


with a copy to:

Office of Technology Licensing

Attn: Director

747 SW Second Avenue

University of Florida

Post Office Box 115575

Gainesville, Florida 32611-5575

Facsimile Number: 352-392-6600

 

  15.2 If to Licensee:

Sue Washer, CEO

Applied Genetic Technologies Corporation

11801 Research Drive, Suite D

Alachua, FL 32615

Facsimile Number 386-462-0875

With a copy to

Fred Hutchison

Hutchison Law Group

5410 Trinity Road

Suite 400

Raleigh, North Carolina 27607

 

Section 16 Contract Formation and Authority

The submission of this Agreement does not constitute an offer, and this document shall become effective and binding only upon the execution by duly authorized representatives of both Licensee and UFRF. Copies of this Agreement that have not been executed and delivered by both UFRF and Licensee shall not serve as a memorandum or other writing evidencing an agreement between the parties. This Agreement shall automatically terminate and be of no further force and effect, without the requirement of any notice from UFRF to Licensee, if UFRF does not receive the License Issue Fee or certificates representing shares issued to UFRF pursuant to this Agreement, as applicable, within thirty (30) days of the Effective Date.

 

  16.1 UFRF and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

 

  16.2 Force Majeure

No default, delay, or failure to perform on the part of Licensee or UFRF shall be considered a default, delay or failure to perform otherwise chargeable hereunder, if such default, delay or failure to perform is due to causes beyond either party’s reasonable control including, but not limited to: strikes, lockouts, or inactions of

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 20 -


governmental authorities, epidemics, war, embargoes, fire, earthquake, hurricane, flood, acts of God, or default of common carrier. In the event of such default, delay or failure to perform, any date or times by which either party is otherwise scheduled to perform shall be extended automatically for a period of time equal in duration to the time lost by reason of the excused default, delay or failure to perform.

 

Section 17 United States Government Interests

 

  17.1 It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [**], during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

  17.2 Licensee agrees that for Licensed Products covered by the Licensed Patents that are subject to the non-exclusive royalty-free license to the United States Government, said Licensed Products will be manufactured substantially in the United States. Licensee further agrees that it shall abide by all the requirements and limitations of U.S. Code, Title 35, Chapter 18, and implementing regulations thereof, for all patent applications and patents invented in whole or in pact with federal money.

 

Section 18 Confidentiality

 

  18.1

Each Party shall maintain all information of the other Party which is treated by such other Party as proprietary or confidential (referred to herein as “Confidential Information”) in confidence, and shall not disclose, divulge or otherwise communicate such confidential information to others, or use it for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, and each party hereby agrees to exercise every reasonable precaution to prevent and restrain the unauthorized disclosure of such confidential information by any of its Affiliates, directors, officers, employees, consultants, subcontractors, Sublicensees or agents. Licensee’s Confidential Information includes but is not limited to the Development Plan, Development Reports and all other financial, research, development or business reports, strategies and agreements, including Sublicenses, of Licensee. The parties agree to keep the terms of this Agreement confidential, provided that each party may disclose this Agreement to their authorized agents and investors who are bound by similar confidentiality provisions. Notwithstanding the foregoing, Confidential Information of a party shall not include information which: (a) was lawfully known by the receiving party prior to disclosure of such information by the disclosing party to the receiving party; (b) was or becomes generally available in

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 21 -


  the public domain, without the fault of the receiving party; (c) is subsequently disclosed to the receiving party by a third party having a lawful right to make such disclosure; (d) is required by law, rule, regulation or legal process to be disclosed, provided that the receiving party making such disclosure shall take all reasonable steps to restrict and maintain to the extent possible confidentiality of such disclosure and shall provide reasonable notice to the other party to allow such party the opportunity to oppose the required disclosure; or (e) has been independently developed by employees or others on behalf of the receiving party without access to or use of disclosing party’s information as demonstrated by written record. Each party’s obligations under this Section 18 shall extend for a period of five (5) years from termination or expiration of this Agreement.

 

Section 19 University Rules and Regulations

 

  19.1 Licensee understands and agrees that University of Florida personnel who are engaged by Licensee, whether as consultants, employees or otherwise, or who possess a material financial interest in Licensee, are subject to the University of Florida’s rule regarding outside activities and financial interests set forth in Florida Administrative Code Rule 6C1-1.011, the University of Florida’s Intellectual Property Policy, and a monitoring plan which addresses conflicts of interests associated therewith. Any term or condition of an agreement between Licensee and such University of Florida personnel which seeks to vary or override such personnel’s obligations to the University of Florida may not be enforced against such personnel, the University of Florida or UFRF, without the express written consent of an individual authorized to vary or waive such obligations on behalf of the University of Florida and UFRF. Furthermore, should an interest of Licensee conflict with the interest of the University of Florida, University of Florida personnel are obligated to resolve such conflicts according to the guidelines and policies set forth by the University of Florida.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 22 -


IN WITNESS WHEREOF, the patties hereto have duly executed this Agreement on the dates indicated below.

 

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

/s/ David L. Day

    Date:   9/14 , 2012
David L. Day      
Director of Technology Licensing      

 

LICENSEE

APPLIED GENETIC TECHNOLOGIES CORPORATION

By:  

/s/ Susan B. Washer

    Date:   9/18 , 2012
Susan B. Washer, President and CEO      

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 23 -


Schedule 1 - Patents and Patent Applications

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 24 -


Appendix A - Development Plan

A Development Plan of the scope outlined below shall be submitted to UFRF by Licensee prior to the execution of this agreement. In general, the plan should provide UFRF with a summary overview of the activities that Licensee believes are necessary to bring products to the marketplace.

 

I. Development Program

 

  A. Development activities to be undertaken

[ ** ]

 

II. Governmental Approval

[ ** ]

 

III. Proposed Market Approach

[ ** ]

 

IV Competitive Information

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Appendix B - Development Report

When appropriate, indicate estimated start date and finish date for activities.

 

I. Date Development Plan initiated and Time Period Covered by this Report.

 

II. Development Report (4-8 paragraphs).

 

  A. Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.

 

  B. Activities currently under investigation, i.e., ongoing activities including object and parameters of such activities, when initiated, and projected date of completion.

 

III. Future Development Activities (4-8 paragraphs).

 

  A. Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.

 

  B. Estimated total development time remaining before a product will be commercialized.

 

  C. Date by which manufacture of a commercial product is expected to begin (include specifics of planned manufacturing of product, i.e., build facility or outsource manufacturing).

 

IV. Changes to Initial Development Plan (2-4 paragraphs).

 

  A. Reasons for change.

 

  B. Variables that may cause additional changes.

 

V. Items to be Provided if Applicable:

 

  A. Information relating to Licensed Products or Licensed Processes that has become publicly available, e.g., published articles, competing products, patents, etc.

 

  B. Development work being performed by third parties, other than Licensee, to include name of third party, reasons for use of third party, planned future uses of third parties including reasons why and type of work.

 

  C. Update of competitive information trends in industry, government compliance (if applicable) and market plan.

 

  D. Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products, or Licensed Processes or the Licensed Patents.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


  E. One year before commencement of manufacturing or commercial production, Licensee will in include in the Development Report specifics of planned manufacturing or production.

PLEASE SEND DEVELOPMENT REPORTS TO:

University of Florida Research Foundation, Inc.

Attn: Director

The Innovation Hub

747 SW Second Avenue

P,O. Box 115575

Gainesville, FL 32611-5575

Facsimile: 352-392-6600

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


Appendix C - UFRF Royalty Report

 

Company Name:   

 

  

If multiple license agreements are required to generate this product, indicate what percentage of the royalty is attributable to each agreement.

 

UFRF Agreement No.:  

 

    Percentage:  

 

 
UFRF Agreement No.:  

 

    Percentage:  

 

 
Period Covered: From:  

 

    Through:  

 

 

 

Prepared By:  

 

    Date:  

 

 
Print Preparer Name:        

 

Preparer Email Address:   

 

     Phone No.:   

 

Approved By:   

 

     Date:   

 

   (Requires Executive Officer Signature)        

Print Officer Name:

If license covers multiple product lines, please prepare a separate spreadsheet for each product line, and a summary report for all products combined.

The spreadsheet should include the following information:

 

    Product Name

 

    Country(ies) of Sales (List each country. If royalties vary by country, provide a breakdown of specified information for each country.)

 

    Unit Sales

 

    Gross Sales

 

    Less Allowances (On a separate page, please indicate the reasons for returns or other adjustments if significant.)

 

    Net Sales

 

    Royalty Rate (Please note any unusual occurrences that affected royalty amounts during this period. To assist UFRF’s forecasting, please comment on any market variables that would impact future royalties).

 

    Total Royalty due this period

 

    Total Royalty paid last period

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Appendix D - Milestones

 

1. Licensee has already provided UFRF a preliminary Development Plan. Within six months of execution of this license, Licensee will provide UFRF a detailed document covering Licensee’s plans as to projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts (“Business Plan”). UFRF will treat this Business Plan as confidential information and to protect it as UFRF would its own confidential information.

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Exhibit 10.10

STANDARD NON-EXCLUSIVE LICENSE AGREEMENT

[**] VECTORS LICENSE A10571

TABLE OF CONTENTS

 

  

Section 1        Definitions

  
  

Section 2        Grant

  
  

Section 3        Due Diligence

  
  

Section 4        Payments

  
  

Section 5        Certain Warranties and Disclaimers of UFRF

  

Section 6        Record Keeping

  
  

Section 7        Patent Prosecution

  
  

Section 8        Infringement and Invalidity

  
  

Section 9        Term and Termination

  
  

Section 10      Assignability

  
  

Section 11      Dispute Resolution Procedures

  
  

Section 12      Product Liability; Conduct of Business

  

Section 13      Use of Names

  
  

Section 14      Miscellaneous

  
  

Section 15      Notices

  
  

Section 16      Contract Formation and Authority

  
  

Section 17      United States Government Interests

  

Section 18      Confidentiality

  
  

Appendix A - Development Plan

  
  

Appendix B - Development Report

  
  

Appendix C - UFRF Royalty Report

  

This Agreement is made effective the 18th day of September, 2012, (the “Effective Date”) by and between the University of Florida Research Foundation, Inc. (hereinafter called “UFRF”), a nonstock, nonprofit Florida corporation, and Applied Genetic Technologies Corporation (hereinafter called “Licensee”), a small entity corporation organized and existing under the laws of Delaware;

WHEREAS, UFRF owns certain inventions that are described in the “Licensed Patents” defined below, and UFRF is willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

 

Section 1 Definitions

 

  1.1 “Licensed Patents” shall refer to and mean all of the following UFRF intellectual property:

 

  1.1.1 the United States patent(s)/patent application(s) [ ** ], and all United States and foreign patents and patent applications based on this U.S. application; and

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 1 -


  1.1.2 all United States and foreign patents issued from the applications listed in 1.1.1 and from divisionals and continuations of these applications, to the extent the claims are directed to subject matter specifically described in [ ** ], all to the extent owned or controlled by UFRF.

 

  1.2 “Licensed Product” and “Licensed Process” shall mean:

 

  1.2.1 In the case of a Licensed Product, any product or part thereof, on a country-by-country basis, developed by or on behalf of Licensee that:

 

  (a) is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any product is made, used or sold; or

 

  (b) is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any such process is used or in which any such product is used or sold; or

 

  (c) incorporates, utilizes or was developed utilizing Know-How or which is manufactured using Know-How.

 

  1.2.2 In the case of a Licensed Process, any process, on a country-by-country basis:

 

  (a) which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which such process is practiced; or

 

  (b) which incorporates or utilizes Know-How.

 

  1.3 “Net Sales” shall mean the total dollar amount invoiced on sales of Licensed Products and/or Licensed Processes by licensee, sublicensee or affiliates. Total amount invoiced may include only promotional discounts allowed in amounts customary in the trade.

 

  1.4 The term “Affiliate” shall mean: (a) any person or entity which controls at least fifty percent (50%) of the equity or voting stock of the Licensee or (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by the Licensee or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the same person or entity owning or controlling at least fifty percent (50%) of Licensee.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


  1.5 “Sublicense” means, directly or indirectly, to sublicense, grant any other right with respect to, or agree not to assert, any right licensed to Licensee under this Agreement.

 

  1.6 “Sublicensee” means any third party to whom Licensee grants a Sublicense.

 

  1.7 “Development Plan” shall mean a written report summarizing the development activities that are to be undertaken by the Licensee to bring Licensed Products and/or Licensed Processes to the market. The Development Plan is attached as Appendix A.

 

  1.8 “Development Report” shall mean a written account of Licensee’s progress under the Development Plan having at least the information specified on Appendix B to this Agreement, and shall be sent to the address specified on Appendix B.

 

  1.9 “Licensed Field” shall mean all fields of use.

 

  1.10 “Licensed Territory” shall be worldwide.

 

  1.11 “Know-How” means unpatented technology and/or information that was developed by the Investigator, including without limitation methods, processes, techniques, compounds, cell lines, materials, sequences, drawings, indications, data, results of tests, or studies, plans, and expertise, whether patentable or not, which relates specifically to the Licensed Patents and existing on the date hereof, only to the extent wholly owned and controlled by UFRF and is necessary to exercise the License Patents, except that, Know-How shall not include the Licensed Patents.

 

  1.12 “Investigator” means [ ** ] while employed by the University of Florida,

 

Section 2 Grant

 

  2.1 License under Licensed Patents

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty bearing non-exclusive license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, have made, develop, import, export, offer to sell, sell, have sold and use Licensed Products and/or Licensed Processes.

 

  2.2 License under Know-How

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty-bearing, non-exclusive license, limited to the Licensed Field and the Licensed Territory, under the Know-How to make, have made, develop, use, lease, import, export, offer to sell, sell and have sold Licensed Products and Licensed Processes.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 3 -


UFRF shall deliver the Know-How to Licensee promptly following execution of this Agreement in a manner and form as mutually agreed between the parties. UFRF and Licensee acknowledge and agree that all direct derivatives and modifications to the tyrosine vector gene sequence as provided by UFRF created by Licensee shall be the property of UFRF and shall be considered Know-How; provided, however that all other materials, substances, modifications, cell lines, derivations, progeny created, developed or produced by Licensee as a result of Licensee’s research or use of the Know-How shall be the property of Licensee, including any intellectual property right associated therewith.

 

  2.3 Sublicense

 

  2.3.1 Licensee may grant written Sublicenses to third parties provided only that such Sublicense also includes a sublicense to Sublicensee to other intellectual property owned by or licensed to Licensee and not covered by this Agreement. However, any agreement granting a Sublicense shall state that the Sublicense is subject to the terms and condition of this Agreement and to the termination of this Agreement. Licensee shall have the same responsibility for the activities of any Sublicensee or Affiliate as if the activities were directly those of Licensee.

 

  2.3.2 In respect to Sublicenses granted by Licensee under Section 2.3.1 above, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products or Licensed Processes sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Products or Licensed Processes sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments within thirty (30) days of receipt of any such fees from Sublicensee; provided, however, that Licensee shall not be obligated to make payment under this Section with respect to (a) amounts paid to Licensee to reimburse Licensee for patent costs paid by Licensee pursuant to Section 7; (b) equity investments in Licensee by a sublicensee up to the amount of the fair market value of the equity purchased on the date of the investment; and (c) reimbursement received by Licensee for Licensee’s actual future research and development costs for research or development to be performed by Licensee (together with subcontractors if applicable) and such costs designated for the development of a Licensed Product or Licensed Process; Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF. Licensee shall provide UFRF with a final unredacted copy of each sublicense agreement and any agreement which transfers intellectual property rights granted hereunder, within thirty (30) days after the execution of the sublicense agreement and further agrees to forward to UFRF annually a copy of such reports received by Licensee from its Sublicensees pertinent to the payments-under said sublicense agreements.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 4 -


Section 3 Due Diligence

 

  3.1 Development.

 

  3.1.1 Licensee agrees to and warrants that: it has, or will obtain, the expertise necessary to independently evaluate the inventions of the Licensed Patents; it will establish and actively and diligently pursue the Development Plan (See Appendix A) to the end that the inventions of the Licensed Patents will be utilized to provide Licensed Products and/or Licensed Processes for sale in the retail market within the Licensed Field; and until the date of first commercial sale of Licensed Products, it will supply UFRF with a written Development Report annually fifteen (15) days after the end of the calendar year (see Appendix B). UFRF’s review of Licensee’s Development Plan and Development Report is solely to verify the existence of Licensee’s commitment to development activity and to ensure compliance with Licensee’s obligations to commercialize the inventions of the Licensed Patents, as set forth above.

Licensee agrees that [ ** ] shall occur [ ** ] of this Agreement or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3 hereto. In addition, Licensee will meet the milestones shown in Appendix D or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3. Licensee will notify UFRF in writing as each milestone is met.

 

  3.1.2 Upon written request by Licensee to negotiate extensions of the date of first commercial sale or any milestones or due dates set forth in Appendix D, such request to be received by UFRF no less than ninety (90) days prior to any of the due dates subject of such request, set forth in this Section 3.1.2, such request fully describing Licensee’s diligent efforts to achieve the milestone required to be met by such due date, UFRF shall consider in good faith such requests. Upon granting such request, UFRF and Licensee shall negotiate such extensions in good faith.

 

Section 4 Payments,

 

  4.1 License Issue Fee.

Licensee agrees to pay to UFRF a license issue fee of [ ** ] within thirty (30) days of the Effective Date.

 

  4.2 Running Royalty.

 

  4.2.1

In addition to the Section 4.1 license issue fee, Licensee agrees to pay to UFRF earned royalties calculated as a percentage of Net Sales in accordance with the terms and conditions of this Agreement. The royalty

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 5 -


  is deemed earned as of the earlier of the date the Licensed Product and/or Licensed Process is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reason. The royalty shall remain fixed while this Agreement is in effect (a) at a rate of [ ** ] of Net Sales of Licensed Products, for each Licensed Product, on a country-by-country basis, that is (i) covered in whole or part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which such Licensed Product is made, imported, exported, used or sold or (ii) is manufactured using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which the Licensed Process is used or (b) at a rate of [ ** ] for the Net Sales of Licensed Processes, for each License Process, on a country-by-country basis, that is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in the country in which such Licensed Process is practiced. For clarification, only one royalty shall be due with respect to the same unit of Licensed Product.

 

  4.2.2 Royalties are payable for the longer of [ ** ].

 

  4.2.3 In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under Section 4.2 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee pays to third parties under such licenses, further provided, however, that the royalties payable to UFRF under Section 4.2.1 shall not be reduced to less than [ ** ] of the applicable Net Sales.

 

  4.2.4 If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to the Licensee by UFRF under any other license agreement and which license agreement calls for the payment of royalties, duplicate royalties for the sales of such Licensed Products or Licensed Process shall not be owed to UFRF by Licensee. Under such circumstances, the royalty calculation shall be made only once, even though the sale of the Licensed Product or Licensed Process may fall under more than one patent and more than one license agreement. If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF, Licensee shall pay only the highest applicable royalty rates under any one license agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 6 -


  4.3 Other Payments.

 

  4.3.1 Licensee agrees to pay UFRF Minimum Royalty payments, as follows:

 

Payment    Year          
[** ]    [ **]      

and every year thereafter on the same date, for the life of this Agreement.

The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect. The first Minimum Royalty payment shall be due on December 31 st , 2012 and shall be in the amount of [ ** ]. The Minimum Royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30, September 30, and December 31 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the minimum royalties will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UFRF for other than the same calendar year in which the royalties were earned.

 

  4.3.2 In addition to all other payments required under this Agreement, Licensee agrees to pay UFRF milestone payments within thirty (30) days of the first achievement of such milestone, as follows:

 

Payment    Event     
[** ]    [ **]   
[** ]    [ **]   
[** ]    [ **]   
[** ]    [ **]   
[** ]    [ **]   

If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF and which license agreement calls for milestone payments for the same milestone event to be paid to UFRF as set forth above, duplicative milestone payments shall not be owed to UFRF by Licensee with respect to a given Licensed Product or Licensed Process. Under such circumstances, the milestone payments shall be made only once, even though the development milestone may apply to more than one license, provided that the dollar value of the milestone payment is the greatest of all applicable milestone payments for such License Product or Licensed Process.

 

  4.4 Sublicense Fees

Licensee shall pay sublicense fees to UFRF per Section 2.3.2 of this Agreement within thirty days (30) of the receipt of any such fees from Sublicensee.

 

  4.5 Accounting for Payments.

 

  4.5.1

Amounts owing to UFRF under Section 4.2 shall be paid on a quarterly basis after the amount of minimum royalties paid is exceeded, with such

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 7 -


  amounts due and received by UFRF on or before the thirtieth day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned. The balance of any amounts owing to UFRF pursuant to this Agreement which remain unpaid more than thirty (30) days after they are due to UFRF shall accrue interest until paid at the rate of the lesser of one and one-half percent (1.5%) per month or the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays. Licensee shall also be responsible for repayment to UFRF of any attorney, collection agency, or other out-of-pocket UFRF expenses required to collect overdue payments due from this Section 4.5.1, Section 6.2 or any other applicable section of this Agreement.

 

  4.5.2 Except as otherwise directed, all amounts owing to UFRF under this Agreement shall be paid in U.S. dollars to UFRF at the following address:

University of Florida Research Foundation, Inc.

223 Grinter Hall

PO Box 115500

Gainesville, Florida 32611-5500

Attention: Business Manager

All monies owing stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation - Value of Foreign Currencies on the day preceding the payment.

 

  4.5.3 A certified full accounting statement showing how any amounts payable to UFRF under Section 4.2 have been calculated shall be submitted to UFRF on the date of each such payment. Such accounting statements shall contain a written representation signed by an executive officer of Licensee that states that the statements are true, accurate, and fairly represent all amounts payable to UFRF pursuant to this Agreement. Such accounting shall be on a per-country and product line, model or trade name basis and shall be summarized on the form shown in Appendix C of this Agreement. In the event no payment is owed to UFRF because the amount of minimum royalties paid has not been exceeded or otherwise, an accounting demonstrating that fact shall be supplied to UFRF.

 

  4.5.4 UFRF is exempt from paying income taxes under U.S. law. Therefore, all payments due under this Agreement shall be made without deduction for taxes, assessments, or other charges of any kind which may he imposed on UFRF by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to UFRF pursuant to this Agreement. All such taxes, assessments, or other charges shall be assumed by Licensee.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 8 -


Section 5 Certain Warranties and Disclaimers of UFRF

 

  5.1 UFRF warrants that, except as otherwise provided under Section 17.1 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  5.1.1 a warranty or representation by UFRF as to the validity of scope of any right included in the Licensed Patents;

 

  5.1.2 a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  5.1.3 an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

  5.1.4 an obligation to furnish any services other than those specified in this Agreement; or

 

  5.1.5 a warranty or representation by UFRF that it will not grant licenses to others to make, use or sell products not covered by the claims of the Licensed Patents which may be similar and/or compete with products made or sold by Licensee.

 

  5.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, UFRF MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING. UFRF ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, ITS SUBLICENSEES, ITS AFFILIATES, OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

Section 6 Record Keeping

 

  6.1 Licensee and each of its Sublicensees or its Affiliates shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s or the Sublicensee’s or the Affiliate’s accounting referred to above, including without limitation, inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products and/or Licensed Processes. Such books and records shall be preserved for a period not less than six years after they are created, both during and after the term of this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 9 -


  6.2 Licensee shall take all steps necessary so that UFRF may within thirty (30) days of its written request, audit, review and/or copy all of the books and records at a single U.S. location to verify the accuracy of Licensee’s or its Sublicensee’s or its Affiliate’s accounting. Such review may be performed by any authorized employees of UFRF as well as by any attorneys and/or accountants designated by UFRF, upon reasonable notice and during regular business hours. If a deficiency with regard to any payment hereunder is determined, Licensee shall pay the deficiency within thirty (30) days of receiving notice thereof along with applicable interest as described in Section 4.5.1. If a royalty payment deficiency for a calendar year exceeds [**] of the royalties paid for that year, then Licensee shall be responsible for paying UFRF’s out-of-pocket expenses incurred with respect to such review.

 

  6.3 At any time during the term of this agreement, UFRF may request in writing that Licensee verify the calculation of any past payments owed to UFRF through the means of a self-audit. Within ninety (90) days of the request, Licensee shall complete a self-audit of its books and records to verify the accuracy and completeness of the payments owed. Within thirty (30) days of the completion of the self-audit, Licensee shall submit to UFRF a report detailing the findings of the self-audit and the manner in which it was conducted in order to verify the accuracy and completeness of the payments owed. If Licensee has determined through its self-audit that there is any payment deficiency, Licensee shall pay UFRF the deficiency along with applicable interest under Section 4.5.1 with the submission of the self-audit report to UFRF.

 

Section 7 Patent Prosecution

 

  7.1 UFRF shall diligently prosecute and maintain the Licensed Patents using counsel of its choice. UFRF shall provide Licensee with copies of all patent applications amendments, and other filings with the United States Patent and Trademark Office and foreign patent offices. UFRF will also provide Licensee with copies of office actions and other communications received by UFRF from the United States Patent and Trademark Office and foreign patent offices relating to Licensed Patents. Licensee agrees to keep such information confidential.

 

  7.2 Licensee shall pay to UFRF the sum of [ ** ], within 30 days of the Effective Date to partially reimburse any and all expenses associated with preparation, filing, prosecution, issuance, maintenance, defense, and reporting of the Licensed Patents incurred prior to the Effective Date.

 

  7.3 Licensee shall be responsible for and pay [ ** ] incurred by UFRF related to the preparation, filing, prosecution, issuance, maintenance, defense and reporting of the Licensed Patents subsequent to and separate of those expenses cited in section 7.2 within thirty (30) days of receipt of an invoice from UFRF. It shall be the responsibility of Licensee to keep UFRF fully apprised of the “small entity” status of Licensee with respect to the U.S. patent laws and with respect to the patent laws of any other countries, if applicable, and to inform UFRF of any changes in such status, within thirty days of any such change.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 10 -


Section 8 Infringement and Invalidity

 

  8.1 UFRF shall have the sole right to determine, in its sole and absolute discretion, whether or not to take action in connection with any infringement or alleged infringement of the Licensed Patents. In no event shall UFRF be obligated to take any action in connection with any infringement or alleged infringement of the Licensed Patents nor shall Licensee have any right to take action with respect to infringement of the Licensed Patents.

 

  8.2 If UFRF prosecutes any such infringement, Licensee agrees that UFRF may include Licensee as a co-plaintiff in any such suit, without expense to Licensee.

 

  8.3 Licensee shall, at the request and expense of UFRF, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

 

  8.4 In the event a declaratory judgment action alleging invalidity or non-infringement of any of the Licensed Patents shall be brought against Licensee, UFRF, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense.

 

  8.5 In the event Licensee contests the validity of any Licensed Patents, Licensee shall continue to pay royalties and make other payments pursuant to this Agreement with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

 

Section 9 Term and Termination

 

  9.1 The term of this license shall begin on the Effective Date of this Agreement and continue until the later of the date that no Licensed Patent remains an enforceable patent and the date on which Licensee’s obligation to pay royalties expires pursuant to Section 4.2 above.

 

  9.2 Licensee may terminate this Agreement at any time by giving at least sixty (60) days written notice of such termination to UFRF. Such a notice shall be accompanied by a statement of the reasons for termination.

 

  9.3 UFRF may terminate this Agreement by giving Licensee at least sixty (60) days written notice if Licensee fails to remedy any of these problems within such 60-day notice period:

 

  9.3.1 is delinquent on any report or payment

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 11 -


  9.3.2 is not diligently developing and commercializing Licensed Products and Licensed Processes

 

  9.3.3 is in breach of any provision of this Agreement

 

  9.3.4 provides any false report

 

  9.3.5 goes into bankruptcy, liquidation or has a receiver appointed to control any assets

 

  9.3.6 violates any laws or regulations of applicable government entities; or

 

  9.3.7 shall cease to carry on its business pertaining to Licensed Patents.

 

  9.3.8 if payments of earned royalties under Section 4.2 once begun ceases for more than (2) calendar quarters

 

  9.4 UFRF may immediately terminate this Agreement upon the occurrence of the second separate default by Licensee within any consecutive three-year period for failure to pay royalties, patent or any other expenses when due.

 

  9.5 Upon the termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination. Licensee shall remain obligated to provide an accounting for and to pay royalties earned to the date of termination, and any minimum royalties shall be prorated as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that Licensee shall remain obligated to provide an accounting for and to pay running royalties thereon.

 

Section 10 Assignability

 

  10.1 This Agreement may not be transferred or assigned by Licensee except with the prior written consent of UFRF, which shall not be unreasonably withheld; provided, however, that Licensee may assign any of its rights under this Agreement in any country to any Affiliates and may delegate its obligations under this Agreement in any country to any Affiliates; and provided, however, that such assignment shall not relieve Licensee of its responsibilities for performance of its obligations under this Agreement. Licensee may assign all of its rights and obligations under this Agreement in connection with a merger or similar reorganization or the sale of all or substantially all of the assets and or stock of the Licensee. This Agreement shall survive any such merger or reorganization of Licensee within, into, or such sale of assets and/or stock to, another party, and no consent for such merger, reorganization or sale shall be required hereunder. Licensee shall provide UFRF written notice of assignment within thirty (30) days of the effective date of such assignment. Any attempted assignment in contravention of this Section 10.1 shall be null and void and shall constitute a material breach of this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 12 -


  10.2 The new assignee shall assume all responsibilities of Licensee under this Agreement and must agree in writing to UFRF to be bound by this Agreement.

 

Section 11 Dispute Resolution Procedures

 

  11.1 Mandatory Procedures.

In the event either party intends to file a lawsuit against the other with respect to any matter in connection with this Agreement, compliance with the procedures set forth in this Section shall be a condition precedent to the filing of such lawsuit, other than for injunctive relief. Either party may terminate this Agreement as provided in this Agreement without following the procedures set forth in this section.

 

  11.1.1 When a party intends to invoke the procedures set forth in this section, written notice shall be provided to the other party. Within thirty (30) days of the date of such notice, the parties agree that representatives designated by the parties shall meet at mutually agreeable times and engage in good faith negotiations at a mutually convenient location to resolve such dispute.

 

  11.1.2 If the parties fail to meet within the time period set forth in section 11.1.1 above or if either party subsequently determines that negotiations between the representatives of the parties are at an impasse, the party declaring that the negotiations are at an impasse shall give notice to the other party stating with particularity the issues that remain in dispute.

 

  11.1.3 Not more than 15 days after the giving of such notice of issues, each party shall deliver to the other party a list of the names and addresses of at least three individuals, any one of whom would be acceptable as a neutral advisor in the dispute (the “Neutral Advisor”) to the party delivering the list. Any individual proposed as a Neutral Advisor shall have experience in determining, mediating, evaluating, or trying intellectual property litigation and shall not be affiliated with the party that is proposing such individual.

 

  11.1.4 Within 10 days after delivery of such lists, the parties shall agree on a Neutral Advisor. If they are unable to so agree within that time, within 5 days, they shall each select one individual from the lists. Within 5 days, the individuals so selected shall meet and appoint a third individual from the lists to serve as the Neutral Advisor. Within 30 days after the selection of a Neutral Advisor:

 

  (a) The parties shall each provide a written statement of the issues in dispute to the Neutral Advisor.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 13 -


  (b) The parties shalt meet with the Neutral Advisor in Gainesville, Florida on a date and time established by the Neutral Advisor. The meeting must be attended by persons authorized to make final decisions on behalf of each party with respect to the dispute. At the meeting, each party shall make a presentation with respect to its position concerning the dispute. The Neutral Advisor will then discuss the issues separately with each party and attempt to resolve all issues in the dispute. At the meeting, the parties will enter into a written settlement agreement with respect to all issues that are resolved. Such settlement agreement shall be final and binding with respect to such resolved issues and may not be the subject of any lawsuit between the parties, other than a suit for enforcement of the settlement agreement.

 

  11.1.5 The expenses of the neutral advisor shall be shared by the parties equally. All other out-of-pocket costs and expenses for the alternative dispute resolution procedure required under this Section shall be paid by the party incurring the same.

 

  11.1.6 Positions taken and statements made during this alternative dispute resolution procedure shall be deemed settlement negotiations and shall not be admissible for any purpose in any subsequent proceeding.

 

  11.2 Failure to Resolve Dispute.

If any issue is not resolved at the meeting with the Neutral Advisor, either party may file appropriate administrative or judicial proceedings with respect to the issue that remains in dispute. No new issues may be included in the lawsuit without the mandatory procedures set forth in this section having first been followed.

 

  11.3 Survival.

The provisions of this Section shall survive termination of this Agreement.

 

Section 12 Product Liability; Conduct of Business

 

  12.1

Licensee and its Sublicensees shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and each of their directors, officers, employees, and agents, and the inventors of the Licensed Patents, regardless of whether such inventors are employed by the University of Florida at the time of the claim, harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, whether arising from a third party claim or resulting from UFRF’s enforcing this indemnification clause against Licensee, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 14 -


  production, manufacture, sale, use, lease, consumption, marketing, or advertisement of Licensed Products or Licensed Process(es) or arising from any right or obligation of Licensee hereunder. Notwithstanding the above, UFRF at all times reserves the right to retain counsel of its own to defend UFRF’s, the Florida Board of Governors’, the University of Florida Board of Trustees’, the University of Florida’s, and the inventor’s interests.

 

  12.2 Licensee warrants that it now maintains and will continue to maintain liability insurance coverage appropriate to the risk involved in producing, manufacturing, selling, marketing, using, leasing, consuming, or advertising the products subject to this Agreement and that such insurance coverage lists UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents as additional insureds. Within thirty (30) days after the execution of this Agreement and thereafter annually between January 1 and January 31 of each year, Licensee will present evidence to UFRF that the coverage is being maintained with UFRF, the University of Florida, and its inventors listed as additional insureds. In addition, Licensee shall provide UFRF with at least thirty (30) days prior written notice of any change in or cancellation of the insurance coverage.

 

Section 13 Use of Names

Licensee and its Sublicensees shall not use the names of UFRF, or of the University of Florida, nor of any of either institution’s employees, agents, or affiliates, nor the name of any inventor of Licensed Patents, nor any adaptation of such names, in any promotional, advertising or marketing materials or any other similar form of publicity, or to suggest any endorsement by the such entities or individuals, without the prior written approval of UFRF in each case.

 

Section 14 Miscellaneous

 

  14.1 This Agreement shall be construed in accordance with the internal laws of the State of Florida

 

  14.2 The parties hereto are independent contractors and not joint venturers or partners.

 

  14.3 Licensee shall ensure that it applies patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement.

 

  14.4 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 15 -


  14.5 Licensee shall not encumber or otherwise grant a security interest in any of the rights granted hereunder to any third party.

 

  14.6 Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of such items may require a license from the cognizant agency of the U.S. Government or written assurances by Licensee that it shall not export such items to certain foreign countries and/or foreign persons without prior approval of such agency. UFRF neither represents that a license is or is not required or that, if required, it shall be issued.

 

  14.7 Licensee is responsible for any and all wire/bank fees associated with all payments due to UFRF pursuant to this agreement.

 

  14.8 Survival

The provisions of this Section shall survive termination of this Agreement. Upon termination of the Agreement for any reason, the following sections of the License Agreement will remain in force as non-cancelable obligations:

 

     Section 6      Record Keeping
     Section 9      Requirement to pay royalties on sale of Licensed Products made, and in process, at the time of License Agreement termination
     Section 12      Product Liability; Conduct of Business
     Section 13      Use of Names
     Section 18      Confidentiality

 

Section 15 Notices

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given

 

    when delivered personally, or

 

    if sent by facsimile transmission, when receipt thereof is acknowledged at the facsimile number of the recipient as set forth below, or

 

    the second day following the day on which the notice has been delivered prepaid to a courier service, or

 

    five (5) business days following deposit in the U.S. mall if sent certified mail, (return receipt acknowledgement is not required to certify delivery).

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 16 -


  15.1 If to the University of Florida Research Foundation, Inc.:

President

University of Florida Research Foundation, Inc.

223 Grinter Hall

University of Florida

Post Office Box 115500

Gainesville, FL 32611-5500

Facsimile Number: 352-846-0505

with a copy to:

Office of Technology Licensing

Attn: Director

747 SW Second Avenue

University of Florida

Post Office Box 115575

Gainesville, Florida 32611-5575

Facsimile Number: 352-392-6600

 

  15.2 If to Licensee:

Sue Washer, CEO

Applied Genetic Technologies Corporation

11801 Research Drive, Suite D

Alachua, FL 32615

Facsimile Number 386-462-0875

With a copy to

Fred Hutchison

Hutchison Law Group

5410 Trinity Road

Suite 400

Raleigh, North Carolina 27607

 

Section 16 Contract Formation and Authority

The submission of this Agreement does not constitute an offer, and this document shall become effective and binding only upon the execution by duly authorized representatives of both Licensee and UFRF. Copies of this Agreement that have not been executed and delivered by both UFRF and Licensee shall not serve as a memorandum or other writing evidencing an agreement between the parties. This Agreement shall automatically terminate and be of no further force and effect, without the requirement of any notice from UFRF to Licensee, if UFRF does not receive the License Issue Fee or certificates representing shares issued to UFRF pursuant to this Agreement, as applicable, within thirty (30) days of the Effective Date.

 

  16.1 UFRF and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 17 -


  16.2 Force Majeure.

No default, delay, or failure to perform on the part of Licensee or UFRF shall be considered a default, delay or failure to perform otherwise chargeable hereunder, if such default, delay or failure to perform is due to causes beyond either party’s reasonable control including, but not limited to: strikes, lockouts, or inactions of governmental authorities, epidemics, war, embargoes, fire, earthquake, acts of God, or default of common carrier. In the event of such default, delay or failure to perform, any date or times by which either party is otherwise scheduled to perform shall be extended automatically for a period of time equal in duration to the time lost by reason of the excused default, delay or failure to perform.

 

Section 17 United States Government Interests

 

  17.1 It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [ ** ], during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

  17.2 Licensee agrees that for Licensed Products covered by the Licensed Patents that are subject to the non-exclusive royalty-free license to the United States Government, said Licensed Products will be manufactured substantially in the United States. Licensee further agrees that it shall abide by all the requirements and limitations of U.S. Code, Title 35, Chapter 18, and implementing regulations thereof, for all patent applications and patents invented in whole or in part with federal money.

 

Section 18 Confidentiality

 

  18.1

Each Party shall maintain all information of the other Party which is treated by such other Party as proprietary or confidential (referred to herein as “Confidential Information”) in confidence, and shall not disclose, divulge or otherwise communicate such confidential information to others, or use it for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, and each party hereby agrees to exercise every reasonable precaution to prevent and restrain the unauthorized disclosure of such confidential information by any of its Affiliates, directors, officers, employees, consultants, subcontractors, Sublicensees or agents. Licensee’s Confidential Information includes but is not limited to the Development Plan, Development Reports and all other financial, research, development or business reports, strategies and agreements, including Sublicenses, of Licensee. The parties agree to keep the terms of this Agreement confidential, provided that each party may disclose this Agreement to their authorized agents and investors who are bound by similar

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 18 -


  confidentiality provisions. Notwithstanding the foregoing, Confidential Information of a party shall not include information which: (a) was lawfully known by the receiving party prior to disclosure of such information by the disclosing party to the receiving party; (b) was or becomes generally available in the public domain, without the fault of the receiving party; (c) is subsequently disclosed to the receiving party by a third party having a lawful right to make such disclosure; (d) is required by law, rule, regulation or legal process to be disclosed, provided that the receiving party making such disclosure shall take alt reasonable steps to restrict and maintain to the extent possible confidentiality of such disclosure and shall provide reasonable notice to the other party to allow such party the opportunity to oppose the required disclosure; or (e) has been independently developed by employees or others on behalf of the receiving party without access to or use of disclosing party’s information as demonstrated by written record. Each party’s obligations under this Section 18 shall extend for a period of five (5) years from termination or expiration of this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 19 -


IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below. UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

/s/ David L. Day

    Date:   9/14 , 2012
David L. Day      
Director of Technology Licensing      

 

LICENSEE

APPLIED GENETIC TECHNOLOGIES CORPORATION

By:  

/s/ Susan B. Washer

    Date:   9/18 , 2012
Susan B. Washer, President and CEO      

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 20 -


Appendix A - Development Plan

A Development Plan of the scope outlined below shall be submitted to UFRF by Licensee prior to the execution of this agreement. In general, the plan should provide UFRF with a summary overview of the activities that Licensee.

 

1. Development Program

 

  A. Development activities to be undertaken

[ ** ]

 

II. Governmental Approval

[ ** ]

 

III. Proposed Market Approach

[ ** ]

 

IV. Competitive Information

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 21 -


Appendix B - Development Report

When appropriate, indicate estimated start date and finish date for activities.

 

I. Date Development Plan Initiated and Time Period Covered by this Report.

 

II. Development Report (4-8 paragraphs).

 

  A. Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.

 

  B. Activities currently under investigation, i.e., ongoing activities including object and parameters of such activities, when initiated, and projected date of completion.

 

III. Future Development Activities (4-8 paragraphs).

 

  A. Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.

 

  B. Estimated total development time remaining before a product will be commercialized.

 

  C. One year before commencement of manufacturing or commercial production, Licensee will include in the Development Report specifics of planned manufacturing or production

 

IV. Changes to Initial Development Plan (2-4 paragraphs).

 

  A. Reasons for change.

 

  B. Variables that may cause additional changes.

 

V. Items to be Provided if Applicable:

 

  A. Information relating to Licensed Products that has become publicly available, e.g., published articles, competing products, patents, etc.

 

  B. Development work being performed by third parties, other than Licensee, to include name of third party, reasons for use of third party, planned future uses of third parties including reasons why and type of work.

 

  C. Update of competitive information trends in industry, government compliance (if applicable) and market plan.

 

  D. Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products or the Licensed Patents.

 

  E. One year before commencement of manufacturing or commercial production, Licensee will include in the Development Report specifics of planned manufacturing or production.

PLEASE SEND DEVELOPMENT REPORTS TO:

University of Florida Research Foundation, Inc.

Attn: Director

The Innovation Hub

747 SW Second Avenue

P.O. Box 115575

Gainesville, FL 32611-5575

Facsimile: 352-392-6600

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 24 -


Appendix C

UFRF Royalty Report

 

Licensee:  

 

Inventor:  

 

Period Covered:         From:  

 

Prepared By  

 

Approved By:  

 

 

  Agreement:  

 

  P#:  

         P

Through:  

 

 
  Date:  

 

  Date:  

 

 

If license covers several major product lines, please prepare a separate report

for each line. Then combine all product lines into a summary report.

 

      Report Type:     ¨    Single Product Line Report:  

 

                                  ¨    Multiproduct Summary Report. Page 1 of              Pages
                                  ¨    Product Line Detail.  Line:  

 

  Tradename:  

 

  Page:  

 

Report Currency:   ¨    U. S. Dollars   ¨    Other  

 

 

     Gross    * Less:    Net    Royalty    Period Royalty Amount
Country    Sales    Allowances    Sales    Rate    This Year    Last Year

U.S.A.

                 

Canada

                 

Europe :

                 

Japan

                 

Other :

                 

TOTAL:

                 

Total Royalty:                              Conversion Rate:                              Royalty in U.S. Dollars:     $                            

The following royalty forecast is non-binding and for UFRF’s internal planning purposes only:

Royalty Forecast Under This Agreement: Next Quarter:              Q2:              Q3:              Q4:             

 

  

* On a separate page, please indicate the reasons for returns or other adjustments if significant.

Also note any unusual occurrences that affected royalty amounts during this period.

To assist UFRF’s forecasting, please comment on any significant expected trends in sales volume.

 

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 26 -


Appendix D – Milestones

 

1. Licensee has already provided UFRF a preliminary Development Plan. Within six months of execution of this license, Licensee will provide UFRF a detailed document covering Licensee’s plans as to projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts (“Business Plan”). UFRF will treat this Business Plan as confidential information and to protect it as UFRF would its own confidential information.

[ ** ]

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 26 -

Exhibit 10.11

STANDARD EXCLUSIVE LICENSE AGREEMENT

WITH KNOW HOW

[**] VECTORS LICENSE-A12044

TABLE OF CONTENTS

 

Section 1

    

Definitions

Section 2

    

Grant

Section 3

    

Due Diligence

Section 4

    

Payments

Section 5

    

Certain Warranties and Disclaimers of UFRF

Section 6

    

Record Keeping

Section 7

    

Patent Prosecution

Section 8

    

Infringement and Invalidity

Section 9

    

Term and Termination

Section 10

    

Assignability

Section 11

    

Dispute Resolution Procedures

Section 12

    

Product Liability; Conduct of Business

Section 13

    

Use of Names

Section 14

    

Miscellaneous

Section 15

    

Notices

Section 16

    

Contract Formation and Authority

Section 17

    

United States Government Interests

Section 18

    

Confidentiality

Section 19

    

University Rules and Regulations

Schedule 1 — Patents and Patent Applications
Appendix A - Development Plan
Appendix B - Development. Report
Appendix C - UFRF Royalty Report
Appendix D - Milestones

This Agreement Is made effective the 5th day of November, 2012, (the “Effective Date”) by and between the University of Florida Research Foundation, Inc. (hereinafter called “UFRF”), a nonstock, nonprofit Florida corporation, and Applied Genetic Technologies Corporation (hereinafter called “Licensee”), a small entity corporation organized and existing under the laws of Delaware;

WHEREAS, UFRF owns certain inventions that are described in the “Licensed Patents” defined below, and UFRF is willing to grant a license to Licensee under any one or all of the Licensed Patents and Licensee desires a license under all of them;

WHEREAS, pursuant to that certain Standard Non-Exclusive License Tyrosine Vectors license A10571 by and between UFRF and Licensee and dated effective as of September 18 , 2012 (the “NonExclusive License”), UFRF has-granted to Licensee a non-exclusive license in and to the Licensed Patents, and

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


WHEREAS, in addition to the non-exclusive rights granted to Licensee pursuant to the NonExclusive License, UFRF is willing to grant an exclusive license to Licensee under the Licensed Patents as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties covenant and agree as follows:

 

Section 1 Definitions

 

  1.1 “Licensed Patents” means all of the following UFRF intellectual property:

 

  1.1.1 the United States patent(s)/patent application(s) [**] and all United States and foreign patents and patent applications based on the U.S. application, and

all United States and foreign patents issued from the applications listed in 1.1.1 above and from divisionals and continuations of these applications, to the extent the claims are directed to subject matter specifically described in [ ** ], all to the extent owned or controlled by UFRF.

 

  1.2 “Licensed Product” and “Licensed Process” means:

 

  1.2.1 In the case of a Licensed Product, any product or part thereof, on a country-by-country basis, developed by or on behalf of Licensee, that:

 

  (a) is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which such product is made, used or sold; or

 

  (b) is manufactured by using a process which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in any country in which any such process is used or in which any such product is used or sold.

 

  (c) incorporates, utilizes, or was developed utilizing, Know-How or which is manufactured using Know-How;

 

  1.2.2 In the case of a Licensed Process, any process, on a country-by-country basis:

 

  (a) which is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in any country in which such process is practiced.

 

  (b) (which incorporates, utilizes, or was developed utilizing, Know-How

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 2 -


  1.3 “Net Sales” means the total dollar amount invoiced on sales of Licensed Products and/or Licensed Processes by licensee, sublicensee or affiliates. Total amount invoiced may include only promotional discounts allowed in amounts customary in the trade.

 

  1.4 “Affiliate” means: (a) any person or entity which controls at least fifty percent (50%) of the equity or voting stock of the Licensee or (b) any person or entity fifty percent (50%) of whose equity or voting stock is owned or controlled by the Licensee or (c) any person or entity of which at least fifty percent (50%) of the equity or voting stock is owned or controlled by the sane person or entity owning or controlling at least fifty percent (50%) of Licensee.

 

  1.5 “Patent Challenge” means a challenge to the validity, patentability, enforceability and/or non-infringement of any of the Licensed Patents or otherwise opposing any of the Licensed Patents.

 

  1.6 “Sublicense” means, directly or indirectly, to sublicense, grant any other right with respect to, or agree not to assert, any right licensed to Licensee under this Agreement.

 

  1.7 “Sublicensee” means any third party to whom Licensee grants a Sublicense.

 

  1.8 “Development Plan” means a written report summarizing the development activities that are to be undertaken by the Licensee to bring Licensed Products and/or Licensed Processes to the market. The Development Plan is attached as Appendix A.

 

  1.9 “Development Report” means a written account of Licensee’s progress under the Development Plan having at least the information specified on Appendix B to this Agreement, and shall be sent to the address specified on Appendix B.

 

  1.10 “Licensed Field” shall be limited to the field of Achromatopsia, X-Linked Retinoschisis and X-linked Retinitis Pigmentosa on an exclusive basis (the “Exclusive Field”) and shall include on a partially exclusive basis as set forth in Section 2 all other uses in the field of orphan ophthalmology (the “Semi-Exclusive Field”).

 

  1.11 “Licensed Territory” shall be worldwide.

 

  1.12 “Investigator” mean [ ** ] while employed by the University of Florida.

 

  1.13 “Know-How” means unpatented, technology and/or information that was developed by the Investigator, including without limitation methods, processes, techniques, compounds, cell lines, materials, sequences, drawings, indications, data, results of tests, or studies, plans, and expertise, whether patentable or not, which relates specifically to the Licensed Patents and existing on the date hereof, only to the extent wholly owned and controlled by UFRF, and is necessary to exercise the Licensed Patents, except that, Know-How shall not include the Licensed Patents.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 3 -


Section 2 Grant

 

  2.1 License

 

  2.1.1 License under Licensed Patents

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty-bearing license, limited to the Licensed Field and the Licensed Territory, under the Licensed Patents to make, have made, develop, use, lease, import, export, offer to sell, and have sold Licensed Products and Licensed Processes. This license shall be exclusive for the Exclusive Field and UFRF further agrees that the license for all other uses in the Licensed Field shall be semi-exclusive and that UFRF shall not grant any future licenses to any third party for use in the Semi-Exclusive Field provided that Licensee acknowledges that UFRF has prior to the Effective Date granted to certain third parties licenses under the Licensed Patents that include use in the Semi-Exclusive Field. UFRF reserves to itself and the University of Florida the right under the Licensed Patents to make, have made, develop, import and use Licensed Products and Licensed Processes solely for their internal, research, clinical (including, but not limited to patient care at Shands Teaching Hospital and University of Florida patient care facilities) and educational purposes. In addition, UFRF reserves to itself, as well as to the University of Florida and to all non-profit research institutions, the right to use materials that might be covered under Licensed Patents solely for their internal research, educational, and clinical purposes and to meet all applicable governmental requirements governing the ability to transfer materials.

 

  2.1.2 License under Licensed Know-How

Subject to the terms of this Agreement, UFRF hereby grants to Licensee a royalty-bearing, non-exclusive license, limited to the Licensed Field and the Licensed Territory, under the Know-How to make, have made, develop, use, lease, import, export, offer to sell, sell and have sold Licensed Products and Licensed Processes.

UFRF shall deliver the Know-How to Licensee promptly following execution of this Agreement in a manner and form as mutually agreed between the parties. UFRF and Licensee acknowledge and agree that all direct derivatives and modifications to the tyrosine gene sequence as provided by UFRF created by Licensee shall be the property of UFRF and shall be consider Know-How; provided, however that all other materials, substances, modifications, cell lines, derivations, progeny created, developed or produced by Licensee as a result of Licensee’s research or use of the Know-How shall be the property of Licensee, including the intellectual property rights associated therewith.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 4 -


  2.2 Sublicense

 

  2.2.1 Licensee may grant written Sublicenses to third parties. However, Licensee shall notify UFRF of the initiation of license negotiations with all potential Sublicensees. Any agreement granting a Sublicense shall state that the Sublicense is subject to the terms and conditions of this Agreement and to the termination of this Agreement. Licensee shall have the same responsibility for the activities of any Sublicensee or Affiliate as if the activities were directly those of Licensee. Licensee shall also include provisions in all sublicenses to provide that in the event that Sublicensee brings a Patent Challenge against UFRF or assists another party in bringing a Patent Challenge against UFRF (except as required under a court order or subpoena) then Licensee may terminate the Sublicense within thirty (30) days.

 

  2.2.2 In respect to Sublicenses granted by Licensee under 2.2.1 above, Licensee shall pay to UFRF an amount equal to what Licensee would have been required to pay to UFRF had Licensee sold the amount of Licensed Products or Licensed Processes sold by such Sublicensee. In addition, if Licensee receives any fees, minimum royalties, or other payments in consideration for any rights granted under a Sublicense, and such payments are not based directly upon the amount or value of Licensed Products or Licensed Processes sold by the Sublicensee, then Licensee shall pay UFRF [ ** ] of such payments within thirty (30) days of receipt of any such fees from Sublicensee; provided, however, that Licensee shall not be obligated to make payment under this Section with respect to (a) amounts paid to Licensee to reimburse Licensee for patent costs paid by Licensee pursuant to Section 7; (b) equity investments in Licensee by a sublicensee up to the amount of the fair market value of the equity purchased on the date of the investment; and (c) reimbursement received by Licensee for actual future research and development costs for research or development to be performed by Licensee (together with subcontractors if applicable) and such cost designated for the development of a Licensed Product or Licensed Process. Licensee shall not receive from Sublicensees anything of value in lieu of cash payments in consideration for any Sublicense under this Agreement without the express prior written permission of UFRF. For clarification, if the rights sublicensed have been licensed to Licensee by UFRF under another license agreement, including the NonExclusive License, Licensee shall not be required to pay duplicate sub licensee fees to UFRF. Under such circumstances, the calculation for a sublicense fee as set forth in this Section 2.2.2 shall be made only once provided however that Licensee shall pay the greatest of the applicable sublicense rates.

If Licensee or any of its Affiliates brings a Patent Challenge against UFRF, or (ii) Licensee or any of its Affiliates assists another party in bringing a Patent Challenge against UFRF (except as required under a

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 5 -


court order or subpoena), and (iii) UFRF does not choose to exercise its rights to terminate this Agreement pursuant to Section 9.3 then, in the event that such a Patent Challenge is successful, Licensee will have no right to recoup any consideration, including royalties, paid during the period of challenge. In the event that a Patent Challenge is unsuccessful, Licensee shall reimburse UFRF for all reasonable legal fees and expenses incurred in its defense against the Patent Challenge.

 

  2.2.3 Licensee shall provide UFRF with a final unredacted copy of each sublicense agreement and any agreement which transfers intellectual property rights granted hereunder, within thirty (30) days after the execution of the sublicense agreement and further agrees to forward to UFRF annually a copy of such reports received by Licensee from its Sublicensees pertinent to the payments under said sublicense agreements.

 

  2.2.4 In the event that UFRF notifies Licensee in writing of a third party’s Interest in a market or territory included in the Licensed Field or Licensed Territory which Licensee is not addressing or intending to address, as evidenced by diligent developmental plan provided to UFRF after thirty (30) days of UFRF notification to Licensee of the third party interest, at the time of receipt of the notice and at UFRF’s request, Licensee shall enter into good faith discussions with such third party with respect to a Sublicense.

 

Section 3 Due Diligence

 

  3.1 Development

 

  3.1.1 Licensee agrees to and warrants that:

 

  (a) it has, or will obtain, the expertise necessary to independently evaluate the inventions of the Licensed Patents;

 

  (b) it will establish and actively and diligently pursue the Development Plan (see Appendix A) to the end that the inventions of the Licensed Patents will be utilized to provide Licensed Products and/or Licensed Processes for sale in the retail market within the Licensed Field;

 

  (c) it will diligently develop markets for Licensed Products and Licensed Processes; and

 

  (d) until the date of first commercial sale of Licensed Products or Licensed Processes, it will supply UFRF with a written Development Report annually fifteen (15) days after the end of the calendar year (see Appendix B).

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 6 -


UFRF’s review of Licensee’s Development Plan and Development Report is solely to verify the existence of Licensee’s commitment to development activity and to ensure compliance with Licensee’s obligations to commercialize the inventions of the Licensed Patents, as set forth above.

 

  3.1.2 Licensee agrees that [ ** ] shall occur on or before [ ** ] of this Agreement or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3 hereto. In addition, Licensee will meet the milestones shown in Appendix D or UFRF shall have the right to terminate the Agreement pursuant to Section 9.3. Licensee will notify UFRF in writing as each milestone is met.

 

  3.2 Upon written request by Licensee to negotiate extensions of the date of first commercial sale or any milestones or due dates set forth in Appendix D, such request to be received by UFRF no less than ninety (90) days prior to any of the due dates subject of such request, set forth in this Section 3.13, such request fully describing Licensee’s diligent efforts to achieve the milestone required to be met by such due date, UFRF shall consider in good faith such requests. Upon granting such request, UFRF and Licensee shall negotiate such extensions in good faith.

 

  3.3 University of Florida policies may require approval of clinical trials at the University of Florida and involving technology invented at the University. Accordingly, Licensee will notify UFRF prior to commencing any clinical trials at the University of Florida or its affiliated medical facilities.

 

Section 4 Payments

 

  4.1 License Issue Fee

Licensee agrees to pay to UFRF a license issue fee of [ ** ] within thirty (30) days of the Effective Date.

 

  4.2 Royalty

Royalty on Licensed Patents: Licensee agrees to pay to UFRF as earned royalties a royalty calculated as a percentage of Net Sales. The royalty is deemed earned as of the earlier of the date the Licensed Product and/or Licensed Process is actually sold and paid for, the date an invoice is sent by Licensee or its Sublicensee(s), or the date a Licensed Product and/or Licensed Process is transferred to a third party for any promotional reasons. Licensee shall pay to UFRF royalties as follows:

(i) [ ** ] for Net Sales of Licensed Products, for each Licensed Product, on a country-by-country basis, that is (a) covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which such Licensed Product is made, imported, exported, used or sold or (b) is manufactured using a Licensed Process which is covered in whole or

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 7 -


in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents, in the country in which such Licensed Process is used. For clarification, only one royalty shall be due with respect to the same unit of Licensed Product/

(ii) [ ** ] for Net Sales of Licensed Processes, for each Licensed Process, on a country-by-country basis, that is covered in whole or in part by an issued, unexpired claim or a pending claim contained in the Licensed Patents in the country in which such process is practiced.

(iii) [ ** ] for Net Sales of Licensed Products, for each product, on a country-by-country basis, that is sold during a period of regulatory exclusivity for such product in the country in which such product is sold.

(iv) [ ** ] for Net Sales of all other Licensed Products and Licensed Processes.

(v) In the event that licenses from third parties are required by Licensee in order to make, have made, use, sell, offer to sell or import any particular Licensed Product or Licensed Process, then the earned royalty which Licensee is obligated to pay UFRF under this Section 4.3 shall be reduced by [ ** ] for each one dollar ($1.00) in royalties which Licensee is pays to third parties under such licenses, further provided, however, that the royalties payable to UFRF under this Section 4.3 shall not be reduced to less than [ ** ] of the applicable Net Sales.

(vi) If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to the Licensee by UFRF under any other license agreement and which license agreement calls for the payment of royalties or is covered under the NonExclusive License, duplicate royalties for the sales of such Licensed Products or Licensed Process shall not be owed to UFRF by Licensee. Under such circumstances, the royalty calculation shall be made only once, even though the sale of the Licensed Product or Licensed Process may fall under more than one patent or more than one license agreement. If a Licensed Product or Licensed Process is covered under another patent of UFRF, the rights to which have been licensed to Licensee by UFRF, or another license agreement, including the NonExclusive License, Licensee shall pay only the greatest of the applicable royalty rates.

Royalties are payable for the longer of [ ** ]. Royalties are payable based on the highest applicable rate calculated per this section and such royalties based on Licensed Patents and Know-How shall not be additive.

Amounts owing to UFRF under Sections 4.3 shall be paid on a quarterly basis after the amount of minimum royalties paid is exceeded, with such amounts due and received by UFRF on or before the thirtieth (30 th ) day following the end of the calendar quarter ending on March 31, June 30, September 30 or December 31 in which such amounts were earned.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 8 -


  4.3 Minimum Royalty

 

  4.3.1 Licensee agrees to pay UFRF Minimum Royalty payments, as follows:

 

Payment    Year
[**]    [**]

and every year thereafter on the same date, for the life of this Agreement.

The Minimum Royalty shall be paid in advance on a quarterly basis for each year in which this Agreement is in effect. The first Minimum Royalty payment shall be due on December 31, 2012 and shall be in the amount of [ ** ]. The Minimum Royalty for a given year shall be due in advance and shall be paid in quarterly installments on March 31, June 30, September 30, and December 31 for the following quarter. Any Minimum Royalty paid in a calendar year will be credited against the earned royalties for that calendar year. It is understood that the minimum royalties will be applied to earned royalties on a calendar year basis, and that sales of Licensed Products and/or Licensed Processes requiring the payment of earned royalties made during a prior or subsequent calendar year shall have no effect on the annual Minimum Royalty due UFRF for other than the same calendar year in which the royalties were earned.

 

  4.4 Milestone Payments

Licensee agrees to pay UFRF milestone payments within thirty (30) days of the first achievement of such milestone, as follows:

 

Payment

  

Event

[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]
[**]    [**]

If a Licensed Product or Licensed Process is covered under the NonExclusive License or another patent of UFRF, the rights to which have been licensed to Licensee by UFRF and which license agreement calls for milestone payments for the same milestone event to be paid to UFRF as set forth above, duplicative milestone payments shall not be owed to UFRF by Licensee with respect to a given Licensed Product or Licensed Process. Under such circumstances, the milestone payments shall be made only once, even though the development milestone may apply to more than one license. The. greater of the applicable milestone shall be paid.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 9 -


  4.5 Sublicense Fees

Licensee shall pay sublicense fees to UFRF per Section 2.2.2 of this Agreement within thirty days (30) of the receipt of any such fees from Sublicensee.

 

  4.6 Accounting for payments

 

  4.6.1 Any amounts which remain unpaid after the date they are due to UFRF under this Section 4, Section 7, Section 2 or any other section of this Agreement shall accrue interest from the due date at the rate equal to the lesser of (i) one and one-half percent (1.5%) per month or (ii) the maximum amount allowed under applicable law. However, in no event shall this interest provision be construed as a grant of permission for any payment delays. Licensee shall also be responsible for repayment to UFRF of any attorney, collection agency, or other out-of-pocket UFRF expenses required to collect overdue payments due from this Section 4, Section 7, Section 2 or any other applicable section of this Agreement.

 

  4.6.2 Except as otherwise directed, all amounts owing to UFRF under this Agreement shall be paid in U.S. dollars to UFRF at the following address:

University of Florida Research Foundation, Inc.

223 Grinter Hall

PO Box 115500

Gainesville, Florida 32611-5500

Attention: Business Manager

All monies owing stated in currencies other than U.S. dollars shall be converted at the rate shown in the Federal Reserve Noon Valuation Value of Foreign Currencies on the day preceding the payment due date.

A certified full accounting statement showing how any amounts payable to UFRF under Section 4.2 have been calculated shall be submitted to UFRF on the date of each such payment. Such accounting statements shall contain a written representation signed by an executive officer of Licensee that states that the statements are true, accurate, and fairly represent all amounts payable to UFRF pursuant to this Agreement. Such accounting shall be on a per-country and product line, model or trade name basis and shall be summarized on the form shown In Appendix C - UFRF Royalty Report of this Agreement.

In the event no payment is owed to UFRF because the amount of minimum royalties paid has not been exceeded or otherwise, an accounting demonstrating that fact shall be supplied to UFRF.

UFRF is exempt from paying income taxes under U.S. law. Therefore, all payments due under this Agreement shall be made without deduction for

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 10 -


taxes, assessments, or other charges of any kind which may be imposed on UFRF by any government outside of the United States or any political subdivision of such government with respect to any amounts payable to UFRF pursuant to this Agreement. All such taxes, assessments, or other charges shall be assumed by Licensee.

 

Section 5 Certain Warranties and Disclaimer of UFRF

 

  5.1 UFRF warrants that, except as otherwise provided under Section 17.1 of this Agreement with respect to U.S. Government interests, it is the owner of the Licensed Patents or otherwise has the right to grant the licenses granted to Licensee in this Agreement. However, nothing in this Agreement shall be construed as:

 

  5.1.1 a warranty or representation by UFRF as to the validity or scope of any right included in the Licensed Patents;

 

  5.1.2 a warranty or representation that anything made, used, sold or otherwise disposed of under the license granted in this Agreement will or will not infringe patents of third parties;

 

  5.1.3 an obligation to bring or prosecute actions or suits against third parties for infringement of Licensed Patents;

 

  5.1.4 an obligation to furnish any services other than those specified in this Agreement; or

 

  5.1.5 a warranty or representation by UFRF that it will not grant licenses to others to make, use or sell products not covered by the claims of the Licensed Patents which may be similar and/or compete with products made or sold by Licensee.

 

  5.2 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, UFRF MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING. UFRF ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, ITS SUBLICBNSEE(S), OR THEIR VENDEES OR OTHER TRANSFEREES OF PRODUCT INCORPORATING OR MADE BY USE OF INVENTIONS LICENSED UNDER THIS AGREEMENT.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 11 -


Section 6 Record Keeping

 

  6.1 Licensee and its Sublicensee(s) shall keep books and records sufficient to verify the accuracy and completeness of Licensee’s and its Sublicensee(s)‘s accounting referred to above, including without limitation, inventory, purchase and invoice records, manufacturing records, sales analysis, general ledgers, financial statements, and tax returns relating to the Licensed Products and/or Licensed Processes. Such books and records shall be preserved for a period not less than six years after they are created or as required by federal law, both during and after the term of this Agreement.

 

  6.2 Licensee and its Sublicensee shall take all steps necessary so that UFRF may, within thirty (30) days of its written request, audit, review and/or copy all of the books and records at a Single U.S. location to verify the accuracy of Licensee’s and its Sublicensee(s)’s accounting. Such review may be performed by any authorized employees of UFRF as well as by any attorneys and/or accountants designated by UFRF, upon reasonable notice and during regular business hours. If a deficiency with regard to any payment hereunder is determined, Licensee and its Sublicensee(s) shall pay the deficiency within thirty (30) days of receiving notice thereof along with applicable interest as described in Section 4.6.1. If a royalty payment deficiency for a calendar year exceeds [**] of the royalties paid for that year, then Licensee and its Sublicensees shall be responsible for paying UFRF’s out-of-pocket expenses incurred with respect to such review.

 

  6.3 At any time during the term of this agreement, UFRF may request in writing that Licensee verify the calculation of any past payments owed to UFRF through the means of a self-audit. Within ninety (90) days of the request, Licensee shall complete a self-audit of its books and records to verify the accuracy and completeness of the payments owed. Within thirty (30) days of the completion of the self-audit, Licensee shall submit to UFRF a report detailing the findings of the self-audit and the manner in which it was conducted in order to verify the accuracy and completeness of the payments owed. If Licensee has determined through its self-audit that there is any payment deficiency, Licensee shall pay UFRF the deficiency along with applicable interest under Section 4.6.1 with the submission of the self-audit report to UFRF.

 

Section 7 Patent Prosecution

 

  7.1 UFRF shall prosecute and maintain the Licensed Patents using counsel of its choice. UFRF shall provide Licensee with copies of all documents sent to and received from the United States Patent and Trademark Office and foreign patent offices relating to Licensed Patents. Licensee agrees to keep such information confidential.

 

  7.2 Licensee shall pay to UFRF the sum of [ ** ] within 30 days of the Effective Date to partially reimburse any and all expenses associated with preparation, filing, prosecution, issuance, maintenance, defense, and reporting of the Licensed Patents incurred prior to the Effective Date

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 12 -


  7.3 Licensee shall be responsible for and pay [ ** ] incurred by UFRF related to the preparation, filing, prosecution, issuance, maintenance, defense and reporting of the Licensed Patents subsequent to and separate of those expenses cited in section 7.2 within thirty (30) days of receipt of an invoice from UFRF. It shall be the responsibility of Licensee to keep UFRF fully apprised of the “small entity” status of Licensee with respect to the U.S. patent laws and with respect to the patent laws of any other countries, if applicable, and to inform UFRF of any changes In such status, within thirty days of any such change.

 

Section 8 Infringement and Invalidity

 

  8.1 Licensee shall inform UFRF promptly in writing of any alleged infringement of the Licensed Patents by a third party and of any available evidence thereof.

 

  8.2 During the term of this Agreement, UFRF shall have the right, but shall not be obligated, to prosecute at its own expense any such infringements of the Licensed Patents. If UFRF prosecutes any such infringement, Licensee agrees that UFRF may include Licensee as a co-plaintiff in any such suit, without expense to Licensee.

 

  8.3 If within six (6) months after having been notified of any alleged infringement, UFRF shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought an infringement action against the alleged infringer, or if UFRF shall notify Licensee at any time prior thereto of its intention not to bring suit against the alleged infringer, then, and in those events only, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Licensed Patents, only in the Licensed Fields as defined in in Section 1.10 of this Agreement, and Licensee may, for such purposes, use the name of UFRF, as party plaintiff. No settlement, consent judgment or other voluntary final disposition of the suit may be entered into without the consent of UFRF, which consent shall not be unreasonably withheld. Licensee shall indemnify UFRF against any order for costs that may be made against UFRF In such proceedings.

 

  8.4 In the event that a declaratory judgment action is brought against UFRF or Licensee by a third party alleging invalidity, unpatentability, unenforceability, or non-infringement of the Licensed Patents, UFRF, at its option, shall have the right within twenty (20) days after commencement of such action to take over the sole defense of the action at its own expense. If UFRF does not exercise this right, and assuming that Licensee is the sole licensee of the Licensed Patents, Licensee shall be responsible for the sole defense of the action at Licensee’s sole expense, subject to Sections 8.5 and 8.6.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 13 -


  8.5 In the event that Licensee shall undertake the enforcement by litigation and/or defense of the Licensed Patents by litigation, UFRF shall have the right, but not the obligation, to voluntarily join such litigation, represented by its own counsel at its own expense. In the event that Licensee shall undertake the enforcement by litigation and/or defense of the Licensed Patents by litigation, any recovery of damages by Licensee for any such suit shall be applied first in satisfaction of any unreimbursed expenses and legal fees of Licensee relating to the suit, and next toward reimbursement of UFRF for any legal fees, and unreimbursed expenses. The balance remaining from any such recovery shall be [ ** ].

 

  8.6 In any suit in which either party is involved to enforce or defend the Licensed Patents pursuant to this Agreement, the other party hereto shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens, and the like.

 

  8.7 In the event Licensee contests the validity of any Licensed Patents, unless and until this Agreement terminates or expires, Licensee shall continue to pay royalties and make other payments pursuant to this Agreement with respect to that patent as if such contest were not underway until the patent is adjudicated invalid or unenforceable by a court of last resort.

 

Section 9 Term and Termination

 

  9.1 The term of this license shall begin on the Effective Date of this Agreement and continue until the later of the date that no Licensed Patent remains an enforceable patent and the date on which Licensee’s obligation to pay royalties expires pursuant to Section 4.3 above.

 

  9.2 Licensee may terminate this Agreement at any time by giving at least sixty (60) days written notice of such termination to UFRF. Such a notice shall be accompanied by a statement of the reasons for termination.

 

  9.3 UFRF may terminate this Agreement by giving Licensee at least sixty (60) days written notice if Licensee:

 

  9.3.1 is delinquent on any report or payment

 

  9.3.2 is not diligently developing and commercializing Licensed Products and Licensed Processes

 

  9.3.3 is in breach of any provision of this Agreement

 

  9.3.4 provides any false report

 

  9.3.5 goes into bankruptcy, liquidation or has a receiver appointed to control any assets

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 14 -


  9.3.6 violates any laws or regulations of applicable government entities; or

 

  9.3.7 shall cease to carry on its business pertaining to Licensed Patents.

 

  9.3.8 If Licensee or any of its Affiliates brings a Patent Challenge against UFRF, or assists others in bringing a Patent Challenge against UFRF (except as required under a court order or subpoena), then UFRF may immediately terminate this Agreement and/or the license granted hereunder. If a Sublicensee brings a Patent Challenge or assists another party in bringing a Patent Challenge (except as required under a court order or subpoena), then UFRF may send a written demand to Licensee to terminate such sublicense. If Licensee fails to so terminate such sublicense within sixty (60) days after UFRF’s demand, UFRF may immediately terminate this Agreement and/or the license granted hereunder

 

  9.3.9 If payments of earned royalties under Section 4.2 once begun, cease for more than two (2) calendar quarters.

Termination under this Section 9.3 will take effect sixty (60) days after written notice by UFRF unless Licensee remedies the problem in that sixty (60) day period.

 

  9.4 UFRF may immediately terminate this Agreement upon the occurrence of the second separate default by Licensee within any consecutive three-year period for failure to pay royalties, patent or any other expenses when due.

 

  9.5 Upon the termination of this Agreement for any reason, nothing herein shall be construed to release either party from any obligation that matured prior to the effective date of such termination. Licensee shall remain obligated to provide an accounting for and to pay royalties earned to the date of termination, and any minimum royalties shall be prorated as of the date of termination by the number of days elapsed in the applicable calendar year. Licensee may, however, after the effective date of such termination, sell all Licensed Products, and complete Licensed Products in the process of manufacture at the time of such termination and sell the same, provided that Licensee shall remain obligated to provide an accounting for and to pay running royalties thereon.

 

Section 10 Assignability

 

  10.1

This Agreement may not be transferred or assigned by Licensee except with the prior written consent of UFRF, which shall not be unreasonably withheld; and provided that Licensee may assign any of its rights under this Agreement in any country to any Affiliates and may delegate its obligations under this Agreement in any country to any Affiliates; provided, however, that such assignment shall not relieve Licensee of its responsibilities for performance of its obligations under this Agreement. Licensee may assign all of its rights and obligations under this Agreement in connection with a merger or similar reorganization or the sale of all or substantially all of the assets and or stock of the Licensee. This Agreement

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 15 -


  shall survive any such merger or reorganization of Licensee within, or into, or such sale of assets and/or stock to, another party, and no consent for such merger, reorganization or sale shall be required hereunder., Licensee shall provide UFRF written notice of assignment within thirty (30) days of the effective date of such assignment. Any attempted assignment in contravention of this Section 10.1 shall be null and void and shall constitute a material breach of this Agreement.

 

  10.2 The new assignee shall assume all responsibilities under this Agreement and must agree in writing to UFRF to be bound by this Agreement.

 

Section 11 Dispute Resolution Procedures

 

  11.1 Mandatory Procedures

In the event either party intends to file a lawsuit against the other with respect to any matter in connection with this Agreement, compliance with the procedures set forth in this Section shall be a condition precedent to the filing of such lawsuit, other than for injunctive relief Either party may terminate this Agreement as provided in this Agreement without following the procedures set forth in this section.

 

  11.1.1 When a party intends to invoke the procedures set forth in this section, written notice shall be provided to the other party. Within thirty (30) days of the date of such notice, the parties agree that representatives designated by the parties shall meet at mutually agreeable times and engage in good faith negotiations at a mutually convenient location to resolve such dispute.

 

  11.1.2 If the parties fail to meet within the time period set forth in Section 11.1.1 above or if either party subsequently determines that negotiations between the representatives of the parties are at an impasse, the party declaring that the negotiations are at an impasse shall give notice to the other party stating with particularity the issues that remain in dispute.

 

  11.1.3 Not more than fifteen (15) days after the giving of such notice of issues, each party shall deliver to the other party a list of the names and addresses of at least three individuals, any one of whom would be acceptable as a neutral advisor in the dispute (the “Neutral Advisor”) to the party delivering the list. Any individual proposed as a Neutral Advisor shall have experience in determining, mediating, evaluating, or trying intellectual property litigation and shall not be affiliated with the party that is proposing such individual.

 

  11.1.4 Within ten (10) days after delivery of such lists, the parties shall agree on a Neutral Advisor. If they are unable to so agree within that time, within five (5) days, they shall each select one individual from the lists. Within five (5) days, the individuals so selected shall meet and appoint a third individual from the lists to serve as the Neutral Advisor. Within thirty (30) days after the selection of a Neutral Advisor:

 

  (a) The parties shall each provide a written statement of the issues In dispute to the Neutral Advisor.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 16 -


  (b) The parties shall meet with the Neutral Advisor in Gainesville, Florida on a date and time established by the Neutral Advisor. The meeting must be attended by persons authorized to make final decisions on behalf of each party with respect to the dispute. At the meeting, each party shall make a presentation with respect to its position concerning the dispute. The Neutral Advisor will then discuss the issues separately with each party and attempt to resolve all issues in the dispute. At the meeting, the parties will enter into a written settlement agreement with respect to all issues that are resolved. Such settlement agreement shall be final and binding with respect to such resolved issues and may not be the subject of any lawsuit between the parties, other than a suit for enforcement of the settlement agreement.

 

  11.1.5 The expenses of the neutral advisor shall be shared by the parties equally. All other out-of-pocket costs and expenses for the alternative dispute resolution procedure required under this Section shall be paid by the party incurring the same.

 

  11.1.6 Positions taken and statements made during this alternative dispute resolution procedure shall be deemed settlement negotiations and shall not be admissible for any purpose in any subsequent proceeding.

 

  11.2 Failure to Resolve Dispute

If any issue is not resolved at the meeting with the Neutral Advisor, either party may file appropriate administrative or judicial proceedings with respect to the issue that remains in dispute. No new issues may be included in the lawsuit without the mandatory procedures set forth in this section having first been followed.

 

  11.3 Survival.

The provisions of this Section shall survive termination of this Agreement.

 

Section 12 Product Liability; Conduct of Business

 

  12.1

Licensee and its Sublicensee(s) shall, at all times during the term of this Agreement and thereafter, indemnify, defend and hold UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and each of their directors, officers, employees, and agents, and the inventors of the Licensed Patents, regardless of whether such inventors are

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 17 -


  employed by the University of Florida at the time of the claim, harmless against all claims and expenses, including legal expenses and reasonable attorneys’ fees, whether arising from a third party claim or resulting from UFRF’s enforcing this indemnification clause against Licensee, arising out of the death of or injury to any person or persons or out of any damage to property and against any other claim, proceeding, demand, expense and liability of any kind whatsoever resulting from the development, production, manufacture, sale, use, lease, consumption, marketing, or advertisement of Licensed Products or Licensed Process(es) or arising from any right or obligation of Licensee hereunder. Notwithstanding the above, UFRF at all times reserves the right to retain counsel of its own to defend UFRF’s, the Florida Board of Governors’, the University of Florida Board of Trustees’, the University of Florida’s, and the inventor’s interests.

 

  12.2 Licensee warrants that it now maintains and will continue to maintain liability insurance coverage appropriate to the risk involved in development, producing, manufacturing, clinical trials, selling, marketing, using, leasing, consuming, or advertising the products subject to this Agreement and that such insurance coverage lists UFRF, the Florida Board of Governors, the University of Florida Board of Trustees, the University of Florida, and the inventors of the Licensed Patents as additional insureds. Within ninety (90) days after the execution of this Agreement and thereafter annually between January 1 and January 31 of each year, Licensee will present evidence to UFRF that the coverage is being maintained with UFRF, the University of Florida, and its inventors listed as additional insureds. In addition, Licensee shall provide UFRF with at least thirty (30) days prior written notice of any change in or cancellation of the insurance coverage.

 

Section 13 Use of Names

Licensee and its Sublicensee(s) shall not use the names of UFRF, or of the University of Florida, nor of any of either institution’s employees, agents, or affiliates, nor the name of any inventor of Licensed Patents, nor any adaptation of such names, in any promotional, advertising or marketing materials or any other similar form of publicity, or to suggest any endorsement by such entitles or individuals, without the prior written approval of UFRF in each case.

 

Section 14 14 Miscellaneous

 

  14.1 This Agreement shall be construed in accordance with the Internal laws of the State of Florida

 

  14.2 The parties hereto are independent contractors and not joint venturers or partners.

 

  14.3 Licensee shall ensure that it applies patent markings that meet all requirements of U.S. law, 35 U.S.C. §287, with respect to all Licensed Products subject to this Agreement.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 18 -


  14.4 This Agreement constitutes the full understanding between the parties with reference to the subject matter hereof, and no statements or agreements by or between the parties, whether orally or in writing, shall vary or modify the written terms of this Agreement. Neither party shall claim any amendment, modification, or release from any provisions of this Agreement by mutual agreement, acknowledgment, or otherwise, unless such mutual agreement is in writing, signed by the other party, and specifically states that it is an amendment to this Agreement.

 

  14.5 Licensee shall not encumber or otherwise grant a security in any of the rights granted hereunder to any third party.

 

  14.6 Licensee acknowledges that it is subject to and agrees to abide by the United States laws and regulations (including the Export Administration Act of 1979 and Arms Export Control Act) controlling the export of technical data, computer software, laboratory prototypes, biological material, and other commodities. The transfer of such items may require license from the cognizant agency of the U.S. Government or written assurances by Licensee that it shall not export such items to certain foreign countries and/or foreign persons without prior approval of such agency. UFRF neither represents that a license is or is not required or that, if required, it shall be issued.

 

  14.7 Licensee is responsible for any and all wire/bank fees associated with all payments due to UFRF pursuant to this agreement.

 

  14.8 Survival

The provisions of this Section shall survive termination of this Agreement. Upon termination of the Agreement for any reason, the following sections of the License Agreement will remain in force as non-cancelable obligations:

 

•       Section 6

     Record Keeping

•       Section 9

     Requirement to pay royalties on sale of Licensed Products made, and in process, at the time of License Agreement termination

•       Section 12

     Product Liability; Conduct of Business

•       Section 13

     Use of Nantes

•       Section 18

     Confidentiality

 

Section 15 Notices

Any notice required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to have been given

 

    when delivered personally, or

 

   

if sent by facsimile transmission, when receipt thereof is acknowledged at the facsimile number of the recipient as set forth below, or

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 19 -


    the second day following the day on which the notice has been delivered prepaid to a courier service, or

 

    five (5) business days following deposit in the U.S. mail if sent certified mail, (return receipt acknowledgement is not required to certify delivery).

 

  15.1 If to the University of Florida Research Foundation, Inc.:

President

University of Florida Research Foundation, Inc.

223 Grinter Hall

University of Florida

Post Office Box 115500

Gainesville, FL 32611-5500

Facsimile Number: 352-846-0505

with a copy to:

Office of Technology Licensing

Attn: Director

747 SW Second Avenue

University of Florida

Post Office Box 115575

Gainesville, Florida 32611-5575

Facsimile Number: 352-392-6600

 

  15.2 If to Licensee:

Sue Washer, CEO

Applied Genetic Technologies Corporation

11801 Research Drive, Suite D

Alachua, FL 32615

Facsimile Number 386.462-0875

With a copy to

Fred Hutchison

Hutchison Law Group

5410 Trinity Road

Suite 400

Raleigh, North Carolina 27607

 

Section 16 Contract Formation and Authority

The submission of this Agreement does not constitute an offer, and this document shall become effective and binding only upon the execution by duly authorized representatives of both Licensee and UFRF. Copies of this Agreement that have not been executed and delivered by both UFRF and Licensee shall not serve as a memorandum or other writing evidencing an agreement between the parties. This Agreement shall automatically terminate and be of no further force and effect,

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 20 -


without the requirement of any notice from UFRF to Licensee, if UTRF does not receive the License Issue Fee or certificates representing shares issued to UFRF pursuant to this Agreement, as applicable, within thirty (30) days of the Effective Date.

 

  16.1 UFRF and Licensee hereby warrant and represent that the persons signing this Agreement have authority to execute this Agreement on behalf of the party for whom they have signed.

 

  16.2 Force Majeure

No default, delay, or failure to perform on the part of Licensee or UFRF shall be considered a default, delay or failure to perform otherwise chargeable hereunder, if such default, delay or failure to perform is due to causes beyond either party’s reasonable control including, but not limited to strikes, lockouts, or inactions of governmental authorities, epidemics, war, embargoes, fire, earthquake, hurricane, flood, acts of God, or default of common carrier. In the event of such default, delay or failure to perform, any date or times by which either party is otherwise scheduled to perform shall be extended automatically for a period of time equal in duration to the time lost by reason of the excused default, delay or failure to perform.

 

Section 17 United States Government Interests

 

  17.1 It is understood that the United States Government (through any of its agencies or otherwise) has funded research, [**], during the course of or under which any of the inventions of the Licensed Patents were conceived or made. The United States Government is entitled, as a right, under the provisions of 35 U.S.C. §202-212 and applicable regulations of Title 37 of the Code of Federal Regulations, to a non-exclusive, nontransferable, irrevocable, paid-up license to practice or have practiced the inventions of such Licensed Patents for governmental purposes. Any license granted to Licensee in this Agreement shall be subject to such right.

 

  17.2 Licensee agrees that for Licensed Products covered by the Licensed Patents that are subject to the non-exclusive royalty-free license to the United States Government, said Licensed Products will be manufactured substantially in the United States. Licensee further agrees that it shall abide by all the requirements and limitations of U.S. Code, Title 35, Chapter 18, and implementing regulations thereof, for all patent applications and patents invented in whole or in part with federal money.

 

Section 18 Confidentiality

18.1 Each Party shall maintain all information of the other Party which is treated by such other Party as proprietary or confidential (referred to herein as “Confidential Information”) in confidence, and shall not disclose, divulge or otherwise communicate such confidential information

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 21 -


to others, or use it for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, and each party hereby agrees to exercise every reasonable precaution to prevent and restrain the unauthorized disclosure of such confidential information by any of its Affiliates, directors, officers, employees, consultants, subcontractors, Sublicensees or agents. Licensees Confidential Information includes but is not limited to the Development Plan, Development Reports and all other financial, research, development or business reports, strategies and agreements, including Sublicenses, of Licensee. The parties agree to keep the terms of this Agreement confidential, provided that each party may disclose this Agreement to their authorized agents and investors who are bound by similar confidentiality provisions. Notwithstanding the foregoing, Confidential Information of a party shall not include information which: (a) was lawfully known by the receiving party prior to disclosure of such information by the disclosing party to the receiving party; (b) was or becomes generally available in the public domain, without the fault of the receiving party; (c) is subsequently disclosed to the receiving party by a third party having a lawful right to make such disclosure; (d) is required by law, rule, regulation or legal process to be disclosed, provided that the receiving party making such disclosure shall take all reasonable steps to restrict and maintain to the extent possible confidentiality of such disclosure and shall provide reasonable notice to the other party to allow such party the opportunity to oppose the required disclosure; or (e) has been Independently developed by employees or others on behalf of the receiving party without access to or use of disclosing party’s information as demonstrated by written record. Each party’s obligations under this Section 18 shall extend for a period of five (5) years from termination or expiration of this Agreement.

 

Section 19 University Rules and Regulations

19.1 Licensee understands and agrees that University of Florida personnel who are engaged by Licensee, whether as consultants, employees or otherwise, or who possess a material financial interest in Licensee, are subject to the University of Florida’s rule regarding outside activities and financial interests set forth in Florida Administrative Code Rule 6C1-1.011, the University of Florida’s Intellectual Property Policy, and a monitoring plan which addresses conflicts of interests associated therewith. Any term or condition of an agreement between Licensee and such University of Florida personnel which seeks to vary or override such personnel’s obligations to the University of Florida may not be enforced against such personnel, the University of Florida or UFRF, without the express written consent of an individual authorized to vary or waive such obligations on behalf of the University of Florida and UFRF. Furthermore, should an interest of Licensee conflict with the interest of the University of Florida, University of Florida personnel are obligated to resolve such conflicts according to the guidelines and policies set forth by the University of Florida.

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 22 -


IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the dates indicated below. UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

UNIVERSITY OF FLORIDA RESEARCH FOUNDATION, INC.

 

/s/ David L. Day

    Date:   11/7 , 2012
David L. Day      
Director of Technology Licensing      

LICENSEE

APPLIED GENETIC TECHNOLOGIES CORPORATION

 

By:  

/s/ Susan B. Washer

    Date:   11/12 , 2012
Susan B. Washer, President and CEO      

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

- 23 -


Appendix A - Development Plan

A Development Plan of the scope outlined below shall be submitted to UFRF by Licensee prior to the execution of this agreement. In general, the plan should provide UFRF with a summary overview of the activities that Licensee believes are necessary to bring products to the marketplace.

Development Program

Development activities to be undertaken

[ ** ]

Proposed Market Approach

[ ** ]

Competitive Information

[ ** ]

 

Initials                         

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 1


Appendix B - Development Report

When appropriate, indicate estimated start date and finish date for activities.

Date Development Plan Initiated and Time Period Covered by this Report.

Development Report (4-8 paragraphs).

Activities completed since last report including the object and parameters of the development, when initiated, when completed and the results.

Activities currently under investigation, i.e., ongoing activities including object and parameters of such activities, when initiated, and projected date of completion.

Future Development Activities (4-8 paragraphs).

Activities to be undertaken before next report including, but not limited to, the type and object of any studies conducted and their projected starting and completion dates.

Estimated total development time remaining before a product will be commercialized.

One year before commencement of manufacturing or commercial production, Licensee will include in the Development Report specifics of planned manufacturing or production

Changes to Initial Development Plan (2-4 paragraphs).

Reasons for change.

Variables that may cause additional changes.

Items to be Provided if Applicable:

Information relating to Licensed Products that has become publicly available, e.g., published articles, competing products, patents, etc.

Development work being performed by third parties, other than Licensee, to include name of third party, reasons for use of third party, planned future uses of third parties including reasons why and type of work.

Update of competitive information trends in industry, government compliance (if applicable) and market plan.

Information and copies of relevant materials evidencing the status of any patent applications or other protection relating to Licensed Products or the Licensed Patents.

One year before commencement of manufacturing or commercial production, Licensee will include in the Development Report specifics of planned manufacturing or production.

PLEASE SEND DEVELOPMENT REPORTS TO:

  University of Florida Research Foundation, Inc.

  Attn: Director

  The Innovation Hub

747 SW Second Avenue

  P.O. Box 115575

  Gainesville, FL 32611-5575

  Facsimile: 352-392-6600

 

Initials                         

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 1


Appendix C - UFRF Royalty Report

 

Company Name:   

 

  

If multiple license agreements are required to generate this product, indicate what percentage of the royalty is attributable to each agreement.

 

UFRF Agreement No.:  

 

     Percentage:   

 

  
UFRF Agreement No.:  

 

     Percentage:   

 

  
Period Covered: From:  

    /    /2

    

Through:

  

    /    /2

     

 

Prepared By:  

 

      Date:   

 

Print Preparer Name:        

 

Preparer Email Address:  

 

      Phone No.:   

 

  

 

Approved By:   

 

   Date:   

 

  
   (Requires Executive Officer Signature)         

Print Officer Name:

If license covers multiple product lines, please prepare a separate spreadsheet for each product line, and a summary report for all products combined.

The spreadsheet should include the following information:

 

    Product Name

 

    Country(ies) of Sales (List each country. If royalties vary by country, provide a breakdown of specified information for each country.)

 

    Unit Sales

 

    Gross Sales

 

    Less Allowances (On a separate page, please indicate the reasons for returns or other adjustments if significant.)

 

    Net Sales

 

    Royalty Rate (Please note any unusual occurrences that affected royalty amounts during this period. To assist UFRF’s forecasting, please comment on any market variables that would impact future royalties).

 

    Total Royalty due this period

 

    Total Royalty paid last period

 

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.


Appendix D - Milestones

 

1. Licensee has already provided UFRF a preliminary Development Plan. Within six months of execution of this license, Licensee will provide UFRF a detailed document covering Licensee’s plans as to projected product development, markets and sales forecasts, manufacturing and operations, and financial forecasts (“Business Plan”). UFRF will treat this Business Plan as confidential information and to protect it as UFRF would its own confidential information.

[ ** ]

 

Initials                         

CONFIDENTIAL MATERIALS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. DOUBLE ASTERISKS [**] DENOTE OMISSIONS.

Page 3

Exhibit 10.12

Execution Version

APPLIED GENETIC TECHNOLOGIES CORPORATION

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

NOVEMBER 15, 2012


APPLIED GENETIC TECHNOLOGIES CORPORATION

AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

T HIS A MENDED AND R ESTATED I NVESTOR R IGHTS A GREEMENT (the “Agreement”) is entered into as of the 15 th day of November, 2012, by and among A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION , a Delaware corporation (the “Company”) and the investors listed on Exhibit A (referred to hereinafter as the “Investors” and each individually as an “Investor”) and the stockholders listed on Exhibit B hereto (the “Common Stockholders”).

R ECITALS

W HEREAS , the Company, certain of the Investors (the “Existing Investors”) and the Common Stockholders previously entered into that certain Investor Rights Agreement dated November 25, 2003 (the “Prior Agreement”) in connection with the purchase of the Company’s Series A-1 Preferred Stock, par value $0.001 per share (the “Series A-1 Preferred Stock”) and of the Company’s Series A-1A Preferred Stock, par value $0.001 per share (the “Series A-1A Preferred Stock,” and with the Series A-1 Preferred Stock, the “Series A Preferred Stock”);

W HEREAS , certain of the Investors are purchasing shares of the Company’s Series B-1 Preferred Stock, par value $0.001 per share (the “Series B-1 Preferred Stock”), and may elect, or may be required by the Company, to purchase shares of the Company’s Series B-2 Preferred Stock, par value $0.001 per share (the “Series B-2 Preferred Stock”) and the Company’s Series B-3 Preferred Stock, par value $0.001 per share (the “Series B-3 Preferred Stock,” and with the Series B-1 Preferred Stock and Series B-2 Preferred Stock, the “Series B Preferred Stock”) pursuant to that certain Series B-1, B-2, and B-3 Preferred Stock Purchase Agreement (the “Purchase Agreement”) of even date herewith (the “Financing”);

W HEREAS , the obligations in the Purchase Agreement are conditioned upon amending and restating the Prior Agreement on the date hereof in the form of this Agreement;

W HEREAS , in connection with the consummation of the Financing, the parties desire to enter into this Agreement in order to grant registration, information and other rights to the Investors as set forth below; and

W HEREAS , the Existing Investors and the Common Stockholders hold the requisite number of shares of capital stock of the Company necessary to amend the Prior Agreement.

 

- 1 -


N OW , T HEREFORE , in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Existing Investors and the Common Stockholders agree that the Prior Agreement shall be amended and restated in its entirety in the form of this Agreement, and the parties further agree hereto as follows:

SECTION 1. GENERAL.

1.1 Definitions. As used in this Agreement the following terms shall have the following respective meanings:

(a) “Affiliate” means, with respect to any specified person or entity, any other person or entity who, directly or indirectly, controls, is controlled by, or is under common control with such person or entity, including without limitation any general partner, managing member, officer or director of such entity 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 entity.

(b) “Common Stock” means shares of the Company’s common stock and shares of common stock issued or issuable upon conversion of the Company’s outstanding Preferred Stock or exercise of any option, warrant, or other security or right of any kind of the Company convertible into or exchangeable for common stock.

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

(d) “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

(e) “Holder” means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.9 hereof.

(f) “Initial Offering” means the Company’s first firm commitment underwritten public offering of its Common Stock registered under the Securities Act.

(g) “Major Investor” means any Investor (together with its Affiliates) holding more than 1,500,000 Registrable Securities then outstanding on an as-converted and as-exercised basis.

(h) “Preferred Stock” means collectively all shares of the Series A Preferred Stock and Series B Preferred Stock.

(i) “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

(j) “Registrable Securities” means (a) the Common Stock issuable or issued upon conversion of the Shares, excluding any Common Stock issued upon conversion of the Preferred Stock pursuant to the “Special Mandatory Conversion” provisions of the Company’s Fourth Amended and Restated Certificate of Incorporation,

 

- 2 -


as amended from time to time (the “Charter”); and (b) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or SEC Rule 144, (ii) sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned or (iii) held by a Holder (together with its affiliates) if, as reflected on the Company’s list of stockholders, such Holder (together with its affiliates) holds less than 1% of the outstanding Common Stock (treating all shares of Preferred Stock on an as converted basis), the Company has completed its Initial Offering and all shares of Common Stock issuable or issued upon conversion of the Shares held by and issuable to such Holder (and its affiliates) may be sold pursuant to SEC Rule 144 during any ninety (90) day period.

(k) “Registrable Securities then outstanding” shall be the number of shares of Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then exercisable or convertible securities.

(l) “Registration Expenses” means all expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements not to exceed twenty-five thousand dollars ($25,000) of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

(m) “SEC” or “Commission” means the Securities and Exchange Commission.

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

(o) “Selling Expenses” means all underwriting discounts and selling commissions applicable to the sale.

(p) “Shares” means (i) the Preferred Stock or stock otherwise acquired and held from time to time by the Investors listed on Exhibit A hereto and their permitted assigns and (ii) shares held on the date of this Agreement by the University of Florida Research Foundation, the Trustees of the University of Pennsylvania, Cornell Research Foundation and Johns Hopkins University (collectively, the “Universities”) and Barry J. Byrne, William W. Hauswirth, Nicholas Muzyczka, R. Jude Samulski and Alpha Net, Inc. (collectively, the “Key Holders”) listed on Exhibit B hereto and their permitted assigns; provided , however , such shares under this clause (ii) shall be deemed to be “Shares” under this Agreement with respect only to the rights and obligations set forth in Section 2 of this Agreement (other than Sections 2.2 and 2.4), and the rights and obligations generally applicable to parties to this Agreement pursuant to Section 5 of this Agreement.

 

- 3 -


(q) “Special Registration Statement” means (i) a registration statement relating to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, including any registration statements related to the issuance or resale of securities issued in such a transaction or (iii) a registration related to stock issued upon conversion of debt securities.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.

2.1 Restrictions on Transfer.

(a) Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until:

(i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(ii) (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act. It is agreed that the Company will not require opinions of counsel for transactions made pursuant to SEC Rule 144, except in unusual circumstances. After its Initial Offering, the Company will not require the transferee to be bound by the terms of this Agreement.

(b) Notwithstanding the provisions of Section 2.1(a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, (D) a partnership or fund transferring to an affiliated partnership or fund managed by it or any of their respective directors, officers or partners, (E) an individual transferring to the Holder’s family member or trust for the benefit of an individual Holder or (F) an entity or individual transferring to the Holder’s Affiliate; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder.

(c) Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR

 

- 4 -


OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT, AS EVIDENCED, AT THE REQUEST OF THE COMPANY, BY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY, CARE OF THE COMPANY’S COUNSEL, FOLEY HOAG LLP, 155 SEAPORT BOULEVARD, BOSTON MA 02210, ATTN: HEMMIE CHANG.

(d) The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.

(e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

2.2 Demand Registration.

(a) Subject to the conditions of this Section 2.2, if the Company shall receive a written request from the Holders of a majority of the Registrable Securities (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of at least a majority of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $10,000,000 (a “Qualified Public Offering”)), then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, effect, as expeditiously as reasonably possible and in any event within sixty (60) days after the date such request is given by the Initiating Holders, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.

 

- 5 -


(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable. In such event, the right of any Holder to include its 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 enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company and reasonably acceptable to a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities), then the Company shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders ) ; provided, however , that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

(c) The Company shall not be required to effect a registration pursuant to this Section 2.2:

(i) after the Company has effected two (2) registrations pursuant to this Section 2.2, and such registrations have been declared or ordered effective;

(ii) prior to the earlier of (A) the third anniversary of the date of this Agreement or (B) one hundred eighty (180) days following the effective date of the registration statement pertaining to the Initial Offering; provided that the Company makes reasonable good faith efforts to cause such registration statement to become effective;

(iii) if within thirty (30) days of receipt of a written request from Initiating Holders pursuant to Section 2.2(a), the Company gives notice to the Holders of the Company’s intention to file a registration statement for its Initial Offering within ninety (90) days;

(iv) if the Company shall furnish to the Initiating Holders, a certificate signed by the Chairman of the Company’s Board of Directors (the “Board”) stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time because such action would (A) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company, (B) require premature disclosure of material information that the Company has a bona fide business purpose for

 

- 6 -


preserving as confidential, or (C) render the Company unable to comply with requirements under the Securities Act or Exchange Act, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period;

(v) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.4 below; or

(vi) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

(d) A registration shall not be counted as “effected” for purposes of this Section 2.2 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, and forfeit their right to one demand registration statement pursuant to Section 2.5, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.2. Registrations effected pursuant to this Section 2.2 shall not be counted as demands for registration or registrations effected pursuant to Section 2.4.

2.3 Piggyback Registrations. The Company shall notify all Holders of Registrable Securities in writing at least fifteen (15) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within twenty (20) days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

(a) Underwriting. If the registration statement under which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities. In such event, the right of any such Holder to be included in a registration pursuant to this Section 2.3 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 Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters

 

- 7 -


selected for such underwriting by the Company. Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders; and third, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided , however , that no such reduction shall reduce the amount of securities of the selling Holders included in the registration below twenty-five percent (25%) of the total amount of securities included in such registration, unless such offering is the Initial Offering and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded in accordance with the immediately preceding clause. In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities proposed to be sold in the offering. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Holder which is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person, or an affiliated partnership or fund managed by any Holder or any of their respective directors, officers or partners shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 whether or not any Holder has elected to include securities in such registration, and shall promptly notify any Holder that has elected to include shares in such registration of such termination or withdrawal. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5 hereof.

2.4 Form S-3 Registration. If the Company shall receive from any Holder or Holders of Registrable Securities (the “Requesting Holders”) a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by the Requesting Holders, the Company will:

(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

 

- 8 -


(b) as soon as practicable and in any event within forty-five (45) days after the date such request is given by the Requesting Holders, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of the Requesting Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of such written notice from the Company; provided, however , that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4:

(i) if Form S-3 is not available for such offering by the Holders;

(ii) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than three million dollars ($3,000,000);

(iii) if within thirty (30) days of receipt of a written request from the Requesting Holders pursuant to this Section 2.4, the Company gives notice to such Holder of the Company’s intention to make a public offering within ninety (90) days, other than pursuant to a Special Registration Statement provided that such Holders are permitted to register such shares as requested to be registered pursuant to Section 2.3 hereof without reduction by the underwriter thereof;

(iv) if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time because such action would (A) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company, (B) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, or (C) render the Company unable to comply with requirements under the Securities Act or Exchange Act, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Requesting Holders under this Section 2.4; provided , that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period;

(v) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on Form S-3 for the Holders pursuant to this Section 2.4; or

(vi) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

(c) A registration shall not be counted as “effected” for purposes of this Section 2.4 until such time as the applicable registration statement has been declared effective by the SEC, unless the Requesting Holders withdraw their request for such

 

- 9 -


registration, and forfeit their right to one demand registration statement pursuant to Section 2.5, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.4. Registrations effected pursuant to this Section 2.4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2.

2.5 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the Initiating Holders or the Requesting Holders, as the case may be, unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders or Requesting Holders, as the case may be, were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to forfeit their right to a requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in which event such right shall be forfeited by all Holders. If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested. If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then the Holders shall not forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand registration.

2.6 Obligations of the Company. Whenever required 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 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 up to one hundred twenty (120) days or, if earlier, until the Holder or Holders have completed the distribution related thereto; provided , however , that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders or Requesting Holders, as the case may be, hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below). In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. The Company may extend the Suspension Period for an additional consecutive ninety (90) days

 

- 10 -


with the consent of the Holders of sixty-six and two-thirds percent (66 2/3%) of the Registrable Securities registered or to be registered under the applicable registration statement, which consent shall not be unreasonably withheld. No more than two (2) such Suspension Periods shall occur in any twelve (12) month period. If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.

(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 provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in Section 2.6(a) above.

(c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d) Use 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 Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use commercially reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

 

- 11 -


(g) Use commercially reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

(h) Use commercially reasonable efforts to cause all 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.

(i) 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.

(j) Promptly make available for inspection by the selling Holders, any 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 selling Holder, 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.

(k) 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.

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

2.7 Delay of Registration; Furnishing Information.

(a) No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

(b) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

 

- 12 -


(c) The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or 2.4 if, due to the operation of Section 2.2(b), the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in Section 2.2 or 2.4, whichever is applicable. Notwithstanding the foregoing, for purposes of Section 2.2, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.2(b), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

2.8 Indemnification. In the event any Registrable Securities are included in a registration statement under Sections 2.2, 2.3 or 2.4:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, members, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for 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 losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated by reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company (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 in connection with the offering covered by such registration statement; and the Company will reimburse each such Holder, partner, member, officer, director, underwriter, controlling person, or other aforementioned person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however , that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter, controlling person, or other aforementioned person of such Holder.

 

- 13 -


(b) To the extent permitted by law, each Holder, severally and not jointly, will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers who have signed the registration statement and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter (as defined in the Securities Act) and any other Holder selling securities under such registration statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement or incorporated reference therein, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act (collectively, a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further , that in no event shall any indemnity or contribution under this Section 2.8 exceed the net proceeds from the offering received by such Holder. Notwithstanding the foregoing, a Holder and its Affiliated Stockholders (as defined in Section 5.13 below) shall jointly and severally indemnify and hold harmless any of the above mentioned indemnified persons for any Holder Violation made by an Affiliated Stockholder.

(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually

 

- 14 -


satisfactory to the parties; provided, however , that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

(d) If the indemnification provided for in this Section 2.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) or Holder Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided , that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

(e) The obligations of the Company and Holders under this Section 2.8 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

2.9 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities in compliance with Section 2.1 hereof (for so long as such shares remain Registrable Securities) that (a) is a subsidiary, parent, general partner, limited partner, retired partner, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company, (b) is a Holder’s family member or trust for the benefit of an individual Holder, (c) acquires at least fifty thousand (50,000) shares of Registrable Securities (as adjusted for stock splits and combinations), (d) is an entity affiliated by common control (or other related entity) with such Holder or (e) is an affiliated partnership or fund managed by a Holder or any of their

 

- 15 -


respective directors, officers or partners; provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement.

2.10 Limitation on Subsequent Registration Rights. Other than as provided in Section 5.10, after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder (i) rights to demand the registration of their shares, or to include their shares in a registration statement that would reduce the number of shares includable by the Holders or (ii) any other registration rights on a parity with or senior to those granted to the Holders hereunder, other than the right to a Special Registration Statement.

2.11 “Market Stand-Off” Agreement. Each Holder (other than the Trustees of the University of Pennsylvania and Cornell Research Foundation) hereby agrees that such Holder shall not, without the prior written consent of the managing underwriter, sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act, or such other 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); provided that:

(i) such agreement shall apply only to the Initial Offering;

(ii) all officers and directors of the Company enter into similar agreements; and

(iii) such agreement shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement.

2.12 Agreement to Furnish Information. Each Holder (other than the Trustees of the University of Pennsylvania and Cornell Research Foundation) agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the Holder’s obligations under Section 2.11 or that are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in Section 2.11 and this Section 2.12 shall

 

- 16 -


not apply to a Special Registration Statement. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred eighty (180) day period. Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by Sections 2.11 and 2.12. The underwriters of the Company’s stock are intended third party beneficiaries of Sections 2.11 and 2.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

2.13 SEC Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

(a) Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public;

(b) 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; and

(c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange Act (at any time after it 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); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration or pursuant to Form S-3.

SECTION 3. COVENANTS OF THE COMPANY.

3.1 Basic Financial Information and Reporting.

(a) The Company will maintain true books and records of account in which full and correct entries will be made of all its business transactions pursuant to a system of accounting established and administered in accordance with generally accepted accounting principles (“GAAP”) consistently applied (except as noted therein), and will set aside on its books all such proper accruals and reserves as shall be required under GAAP consistently applied.

(b) As soon as practicable after the end of each fiscal year of the Company, and in any event within one-hundred twenty (120) days thereafter, the Company will furnish to each Major Investor a balance sheet of the Company, as at the end of such fiscal year, a statement of income and a statement of cash flows of the Company, for such year, and a statement of stockholders’ equity as of the end of such year, all prepared in accordance with GAAP consistently applied (except as noted therein) and setting forth in

 

- 17 -


each case in comparative form the figures for the previous fiscal year, all in reasonable detail. Such financial statements shall be audited and accompanied by a report and opinion thereon by independent public accountants selected by the Board.

(c) The Company will furnish to each Major Investor, as soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company, and in any event within forty-five (45) days thereafter, a balance sheet of the Company as of the end of each such quarterly period, and a statement of income and a statement of cash flows of the Company for such period and for the current fiscal year to date, prepared in accordance with GAAP consistently applied (except as noted therein), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

(d) The Company will furnish to each Major Investor: (i) at least thirty (30) days prior to the beginning of each fiscal year an annual budget and operating plans for such fiscal year (and as soon as available, any subsequent written revisions thereto) prepared on a monthly basis; and (ii) as soon as practicable after the end of each month, and in any event within thirty (30) days thereafter, a balance sheet of the Company as of the end of each such month, and a statement of income and a statement of cash flows of the Company for such month and for the current fiscal year to date, including a comparison to plan figures for such period, prepared in accordance with GAAP consistently applied (except as noted thereon), with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

3.2 Inspection Rights. Each Major Investor shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably requested all at such reasonable times and after reasonable notice and as often as may be reasonably requested; provided, however, that the Company shall not be obligated under this Section 3.2 with respect to a competitor of the Company or with respect to information which the Board determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed.

3.3 Confidentiality of Records. 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 general (other than as a result of a breach of this Section 3.3 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the 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, provided that such persons are bound by professional obligations or confidentiality restrictions at least as strict as those

 

- 18 -


contained in this Section 3.3; (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 Section 3.3; (iii) to any existing or prospective 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, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

3.4 Preservation of Corporate Existence. The Company shall preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary in view of its business and operations or the ownership or lease of its properties.

3.5 Compliance with Laws. The Company shall comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, where noncompliance would have a material adverse effect on the business, operations, affairs or financial condition of the Company.

3.6 Meetings of Directors. The Company shall hold meetings of the Board not less than four (4) times a year on a quarterly basis. The Company shall promptly reimburse in full, each director of the Company who is not an employee of the Company for all of his or her reasonable out-of-pocket documented expenses incurred in attending each meeting of the Board or any committee thereof.

3.7 Reservation of Common Stock. The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion.

3.8 Insurance . The Company shall use commercially reasonable efforts to procure and maintain (i) Directors and Officers liability insurance with a coverage limit of at least $3 million and (ii) employment practices liability insurance with a coverage limit of at least $1 million, in each case from financially sound and reputable insurers, and in each case until such time as the Board, including (A) prior to the Second Closing (as defined in the Purchase Agreement), the Series B-1 Directors (as defined in the Charter) or (B) following the Second Closing, a majority of the Series B-2 Directors (as defined in the Charter), determines that such insurance should be discontinued.

3.9 Stock Vesting. Unless otherwise approved by the Board, all stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers shall be subject to vesting as follows: (a) twenty-five percent (25%) of such stock shall vest at the end of the first year following the earlier of the date of issuance or such person’s services commencement date with the Company, and (b) seventy-five percent (75%) of such stock shall vest over the remaining three (3) years. With respect to any shares of stock purchased by any such person, the

 

- 19 -


Company’s repurchase option shall provide that upon such person’s termination of employment or service with the Company, with or without cause, the Company or its assignee shall have the option to purchase at cost any unvested shares of stock held by such person.

3.10 Proprietary Information and Inventions Agreement. The Company shall require all current and future employees and consultants to execute and deliver a Confidentiality, Inventions and Non-Competition Agreement substantially in a form approved by the Company’s counsel or the Board.

3.11 Assignment of Rights of First Refusal. In the event the Company elects not to exercise any right of first refusal or right of first offer the Company may have on a proposed transfer of any of the Company’s outstanding capital stock pursuant to the Company’s charter documents, by contract or otherwise, the Company shall, to the extent it may do so, assign such right of first refusal or right of first offer to each Major Investor. In the event of such assignment, each Major Investor shall have a right to purchase its pro rata portion of the capital stock proposed to be transferred. Each Major Investor’s pro rata portion shall be equal to the product obtained by multiplying (i) the aggregate number of shares proposed to be transferred by (ii) a fraction, the numerator of which is the number of shares of Registrable Securities held by such Major Investor at the time of the proposed transfer and the denominator of which is the total number of shares owned by all Major Investors at the time of such proposed transfer.

3.12 Assumptions or Guaranties of Indebtedness of Other Persons. The Company shall not assume, guarantee, endorse or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) any indebtedness of any other party, except for trade accounts of the Company arising in the ordinary course of business.

3.13 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 as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Charter, or elsewhere, as the case may be.

3.14 Investor Activities. The Company acknowledges that Alta Partners VIII, L.P. (“Alta”) and S.R. One, Limited (“SROne”) and their respective Affiliates may invest in and/or serve on the board of directors of entities which are competitive with the Company. Nothing contained in this Agreement shall prevent Alta, SROne or their respective Affiliates from investing in and/or serving on the board of directors of such competitive companies, provided , however , that nothing herein shall relieve Alta, SROne or any other party from liability associated with misuse of the Company’s confidential information or relieve any director designated by Alta or SROne to serve on the Board from their fiduciary duties or duty of loyalty.

 

- 20 -


3.15 Filing of Amended and Restated Certificate of Incorporation. In accordance with Sections 2.3(e) and 2.4(e) of the Purchase Agreement, the Company shall file an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect the amount of the Series B-2 Purchase Price or the Series B-3 Purchase Price (each, as defined in the Charter), as the case may be, in U.S. currency as calculated pursuant to Section 2.3 or 2.4 of the Purchase Agreement, respectively.

3.16 Termination of Covenants. All covenants of the Company contained in Section 3 of this Agreement (other than the provisions of Section 3.3) shall expire and terminate as to each Investor upon the earlier of (i) the effective date of the registration statement pertaining to the Initial Offering that results in the Preferred Stock being converted into Common Stock or (ii) upon a “Deemed Liquidation Event,” as defined in the Charter (a “Change of Control”).

SECTION 4. RIGHTS OF FIRST REFUSAL.

4.1 Subsequent Offerings. Subject to applicable securities laws, each Major Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.6 hereof. Each Major Investor’s pro rata share is equal to the ratio of (a) the number of shares of Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares) which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities. A Major Investor shall be entitled to apportion the right of first refusal hereby granted to it in such proportions as it deemed appropriate among itself and its Affiliates. The term “Equity Securities” shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security, or (iv) any such warrant or right.

4.2 Exercise of Rights. If the Company proposes to issue any Equity Securities, it shall give each Major Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Major Investor shall have twenty (20) days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Major Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

 

- 21 -


4.3 Issuance of Equity Securities to Other Persons . If not all of the Major Investors elect to purchase their pro rata share of the Equity Securities, then the Company shall promptly notify in writing the Major Investors who do so elect and shall offer such Major Investors the right to acquire such unsubscribed shares. The Major Investors shall have ten (10) days after receipt of such notice to notify the Company of its election to purchase all or a portion thereof of the unsubscribed shares. If the Major Investors fail to exercise in full the rights of first refusal, the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Major Investor’s rights were not exercised, at a price and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Major Investors pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Section 4.2, the right provided hereunder shall be deemed to be revived and the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Major Investors in the manner provided above.

4.4 Termination and Waiver of Rights of First Refusal. The rights of first refusal established by this Section 4 shall not apply to, and shall terminate upon the earlier of (i) the effective date of the registration statement pertaining to the Initial Offering or (ii) a Change of Control. Notwithstanding Section 5.5 hereof, the rights of first refusal established by this Section 4 may be amended, or any provision waived with the written consent of the Company and the Major Investors holding more than fifty percent (50%) of the Registrable Securities held by all Major Investors, or as permitted by Section 5.5.

4.5 Transfer of Rights of First Refusal. The rights of first refusal of each Major Investor under this Section 4 may be transferred to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.9.

4.6 Excluded Securities. The rights of first refusal established by this Section 4 shall have no application to any of the following Equity Securities:

(a) shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board;

(b) stock issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement; and stock issued pursuant to any rights or agreements, options, warrants or convertible securities granted after the date of this Agreement, so long as the rights of first refusal established by this Section 4 were complied with, waived, or were inapplicable pursuant to any provision of this Section 4.6 with respect to the initial sale or grant by the Company of such rights or agreements, options, warrants or convertible securities;

 

- 22 -


(c) any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, strategic alliance, acquisition or similar business combination approved by the Board;

(d) any Equity Securities issued in connection with any stock split, stock dividend or recapitalization by the Company;

(e) any Equity Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing from a bank or similar financial or lending institution approved by the Board;

(f) any Equity Securities that are issued by the Company pursuant to a registration statement filed under the Securities Act;

(g) any Equity Securities issued in connection with strategic transactions involving the Company and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein has been approved by the Board and is not substantially for equity financing purposes; or

(h) any shares of Series B-2 Preferred Stock or B-3 Preferred Stock issued in any Closing (as such term is defined in the Purchase Agreement) occurring after the date hereof.

SECTION 5. MISCELLANEOUS.

5.1 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Delaware in all respects as such laws are applied to agreements among Delaware residents entered into and to be performed entirely within Delaware, without reference to conflicts of laws or principles thereof.

5.2 Successors and Assigns. The rights under this Agreement may be assigned by a Holder that is (a) a partnership to its partners or former partners in accordance with partnership interests, (b) a corporation to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (c) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (d) a partnership or fund to an affiliated partnership or fund managed by it or any of their respective directors, officers or partners, or (e) an individual to the Holder’s family member or trust for the benefit of an individual Holder; provided , however , that (i) 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 (ii) such transferee agrees in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of any of the above-mentioned transferees shall be aggregated together and with those of the transferring Holder. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, permitted assigns, heirs,

 

- 23 -


executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however , that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.

5.3 Entire Agreement. This Agreement, and the Exhibits hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.

5.4 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

5.5 Amendment and Waiver.

(a) Except as otherwise expressly provided, this Agreement may be amended or modified only upon the written consent of (i) the Company and (ii) the holders of more than fifty percent (50%) of the then-outstanding Registrable Securities (excluding shares of Registrable Securities held by the Universities and the Key Holders as long as such amendment affects all of the Investors and Common Stockholders in the same manner). For the avoidance of doubt, this Agreement may not be amended 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, termination, or waiver applies to all Investors in the same fashion.

(b) Except as otherwise expressly provided, the obligations of the Company and the rights of the Holders under this Agreement may be waived only with the written consent of the holders of more than fifty percent (50%) of the then-outstanding Registrable Securities (excluding shares of Registrable Securities held by the Universities and the Key Holders as long as such waiver affects all of the Investors and Common Stockholders in the same manner). Any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. 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.

 

- 24 -


(c) For the purposes of determining the number of Holders or Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company.

(d) The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver.

5.6 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

5.7 Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or Exhibit A and Exhibit B hereto or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.

5.8 Attorneys’ Fees. In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

5.9 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

5.10 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Series B Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares of Series B Preferred Stock shall

 

- 25 -


become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor,” a “Holder” and a party hereunder.

5.11 Prior Agreements. The Universities hereby acknowledge that upon execution of the Prior Agreement, all rights of first refusal, preemptive rights, registration rights and any notice period associated therewith granted in prior agreements by the Company relating to shares owned by the Universities, including without limitation the Registration Rights Agreement dated September 25, 2001, were waived, released, terminated and superseded in their entirety and of no further force or effect.

5.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf) 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.

5.13 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control (“Affiliated Stockholders”) shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such affiliated entities or persons may apportion such rights as among themselves in any manner they deem appropriate.

5.14 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

5.15 Termination. This Agreement shall terminate and be of no further force or effect upon the earlier of (i) the date five (5) years following the closing of the Initial Offering that results in the conversion of all outstanding shares of Preferred Stock and (ii) the date of the closing of a Deemed Liquidation Event, as defined in the Charter.

5.16 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.

 

- 26 -


5.17 Amendment of Prior Agreement. The Prior Agreement is hereby amended and superseded in its entirety and restated herein. Such amendment and restatement is effective upon the execution of this Agreement by the Company and the parties required for an amendment pursuant to the Prior Agreement. Upon such execution, all provisions of, rights granted and covenants made in the Prior Agreement are hereby superseded in their entirety by the provisions hereof and shall have no further force or effect.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

- 27 -


I N W ITNESS W HEREOF , the parties hereto have executed this A MENDED AND R ESTATED I NVESTOR R IGHTS A GREEMENT as of the date set forth in the first paragraph hereof.

 

COMPANY:       INVESTORS:
A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION       A LTA P ARTNERS VIII, L.P.
         By:   

Alta Partners Management VIII, LLC

By:   

/s/ Susan B. Washer

         its general partner
   Susan B. Washer, President         
         By:   

/s/ Edward Hurwitz

         Name:   

Edward Hurwitz

         Title:   

Director

         S.R. O NE , L IMITED
         By:   

/s/ Kent Gossett

         Name:   

Kent Gossett

         Title:   

Vice President and partner

         I NTERSOUTH P ARTNERS VI, L.P.
         By:    Intersouth Associates VI, LLC
            its general partner
         By:   

/s/ James Rosen

         Name:   

James Rosen

         Title:   

Member Manager

[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE]


       I NTER W EST P ARTNERS VIII, L.P.
       By:    InterWest Management Partners VIII, L.P.,
          its general partner
       By:   

/s/ Arnold L Oronsky

       Name:   

Arnold L Oronsky

       Title:   

Managing Director

       I NTER W EST I NVESTORS VIII, L.P.
       By:    InterWest Management Partners VIII, L.P.,
          its general partner
       By:   

/s/ Arnold L Oronsky

       Name:   

Arnold L Oronsky

       Title:   

Managing Director

       I NTER W EST I NVESTORS Q VIII, L.P.
       By:    InterWest Management Partners VIII, L.P.,
          its general partner
       By:   

/s/ Arnold L Oronsky

       Name:   

Arnold L Oronsky

       Title:   

Managing Director

[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

SIGNATURE PAGE]


M ED I MMUNE V ENTURES , I NC .
By:  

/s/ Ron Laufer

Name:  

Ron Laufer

Title:  

Sr. Managing Director

WS I NVESTMENT C OMPANY , LLC (2012A)
By:  

/s/ illegible

Name:  

 

Title:  

 

[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]


O SAGE U NIVERSITY P ARTNERS I, L.P.
By Osage University GP, LP, its general partner
By: Osage Partners, LLC, its general partner
By:  

/s/ William Harrington

William Harrington
Member

[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]


EXHIBIT A

SCHEDULE OF INVESTORS

 

N AME AND A DDRESS

A LTA P ARTNERS VIII, L.P.

One Embarcadero Center, 37th Floor

San Francisco, CA 94111

 

S.R. O NE , L IMITED

161 Washington Street,

Suite 500

Conshohocken, PA 19428

 

Osage University Partners I, L.P.

C / O O SAGE M ANAGEMENT C O ., L.P.

50 M ONUMENT R OAD

S UITE 201

B ALA C YNWYD , PA 19004

 

I NTERWEST P ARTNERS VIII, L.P.

2710 Sand Hill Road, Second Floor

Menlo Park, CA 94025

Attn: Arnold Oronsky

I NTER W EST I NVESTORS VIII, L.P.

2710 Sand Hill Road, Second Floor

Menlo Park, CA 94025

Attn: Arnold Oronsky

I NTER W EST I NVESTORS Q VIII, L.P.

2710 Sand Hill Road, Second Floor

Menlo Park, CA 94025

Attn: Arnold Oronsky

I NTERSOUTH P ARTNERS VI, L.P.

406 Blackwell Street

Durham, NC 27701

Attn: James Rosen

SCHEDULE OF INVESTORS


M ED I MMUNE V ENTURES , I NC .

One MedImmune Way

Gaithersburg, MD 20878

WS I NVESTMENT C OMPANY , LLC (2012A)

650 Page Mill Rd.

Palo Alto, CA 94304

Attn: James A. Terranova

S KYLINE V ENTURE P ARTNERS III, L.P.

125 University Avenue

Palo Alto, CA 94301

Attn: David Lowe

S KYLINE V ENTURE P ARTNERS Q UALIFIED P URCHASER F UND III, L.P.

125 University Avenue

Palo Alto, CA 94301

Attn: David Lowe

J OSEPH K LEIN , III

1724 Hillside Road

Stevenson, MD 21153

M ICHEL DE R OSEN

President & CEO

C/O Viropharma

405 Eagleview Boulevard

Exton, PA 19341

D UKE U NIVERSITY S PECIAL V ENTURES F UND

Duke Management Company

2200 W. Main Street, Suite 1000

Durham, NC 27705

GC&H I NVESTMENTS

John Cardoza

One Maritime Plaza, 20th Floor

San Francisco, CA 94111-3580

SCHEDULE OF INVESTORS


EXHIBIT B

SCHEDULE OF COMMON STOCKHOLDERS

 

     Shares  

C ORNELL R ESEARCH F OUNDATION , I NC .

20 Thomwood Drive, Suite 105

Ithaca, NY 14850

     2,500   

J OHNS H OPKINS U NIVERSITY

Licensing and Technology Development

Johns Hopkins University

100 N. Charles Street, 5 th Floor

Baltimore, MD 21201

     52,232   

T RUSTEES OF THE U NIVERSITY OF P ENNSYLVANIA

3160 Chestnut Street, Suite 200

Philadelphia, PA 19101-6283

     3,333   

U NIVERSITY OF F LORIDA R ESEARCH F OUNDATION

c/o University of Florida

Office of Technology Licensing

316 Walker Hall

Gainesville, FL 32611

     326,869   

B ARRY J. B YRNE

Pediatric Cardiology

University of Florida

1600 SW Archer Street

Gainesville, FL 32610-0216

     333,333   

W ILLIAM W. H AUSWIRTH

Department of Opthamology

University of Florida

P.O. Box 100284

Gainesville, FL 32611

     333,333   

N ICHOLAS M UZYCZKA

Powell Gene Therapy Center

University of Florida

College of Medicine

1600 SW Archer Rd., RM R-1-191

Gainesville, FL 32610

     333,333   


R. J UDE S AMULSKI

Campus Box No. 7352

Gene Therapy Center

University of North Carolina at Chapel Hill

Chapel Hill, NC 27599-7352

     333,333   

A LPHA N ET , I NC .

c/o John W. Walsh, Chairman and President

2937 SW 27 th Avenue, Suite 305

Miami, FL 33133

     333,333   

Exhibit 10.13

APPLIED GENETIC TECHNOLOGIES CORPORATION

STOCK OPTION PLAN

 

1. Purpose . The Applied Genetic Technologies Corporation Stock Option Plan (the “Plan”) is established to create an additional incentive for key employees, directors and consultants or advisors of Applied Genetic Technologies Corporation and any successor corporations thereto (collectively referred to as the “Company”), and any present or future parent and/or subsidiary corporations of such corporation (all of whom along with the Company being individually referred to as a “Participating Company” and collectively referred to as the “Participating Company Group”), to promote the financial success and progress of the Participating Company Group. For purposes of the Plan, a parent corporation and a subsidiary corporation shall be as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2. Administration . The Plan shall be administered by the Board of Directors of the Company (the “Board”) and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted herein, other than power to terminate or amend the Plan as provided in Paragraph 12 hereof, subject to the terms of the Plan and any applicable limitations imposed by law. All questions of interpretation of the Plan or of any option granted under the Plan (an “Option”) shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan and/or any Option. Options may be either incentive stock options as defined in Section 422 of the Code (“Incentive Stock Options”) or nonqualified stock options. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

 

3. Eligibility . The Options may be granted only to employees (including officers) and directors of the Participating Company Group or to individuals who are rendering services as consultants, advisors or other independent contractors to the Participating Company Group. The Board, in its sole discretion, shall determine which persons shall be granted Options (an “Optionee”). A director of the Company shall be eligible to be granted only a nonqualified stock option unless the director is also an employee of the Company. An individual who is rendering services as a consultant, advisor, or other independent contractor shall be eligible to be granted only a nonqualified stock option. An Optionee may, if otherwise eligible, be granted additional Options.

 

4.

Shares Subject to Option . Options shall be options for the purchase of the authorized but unissued common stock of the Company (the “Stock”), subject to adjustment as provided in Paragraph 10 below. The maximum number of shares of Stock which may be issued under the Plan shall be One Hundred Thirty-Seven Thousand Three Hundred Sixty-One

 

1


  (137,361) shares. In the event that any outstanding Option for any reason expires or is terminated or cancelled and/or shares of Stock subject to repurchase are repurchased by the Company, the shares allocable to the unexercised portion of such Option, or such repurchased shares, may again be subject to an Option grant. It is intended that the Plan shall constitute a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act of 1933, as amended (“Rule 701”), and that the Plan shall otherwise be administered in compliance with the requirements of Rule 701. To ensure such compliance, the Board shall maintain a record of shares subject to outstanding Options under the Plan and the exercise price of such Options, plus a record of all shares of Common Stock issued upon the exercise of such Options and the exercise price of such Options.

 

5. Time for Granting Options . All Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the shareholders of the Company.

 

6. Terms, Conditions and Form of Options . Subject to the provisions of the Plan, the Board shall determine for each Option (which need not be identical) the number of shares of Stock for which the Option is granted, whether the Option is to be treated as an Incentive Stock Option or as a nonqualified stock option and all other terms and conditions of the Option not inconsistent with the Plan. Options granted pursuant to the Plan shall comply with and be subject to the following terms and conditions:

 

  (a) Option Price . The option price for each Option shall be established in the sole discretion of the Board; provided, however, that (i) the option price per share for an Incentive Stock Option shall be not less than the fair market value of a share of Stock on the date of the granting of the Incentive Stock Option and (ii) the option price per share of an Incentive Stock Option granted to an Optionee who at the time the Incentive Stock Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code (a “Ten Percent Owner Optionee”) shall be not less than one hundred ten percent (110%) of the fair market value of a share of Stock on the date the Option is granted. For this purpose, “fair market value” means the value assigned to the stock for a given day by the Board, as determined pursuant to a reasonable method established by the Board that is consistent with the requirements of Sections 422 and 424 of the Code and the regulations thereunder (which method may be changed from time to time). Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a nonqualified stock option) may be granted by the Board in its discretion with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying with the provisions of Section 424(a) of the Code. Nothing hereinabove shall require that any such assumption or modification will result in the Option having the same characteristics, attributes or tax treatment as the Option for which it is substituted.

 

2


  (b) Exercise Period of Options . The Board shall have the power to set the time or times within which each Option shall be exercisable or the event or events upon the occurrence of which all or a portion of each Option shall be exercisable and the term of each Option; provided, however, that (i) no Incentive Stock Option shall be exercisable after the expiration of ten (10) years after the date such Incentive Stock Option is granted, (ii) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the date such Incentive Stock Option is granted and (iii) no Incentive Stock Option shall be exercisable after the date the Optionee’s employment with the Participating Company Group is terminated for cause (as determined in the sole discretion of the Board); and provided, further, an Option shall terminate and cease to be exercisable no later than three (3) months after the date on which the Optionee terminates employment with the Participating Company Group, unless the Optionee’s employment with the Participating Company Group shall have terminated as a result of the Optionee’s death or disability (within the meaning of Section 22(e)(3) of the Code), in which event the Option shall terminate and cease to be exercisable no later than twelve (12) months from the date on which the Optionee’s employment terminated. For this purpose, an Optionee’s employment shall be deemed to have terminated on account of death if the Optionee dies within three (3) months following the Optionee’s termination of employment.

 

  (c) Payment of Option Price . Payment of the option price for the number of shares of Stock being purchased pursuant to any Option shall be made in cash, by check, cash equivalent or in any other form as may be permitted by the Board in its discretion.

 

  (d) $100,000 Limitation . The aggregate fair market value, determined as of the date on which an Incentive Stock Option is granted, of the shares of Stock with respect to which incentive stock options (determined without regard to this subparagraph) are first exercisable during any calendar year (under this Plan or under any other plan of the Participating Company Group) by any Optionee shall not exceed $100,000. If such limitation would be exceeded with respect to an Optionee for a calendar year, the Incentive Stock Option shall be deemed a nonqualified stock option to the extent of such excess.

 

7. Standard Form of Stock Option Agreement . All Options shall be evidenced by a written award agreement substantially in the form of the nonqualified stock option agreement attached hereto as Exhibit A or the incentive stock option award agreement attached hereto as Exhibit B , as applicable, both of which are incorporated herein by reference (the “Standard Option Agreements”) or such other form as shall be approved by the Board consistent with the terms of this Plan.

 

8.

Transfer of Control . Upon a merger, consolidation, corporate reorganization, or any transaction in which all or substantially all of the assets or stock of the Company are sold, leased, transferred or otherwise disposed of (other than a mere reincorporation transaction or one in which the holders of capital stock of the Company immediately prior to such

 

3


  merger or consolidation continue to hold at least a majority of the voting power of the surviving corporation) (a “Transfer of Control”), then, except as may be otherwise provided in any individual stock option award agreement, any unvested portion of an outstanding Option that would otherwise become vested within twelve months following the effective time of the Transfer of Control shall become immediately vested as of a date prior to the Transfer of Control, which date shall be determined by the Board. Upon the occurrence of a Transfer of Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. For purposes of this Section 8, an Option shall be deemed assumed if, following the Transfer of Control, the Option confers the right to purchase in accordance with its terms and conditions, for each share of Stock subject to the Option immediately prior to the Transfer of Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of the Transfer of Control was entitled. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer of the Control shall terminate and cease to be outstanding effective as of the date of the Transfer of Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Transfer of Control and any consideration received pursuant to the Transfer of Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement.”

 

9. Authority to Vary Terms . The Board shall have the authority from time to time to vary the terms of the Standard Option Agreements either in connection with the grant of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of such revised or amended standard form or forms of stock option agreement shall be in accordance with the terms of the Plan. Such authority shall include, but not by way of limitation, the authority to grant Options which are not immediately exercisable.

 

10. Effect of Change in Stock Subject to Plan . The Board shall make appropriate adjustments in the number and class of shares of Stock subject to the Plan and to any outstanding Options and in the option price of any outstanding Options in the event of a stock dividend, stock split, reverse stock split, combination, reclassification or like change in the capital structure of the Company.

 

11. Options Non-Transferable . During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution.

 

12.

Termination or Amendment of Plan . The Board may terminate or amend the Plan at any time; provided however, that without the approval of the Company’s shareholders, there shall be (a) no increase in the total number of shares of Stock covered by the Plan (except by operation of the provisions of Paragraph 10 above), (b) no change in the class of

 

4


  persons eligible to receive Incentive Stock Options, and (c) no extension of the period during which Incentive Stock Options may be granted beyond the date which is ten (10) years following the date the Plan is adopted by the Company or the date the Plan is approved by the shareholders of the Company. In any event, no amendment may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such amendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option.

 

13. Miscellaneous

 

  (a) Nothing in this Plan or any Option granted hereunder shall confer upon any Optionee any right to continue in the employ of the Participating Company Group, or to serve as a director thereof, or interfere in any way with the right of a Participating Company to terminate his or her employment at any time. Unless specifically provided otherwise, no grant of an Option shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of a Participating Company for the benefit of its employees unless the Participating Company shall determine otherwise. No Optionee shall have any claim to an Option until it is actually granted under the Plan. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Board, be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as otherwise provided by the Committee.

 

  (b) The Plan and the grant of Options hereunder shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any United States government or regulatory agency as may be required.

 

  (c) The terms of the Plan shall be binding upon the Company, and its successors and assigns.

 

  (d) This Plan and all actions taken hereunder shall be governed by the laws of the State of Florida.

 

  (e) With respect to any payments not yet made to an Optionee by the Company, nothing contained herein shall give any such Optionee any rights that are greater than those of a general creditor of the Company.

 

  (f)

If any provision of this Plan or a Standard Option Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Standard Option Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the

 

5


  determination of the Board, materially altering the intent of the Plan or the Standard Option Agreement, it shall be stricken and the remainder of the Plan or the Standard Option Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing Plan was duly adopted by the Board of Directors of the Company on the 30 th day of July, 2001.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:   /s/ Barry J. Byrne
  Barry J. Byrne, Secretary

 

6


FIRST AMENDMENT

OF APPLIED GENETIC TECHNOLOGIES CORPORATION

STOCK OPTION PLAN

This First Amendment of Applied Genetic Technologies Corporation Stock Option Plan is dated as of November 25, 2003.

WHEREAS, the Board of Directors of Applied Genetic Technologies Corporation (the “ Corporation ”) has adopted and the stockholders of the Corporation have approved the Applied Genetic Technologies Stock Option Plan (the “ Plan ”); and

WHEREAS, the Board of Directors deems it to be in the best interest of the Company to amend the Plan in order to (i) eliminate, for options granted after November 25, 2003, the provision providing for immediate vesting of a portion of an outstanding stock option upon a transfer of control, and (ii) to increase the maximum number of shares of common stock issuable pursuant to options granted under the Plan from Two Hundred Twenty-Eight Thousand Nine Hundred Thirty-Five (228,935)* shares to Three Million Two Hundred Forty-Nine Thousand Three Hundred Ninety-Five (3,249,395) shares.

NOW, THEREFORE, the Plan shall be amended as follows:

1. The first sentence of Paragraph 8 of the Plan shall be deleted in its entirety.

2. The second sentence of Paragraph 8 of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

“Upon a merger, consolidation, corporate reorganization, or any other transaction in which all or substantially all of the assets or stock of the Company are sold, leased, transferred or otherwise disposed of (other than a mere reincorporation transaction or one in which the holders of the capital stock of the Company immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the surviving corporation) (a “Transfer of Control”), the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. Any outstanding Options not so assumed or substituted prior to the closing of a Transfer of Control shall be deemed canceled effective as of the closing of a Transfer of Control.”

 

* as adjusted to reflect the reverse 1 for 6 stock split effected at the time of the merger of Applied Genetic Technologies Corporation, a Florida corporation, into the Corporation

 

1


3. The second sentence of Paragraph 4 of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

“The maximum number of shares of Stock which may be issued under the Plan shall be Three Million Two Hundred Forty-Nine Thousand Three Hundred Ninety-Five (3,249,395) shares.

4. Except as herein amended, the terms and provisions of the Plan shall remain in full force and effect as originally adopted and approved.

IN WITNESS WHEREOF, the undersigned hereby certifies that this First Amendment was duly adopted by the Board of Directors of the Company as of the 25 th day of November, 2003 and by the stockholders of the Corporation on the 25 th day of November, 2003.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:   /s/ Sue Washer
  Sue Washer
  President

 

2


SECOND AMENDMENT

OF APPLIED GENETIC TECHNOLOGIES CORPORATION

STOCK OPTION PLAN

This Second Amendment of Applied Genetic Technologies Corporation Stock Option Plan is dated as of February 3, 2006.

WHEREAS, the Board of Directors of Applied Genetic Technologies Corporation (the “ Corporation ”) has adopted and the stockholders of the Corporation have approved the Applied Genetic Technologies Stock Option Plan (the “ Plan ”); and

WHEREAS, the Board of Directors deems it to be in the best interest of the Corporation to amend the Plan in order to increase the maximum number of shares of common stock issuable pursuant to options granted under the Plan to Four Million Two Hundred Twenty-Two Thousand (4,222,000) shares.

NOW, THEREFORE, the Plan shall be amended as follows:

1. The second sentence of Paragraph 4 of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

“The maximum number of shares of Stock which may be issued under the Plan shall be Four Million Two Hundred Twenty-Two Thousand (4,222,000) shares.

2. Except as herein amended, the terms and provisions of the Plan shall remain in full force and effect as originally adopted and approved.

IN WITNESS WHEREOF, the undersigned hereby certifies that this Second Amendment was duly adopted by the Board of Directors of the Corporation on November 9, 2005, to be effective February 3, 2006, and by the stockholders of the Corporation on February 3, 2006.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:   /s/ Susan B. Washer
  Susan B. Washer
  President

 

1


Exhibit A

THIRD AMENDMENT

OF APPLIED GENETIC TECHNOLOGIES CORPORATION

STOCK OPTION PLAN

WHEREAS, the Board of Directors of Applied Genetic Technologies Corporation (the “Corporation” ) has adopted and the stockholders of the Corporation have approved the Applied Genetic Technologies Stock Option Plan (the “Plan” ); and

WHEREAS, the Board of Directors deems it to be in the best interest of the Corporation to amend the Plan in order to increase the maximum number of shares of common stock issuable pursuant to options granted under the Plan from Four Million Two Hundred Twenty-two Thousand (4,222,000) shares to Five Million Six Hundred Thousand One Hundred Sixty-Two (5,600,162) shares.

NOW, THEREFORE, the Plan shall be amended as follows:

1. The second sentence of Paragraph 4 of the Plan shall be deleted in its entirety and the following substituted in lieu thereof:

“The maximum number of shares of Stock which may be issued under the Plan shall be Five Million Six Hundred Thousand One Hundred Sixty-Two (5,600,162) shares.

2. Except as herein amended, the terms and provisions of the Plan shall remain in full force and effect as originally adopted and approved.

IN WITNESS WHEREOF, the undersigned hereby certifies that this Third Amendment was duly adopted by the Board of Directors of the Corporation on September 18, 2009 and by the stockholders of the Corporation on September 9, 2010.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:  

/s/ Susan B. Washer

  Susan B. Washer
  President

Exhibit 10.14

APPLIED GENETIC TECHNOLOGIES CORPORATION

2011 STOCK INCENTIVE PLAN

 

1. Purpose

The purpose of this 2011 Stock Incentive Plan (the “ Plan ”) of Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company’s stockholders. Except where the context otherwise requires, the term “ Company ” includes the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “ Code ”) and other business ventures (including, without limitation, any joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “ Board ”).

 

2. Eligibility

All of the Company’s employees, officers, directors, and individual consultants and advisors (each a “ Service Provider ”) are eligible to receive options, restricted stock, restricted stock units and other stock-based awards (each, an “ Award ”) under the Plan. Each person who receives an Award under the Plan is deemed a “ Participant .”

 

3. Administration and Delegation

(a) Administration by Board of Directors . The Plan shall be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

(b) Appointment of Committees . To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “ Committee ”). All references in the Plan to the “ Board ” shall mean the Board or a Committee of the Board to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

 

4. Stock Available for Awards .

(a) Subject to adjustment under Section 8, Awards may be made under the Plan for up to 5,446,341 shares of the common stock of the Company, $0.001 par value per share (the “ Common Stock ”); provided , however , that initially, only 830.754 shares of Common Stock are authorized for issuance under the Plan, which number shall be increased automatically from time to time, up to an


aggregate of 5,446,341 shares of Common Stock, with one additional share becoming available for grant with respect to each option to purchase a share of Common Stock outstanding under the Company’s Stock Option Plan as of the date of the adoption of this Amendment which is terminated, surrendered or cancelled without having been exercised. If any Award issued under this Plan expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock tendered to the Company by a Participant to exercise an Award shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. At no time while there is any Option (as defined below) outstanding and held by a Participant who was a resident of the State of California on the date of grant of such Option, shall the total number of shares of Common Stock issuable upon exercise of all outstanding options and the total number of shares provided for under any stock bonus or similar plan or agreement of the Company exceed the applicable percentage as calculated in accordance with the conditions and exclusions of Section 260.140.45 of the California Code of Regulations, as amended (the “ California Regulations ”), based on the shares of the Company which are outstanding at the time the calculation is made unless the Plan complies with all conditions of Rule 701 of the Securities Act of 1933, as amended.

(b) Substitute Awards . In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code.

 

5. Stock Options

(a) General . The Board may grant options to purchase Common Stock (each, an “ Option ”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option, or portion of an Option, which is not intended to be or fails to qualify as an Incentive Stock Option (as hereinafter defined) shall be designated a “ Nonstatutory Stock Option .”

(b) Incentive Stock Options . An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “ Incentive Stock Option ”) shall only be granted to employees of the Company and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. A Participant who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall not be eligible for the grant of an Incentive Stock Option unless (i) the exercise price is at least 110% of the Fair Market Value (as defined below) on the date the Option is granted and (ii) such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date the Option is granted. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board pursuant to Section 9(f), including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option.

 

2


(c) Exercise Price . The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement. The exercise price shall be not less than 100% of the Fair Market Value on the date the Option is granted unless the Board specifically determines that the exercise price is intended to be less than such Fair Market Value, in which case the option agreement shall contain provisions complying with Section 409A of the Code; provided that if the Board approves the grant of an Option with an exercise price to be determined on a future dale, the exercise price shall be not less than 100% of the Fair Market Value on such future date. The term “ Fair Market Value ” shall mean, as of a given date: (i) if the Common Stock is listed on a national securities exchange, the last sale price of the Common Stock in the principal trading market for the Common Stock on such date; (ii) if the Common Stock is not listed on a national securities exchange, but is traded in the over-the counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; or (iii) if the Common Stock is not listed on a national securities exchange or traded in the over-the-counter market, such price as shall be determined by (or in a manner approved by) the Board in good faith and in compliance with applicable provisions of the Code and the regulations issued thereunder.

(d) Duration of Options . Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

(e) Exercise of Option . Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares of Common Stock for which the Option is exercised. Shares of Common Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company’s obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board).

(f) Payment Upon Exercise . Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as may otherwise be provided in the applicable option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) when the Common Stock is registered under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and to the extent provided for in the applicable option agreement or approved by the Board, in its sole discretion, by delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;

 

3


(4) to the extent permitted by applicable law and provided for in the applicable option agreement or approved by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

 

6. Restricted Stock; Restricted Stock Units

(a) General . The Board may grant Awards entitling recipients to acquire shares of Common Stock (“ Restricted Stock ”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Common Stock to be delivered at the time such shares of Common Stock vest (“ Restricted Stock Units ”) (Restricted Stock and Restricted Stock Units are each referred to herein as a “ Restricted Stock Award ”).

(b) Terms and Conditions . The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.

(c) Additional Provisions Relating to Restricted Stock.

(1) Dividends . Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided by the Board. If any such dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock other than an ordinary cash dividend, the shares, cash or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Each dividend payment will be made no later than the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the dale the dividends are paid to stockholders of that class of stock.

(2) Stock Certificates . The Company may require that any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and be deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). After the expiration of the applicable restriction periods, upon request of a Participant or as otherwise determined by the Company, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “ Designated Beneficiary ”). In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s then living spouse, or, if none, the Participant’s estate.

 

4


7. Other Stock-Based Awards

Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“ Other Stock-Based Awards ”), including without limitation stock appreciation rights and Awards entitling recipients to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the conditions of each Other Stock-Based Award, including any purchase price applicable thereto.

 

8. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization . In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the number and class of securities and exercise price per share of each outstanding Option, (iii) the number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award, and (iv) the terms of each other outstanding Award shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(b) Change in Control

(1) Definition . Unless otherwise specifically provided in an Award agreement, a “ Change in Control ” shall be deemed to have occurred upon the first to occur of:

(i) any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becoming a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing either (A) more than a majority of the voting power of the then outstanding securities of the Company, or (B) more than a majority of the aggregate fair market value of the then outstanding securities of the Company; provided , however , that a Change in Control shall not be deemed to occur as a result of (x) a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than majority of all votes to which all stockholders of the parent corporation would be entitled in the election of directors, or (y) a transaction in which the person acquires newly issued securities of the Company in exchange for an investment in the Company; or

(ii) the consummation of either: (A) a merger, share exchange, consolidation or reorganization of the Company where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger, share exchange, consolidation or reorganization, shares entitling such stockholders to either (x) more than a majority of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, or (y) more than a majority of the aggregate fair market value of then outstanding securities of the Company; or (B) a sale or other disposition of all or substantially all of the assets of the Company.

 

5


(2) Consequences of a Change in Control on Awards Other than Restricted Stock Awards . In connection with a Change in Control, the Board may take any one or more of the following actions as to all (or any portion of) outstanding Awards other than Restricted Stock Awards on such terms as the Board determines: (i) provide that Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) in compliance with the applicable provisions of the Code, including Code Sections 409A, 422 and 424, (ii) upon written notice to a Participant, provide that the Participant’s unexercised Options or other unexercised Awards will terminate immediately prior to the consummation of such Change in Control unless exercised by the Participant within a specified period following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Change in Control, (iv) in the event of a Change in Control under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Change in Control (the “ Acquisition Price ”), make or provide for a cash payment to a Participant equal to the excess, if any, of (A) the Acquisition Price times the number of shares of Common Stock subject to the Participant’s Options or other Awards (to the extent the exercise price does not exceed the Acquisition Price) less (B) the aggregate exercise price of all such outstanding Options or other Awards and any applicable tax withholdings, in exchange for the termination of such Options or other Awards, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise price thereof) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 8(b), the Board shall not be obligated by the Plan to treat all Awards, or all Awards of the same type, identically.

For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Change in Control, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Change in Control, the consideration (whether cash, securities or other property) received as a result of the Change in Control by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Change in Control (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided , however , that if the consideration received as a result of the Change in Control is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) with equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Change in Control.

(3) Consequences of a Change in Control on Restricted Stock Awards . Upon the occurrence of a Change in Control other than a liquidation or dissolution of the Company, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Change in Control in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. Upon the occurrence of a Change in Control involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, all restrictions and conditions on all Restricted Stock Awards then outstanding shall automatically be deemed terminated or satisfied.

 

6


9. General Provisions Applicable to Awards

(a) Transferability of Awards . Except as the Board may otherwise expressly determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation . Unless otherwise expressly determined by the Board, each Incentive Stock Option shall be evidenced by a Notice of Incentive Stock Option and Incentive Stock Option Agreement substantially in the form attached as Exhibit A , each Nonstatutory Stock Option shall be evidenced by a Notice of Nonstatutory Stock Option and Nonstatutory Stock Option Agreement substantially in the form attached as Exhibit B , and each Restricted Stock Award shall be evidenced by a Summary of Restricted Stock Purchase and Restricted Stock Purchase Agreement substantially in the form attached as Exhibit C . Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion . Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status . The Board shall determine the effect on an Award of the disability, death, termination of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.

(e) Withholding . The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations. Payment of withholding obligations is due before the Company will issue any shares on exercise or release from forfeiture of an Award or, if the Company so requires, at the same time as is payment of the exercise price unless the Company determines otherwise. If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided , however , except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

 

7


(f) Amendment of Award .

(1) The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

(2) The Board may, without stockholder approval, amend any outstanding Award granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Award provided that such amended exercise price is at least equal to the then-current Fair Market Value. The Board may also, without stockholder approval, cancel any outstanding award (whether or not granted under the Plan) and grant in substitution new Awards under the Plan covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled award.

(g) Conditions on Delivery of Stock . The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules, regulations or contracts of the Company.

(h) Acceleration . The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

 

10. Miscellaneous

(a) No Right To Employment or Other Status . No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder . Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend or otherwise and the exercise price of and the number of shares subject to such Option are adjusted as of the effective date of the stock dividend or split (rather than as of the record date for such stock dividend or split), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend or split shall be entitled to receive, on the distribution date, the stock dividend or split with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend or split.

 

8


(c) Effective Date and Term of Plan . The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under the Plan after the expiration of 10 years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan . The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided , however , that if at any time the approval of the Company’s stockholders is required as to any modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 10(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the amendment is adopted, provided the Board determines that such amendment does not materially and adversely affect the rights of Participants under the Plan.

(e) Authorization of Sub-Plans . The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax law’s of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

(f) Compliance with Code Section 409A . It is intended that all Awards granted hereunder be either exempt from, or issued in compliance with, Code Section 409A. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Code Section 409A is not so exempt or compliant, or for any action taken by the Board.

(g) Governing Law . The provisions of the Plan and all Awards made hereunder 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 the internal laws of the State of Florida (without reference to conflict of law provisions), as to all other matters.

*  *  *  *  *  *  *  *

 

9


APPLIED GENETIC TECHNOLOGIES CORPORATION

2011 STOCK INCENTIVE PLAN

CALIFORNIA SUPPLEMENT

Pursuant to Section 10(e) of the Plan, the Board has adopted this supplement for purposes of satisfying the requirements of Section 25102(o) of the California Corporations Code, as amended:

Any Awards granted under the Plan to a Participant who is a resident of the State of California on the date of grant (a “ California Participant ”) shall be subject to the following additional limitations, terms and conditions:

1. Additional Limitations on Awards .

(a) Generally . The terms of all Awards granted to a California Participant under Sections 5, 6 or 7 of the Plan shall comply, to the extent applicable, with Section 260.140.41 or Section 260.140.42 of the California Regulations.

(b) Maximum Duration of Options . No Options granted to California Participants shall have a term in excess of 10 years measured from the Option grant date.

(c) Minimum Exercise Period Following Termination . Unless a California Participant’s employment is terminated for cause (as defined by applicable law, the terms of any contract of employment between the Company and such Participant, or in the instrument evidencing the grant of such Participant’s Option), in the event of termination of employment of such Participant, such Participant shall have the right to exercise an Option, to the extent that he or she was otherwise entitled to exercise such Option on the date employment terminated, until the earlier of the Option expiration date or: (i) at least six months from the date of termination, if termination was caused by such Participant’s death or “ permanent and total disability ” (within the meaning of Section 22(e)(3) of the Code) and (ii) at least 30 days from the date of termination, if termination was caused other than by such Participant’s death or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code).

2. Additional Requirement to Provide Information to California Participants . Unless the Plan or agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended (“ Rule 701 ”), the Company shall provide to each California Participant and to each California Participant who acquires Common Stock pursuant to the Plan, not less frequently than annually, copies of annual financial statements (which need not be audited). The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information or when the Plan or agreement complies with all conditions of Rule 701.

3. Additional Limitations on Timing of Awards . No Award granted to a California Participant shall become exercisable, vested or realizable, as applicable to such Award, unless the Plan has been approved by the holders of at least a majority of the Company’s outstanding voting securities by the later of (i) within 12 months before or after the date the Plan was adopted by the Board or the agreement entered into; and (ii) prior to or within 12 months of the granting of any option or issuance of any security under the Plan or agreement to a California Participant.

4. Additional Restriction Regarding Recapitalizations, Stock Splits, Etc. For purposes of Section 8 of the Plan, in the event of a stock split, reverse stock split, stock dividend, recapitalization, combination,


reclassification or other distribution of the Company’s securities, the number of securities allocated to each California Participant must be adjusted proportionately and without the receipt by the Company of any consideration from any California Participant.

 

A - 2


EXHIBIT A

Notice of Incentive Stock Option

and

Incentive Stock Option Agreement


APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTICE OF INCENTIVE STOCK OPTION

2011 STOCK INCENTIVE PLAN

Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”) grants to the undersigned (the “ Participant ”) the following incentive stock option to purchase shares (the “ Shares ”) of the common stock of the Company, par value $0.001 per share (the “ Common Stock ”), pursuant to the Company’s 2011 Stock Incentive Plan (the “ Plan ”):

 

Participant:    * [ Participant Name ]
Total Number of Shares:    * [ Number of Shares ]
Grant Date:    * [ Grant Date ]
Exercise Price per Share:    $* [ Exercise Price ]
Vesting Commencement Date:    * [ Vesting Date ]
Vesting Schedule:    * [ 25% of the Total Number of Shares shall vest and become exercisable on the 1 year anniversary of the Vesting Commencement Date and 1/48 of the Total Number of Shares shall vest and become exercisable on the corresponding day of each month thereafter, or on the last day of each month, to the extent each month thereafter does not have the corresponding day. until all of the Shares have vested on the fourth anniversary of the Vesting Commencement Date, subject to Participant continuing to be a Service Provider through each such date. ] * [ In addition, this Option may vest and become exercisable on an accelerated basis under Section 2 of the Incentive Stock Option Agreement. ]
Final Exercise Date:    * [ Expiration Date ] . This Option may expire earlier pursuant to Section 3 of the Incentive Stock Option Agreement if the Participant’s relationship with the Company is terminated or pursuant to Section 8 of the Plan.

This incentive stock option is granted under and governed by the terms and conditions of the Plan and the Incentive Stock Option Agreement, both of which are incorporated herein by reference. By signing below, the Participant accepts this incentive stock option, acknowledges receipt of a copy of the Plan and the Incentive Stock Option Agreement, and agrees to the terms thereof.

 

*[PARTICIPANT NAME]:     APPLIED GENETIC TECHNOLOGIES CORPORATION:

 

    By:  

 

(Signature)      
      Name:  

 

Address:  

 

    Title:  

 

 

    Date:  

 


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

APPLIED GENETIC TECHNOLOGIES CORPORATION

INCENTIVE STOCK OPTION AGREEMENT

Granted under 2011 Stock Incentive Plan

1. Grant of Option .

This Incentive Stock Option Agreement (the “ Agreement ”) evidences the grant by Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), on the Grant Date to the Participant, an employee of the Company, of an option (this “ Option ”) to purchase, in whole or in part, on the terms provided herein and in the Plan, the Total Number of Shares at the Exercise Price per Share, all as defined and set forth in the accompanying Notice of Incentive Stock Option (the “ Notice ”). Capitalized terms that are not otherwise defined herein or in the Notice shall have the meanings given to such terms in the Plan.

It is intended that this Option shall be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “ Code ”). If for any reason the Option, or any portion thereof, does not meet the requirements of Section 422 of the Code, then the Option, or any portion thereof, as necessary, shall be deemed a nonstatutory stock option granted under the Plan. Except as otherwise indicated by the context, the term “Participant,” as used in this Agreement, shall include any person who acquires the right to exercise this Option validly under its terms.

2. Vesting Schedule .

This Option shall vest and become exercisable at the time or times set forth in the accompanying Notice. [ In addition, this Option may vest and become exercisable on an accelerated basis as follows:

* [ Insert any applicable acceleration provisions, such as one of the following examples. ]

* [ If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall become exercisable as to [partial acceleration : that portion of the Total Number of Shares that otherwise would have vested during the * [              ] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ] OR [full acceleration : 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]

[Single Trigger] * [ Immediately prior to the effective date of a Change in Control, this Option shall vest and become exercisable as to [partial acceleration : that portion of the Total Number of Shares


that otherwise would have vested during the * [              ] month period following the effective date of such Change in Control, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]

[Double Trigger ] * [ If (a) upon the consummation of a Change in Control this Option is assumed, or a substantially equivalent award is substituted, by the acquiring or succeeding corporation (in accordance with Section 8(b)(2)(i) of the Plan) and (b) within * [12] months following such Change in Control the Participant’s status as a Service Provider is terminated by the acquiring or succeeding corporation without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the * [              ] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]

3. Exercise of Option .

(a) Form of Exercise . Each election to exercise this Option shall be in writing in substantially the form of the Notice of Stock Option Exercise attached to this Agreement as Exhibit A , signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of Shares subject to this Option; provided that , no partial exercise of this Option may be for any fractional share.

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this Option may not be exercised unless the Participant, at the time of the exercise of this Option, is, and has been at all times since the Grant Date, a Service Provider to or of the Company or any subsidiary of the Company as defined in Section 424 (f) of the Code (an “ Eligible Participant ”).

(c) Termination of Relationship with the Company . If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this Option shall terminate three months after such cessation (but in no event after the Final Exercise Date); provided that, this Option shall be exercisable only to the extent that the Participant was entitled to exercise this Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment agreement, confidentiality and nondisclosure agreement, or other agreement between the Participant and the Company, the right to exercise this Option shall terminate immediately upon such violation.

(d) Exercise Period Upon Death or Disability . If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while the Participant is an Eligible Participant and the Company has not terminated such relationship for “Cause” (as defined below), this Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee); provided that, this Option shall be exercisable only to the extent that this Option was exercisable by the Participant on the date of the Participant’s death or disability, and further provided that this Option shall not be exercisable after the Final Exercise Date.

 

2


(e) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company for Cause (as defined below), the right to exercise this Option shall terminate immediately upon the effective date of such termination. If the Participant is party to an agreement with the Company that contains an applicable definition of “cause”, “ Cause ” shall have the meaning ascribed to such term in such agreement. Otherwise, “ Cause ” shall mean willful misconduct by the Participant or willful failure by the Participant to perform the Participant’s responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for Cause if the Company determines, within 30 days after the Participant’s resignation, that discharge for cause was warranted.

4. Restrictions on Transfer; Rights of First Refusal and Stockholder Agreements .

(a) Bylaws . The Participant acknowledges and agrees that the Shares are subject to the provisions of the Company’s Bylaws, as amended from time to time (the “ Bylaws ”), including without limitation, all restrictions on transfer and rights of first refusal described in the Bylaws. The Participant may inspect the Bylaws at the Company’s principal office.

(b) Legend . Any certificate representing Shares shall bear a legend substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

“The securities represented by this certificate, and the transfer thereof, are subject to the restriction on transfer provisions of the Bylaws of the Company, a copy of which is on file in, and may be examined at, the principal office of the Company”

(c) Stockholder Agreements . The Participant acknowledges and agrees that the Company may condition the issuance of the Shares upon the Participant joining and becoming a party to such stockholder agreements, which may impose certain contractual rights and obligations on the Shares, as may be entered into from time to time by and among the Company and certain holders of the Company’s capital stock.

5. Agreement in Connection with Public Offering . The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”): (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, which period may be extended upon the request of the underwriters for an additional period of up to fifteen (15) days if the Company issues or proposes to issue an earnings or other public release within fifteen (15) days of the expiration of the 180-day lockup period, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering.

The Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters of such offering which are consistent with the foregoing or

 

3


which are necessary to give further effect thereto. In addition, if requested, by the Company or the underwriters of such offering, the Participant shall provide, within 10 days of such request, such information as may be required by the Company or such underwriters in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 5 shall not apply to a registration relating solely to employee benefits plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the applicable period. Participant agrees that any transferee of this Option or Shares pursuant to this Agreement shall be bound by this Section 5.

6. Tax Matters .

(a) Withholding . No Shares shall be issued pursuant to the exercise of this Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this Option.

(b) Disqualifying Disposition . If the Participant disposes of Shares acquired upon exercise of this Option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this Option, the Participant shall immediately notify the Company in writing of such disposition and shall timely satisfy all resulting tax obligations and shall hold the Company harmless with respect to any such tax obligations.

(c) Code Section 409A . The Exercise Price is intended to be the Fair Market Value of the Common Stock on the Grant Date. The Company has determined the Fair Market Value of the Common Stock in good faith and using the reasonable application of a reasonable valuation method, for purposes of determining the Exercise Price. Notwithstanding this, the Internal Revenue Service may assert that the Fair Market Value of the Common Stock on the Grant Date was greater than the Exercise Price. Under Code Section 409A, if the Exercise Price is less than the Fair Market Value of the Common Stock as of the Grant Date, this Option may be treated as a form of deferred compensation and the Participant may be subject to an additional twenty percent (20%) tax, plus interest and possible penalties. The Participant acknowledges that the Company has advised the Participant to consult with a tax adviser regarding the potential impact of Code Section 409A and that the Company, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify this Agreement in any manner and delay the payment of any amounts payable pursuant to this Agreement to the minimum extent necessary to meet the requirements of Code Section 409A, as amplified by any Internal Revenue Service or U.S. Treasury Department regulations or guidance as the Company deems appropriate or advisable.

7. Nontransferability of Option . This Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this Option shall be exercisable only by the Participant.

8. Provisions of the Plan . This Option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Option.

9 Entire Agreement; Governing Law . The Plan and the accompanying Notice are incorporated herein by reference. This Agreement, the Notice and the Plan constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. 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 the internal laws of the State of Florida.

 

4


10. Amendment . Except as set forth in Section 6(c), this Agreement may not be modified or amended in any manner adverse to the Participant’s interest except by means of a writing signed by the Company and Participant.

11. No Guarantee of Continued Service . THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF OPTIONS PURSUANT TO THE VESTING SCHEDULE SET FORTH HEREIN AND IN THE NOTICE ARE EARNED ONLY BY CONTINUING SERVICE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PARTICIPANT’S SERVICE WITH OR WITHOUT CAUSE.

*            *             *

 

5


Exhibit A

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTICE OF INCENTIVE STOCK OPTION EXERCISE

2011 STOCK INCENTIVE PLAN

The undersigned (the “ Participant ”) has previously been awarded an incentive stock option (the “ Option ”) to purchase shares (the “ Shares ”) of the common stock of Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), pursuant to the Company’s 2011 Stock Incentive Plan (the “ Plan ”), and hereby notifies the Company of the Participant’s desire to exercise the Option on the terms set forth herein:

 

PARTICIPANT INFORMATION:       OPTION INFORMATION:   
Name:  

 

         Grant Date:   

 

  
Address:  

 

         Exercise Price Per Share:    $                
 

 

              
Taxpayer            Total Shares Covered      
ID #:  

 

         by Option:   

 

  

EXERCISE INFORMATION:

 

Number of Shares Being Purchased:  

 

 
Aggregate Exercise Price:   $               
Form of Payment (check all that apply):   ¨ Check for $              made payable to “Applied Genetic Technologies Corporation”
 

 

¨ Cash in the amount of $             

 
Please register the Shares in my name as follows:  

 

 
  (Print name as it is to appear on stock certificate)  
   


REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANT:

The Participant hereby represents and warrants to the Company that, as of the date hereof:

1. I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “ Securities Act ”), or any rule or regulation under the Securities Act.

2. I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

3. 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.

4. 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.

5. I acknowledge that I am acquiring the Shares subject to all other terms of the Plan, including the Notice of Incentive Stock Option and related Incentive Stock Option Agreement.

6. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Shares at this time. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me.

7. I acknowledge that the Shares remain subject to the Company’s right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Incentive Stock Option and related Incentive Stock Option Agreement.

8. I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

 

(Print Participant Name)

 

(Signature)
Date:  

 


EXHIBIT B

Notice of Nonstatutory Stock Option

and

Nonstatutory Stock Option Agreement


APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTICE OF NONSTATUTORY STOCK OPTION

2011 STOCK INCENTIVE PLAN

Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”) grants to the undersigned (the “ Participant ”) the following nonstatutory stock option to purchase shares (the “ Shares ”) of the common stock of the Company, par value $0.001 per share (the “ Common Stock ”) pursuant to the Company’s 2011 Stock Incentive Plan (the “ Plan ”):

 

Participant:    * [ Participant Name ]
Total Number of Shares:    * [ Number of Shares ]
Grant Date:    * [ Grant Date ]
Exercise Price per Share:    $* [ Exercise Price ]
Vesting Commencement Date:    * [ Vesting Date ]
Vesting Schedule:    * [ 25% of the Total Number of Shares shall vest and become exercisable on the 1 year anniversary of the Vesting Commencement Date and 1/48 of the Total Number of Shares shall vest and become exercisable on the corresponding day of each month thereafter, or on the last day of each month, to the extent each month thereafter does not have the corresponding day, until all of the Shares have vested on the fourth anniversary of the Vesting Commencement Date, subject to Participant continuing to be a Service Provider through each such date. ] * [ In addition, this option may vest and become exercisable on an accelerated basis under Section 2 of the Nonstatutory Stock Option Agreement. ]
Final Exercise Date:    * [ Expiration Date ] . This option may expire earlier pursuant to Section 3 of the Nonstatutory Stock Option Agreement if the Participant’s relationship with the Company is terminated, or pursuant to Section 8 of the Plan.

This nonstatutory stock option is granted under and governed by the terms and conditions of the Plan and the Nonstatutory Stock Option Agreement, both of which are incorporated herein by reference. By signing below, the Participant accepts this nonstatutory stock option, acknowledges receipt of a copy of the Plan and the Nonstatutory Stock Option Agreement, and agrees to the terms thereof.

 

[PARTICIPANT NAME]:     APPLIED GENETIC TECHNOLOGIES CORPORATION:

 

    By:  

 

(Signature)      
    Name:  

 

Address:  

 

    Title:  

 

 

    Date:  

 


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

APPLIED GENETIC TECHNOLOGIES CORPORATION

NONSTATUTORY STOCK OPTION AGREEMENT

Granted Under 2011 Stock Incentive Plan

1. Grant of Option .

This Nonstatutory Stock Option Agreement (the “ Agreement ”) evidences the grant by Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), on the Grant Date to the Participant, a [ n ] * [ employee/officer/director/consultant/advisor ] of the Company, of an option (this “ Option ”) to purchase, in whole or in part, on the terms provided herein and in the Plan, the Total Number of Shares of Common Stock at the Exercise Price per Share, all as defined and set forth in the accompanying Notice of Nonstatutory Stock Option (the “ Notice ”). Capitalized terms that are not otherwise defined herein or in the Notice shall have the meanings given to such terms in the Plan.

It is intended that this Option shall not be an incentive stock option as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “ Code ”). Except as otherwise indicated by the context, the term “Participant,” as used in this Agreement, shall include any person who acquires the right to exercise this Option validly under its terms.

2. Vesting Schedule .

This Option shall vest and become exercisable at the time or times set forth in the accompanying Notice. [ In addition, the Option may vest and become exercisable on an accelerated basis as follows:

* [ Insert any applicable acceleration provisions. ]

* [ If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the * [              ] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision.) OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]

[Single Trigger] * [ Immediately prior to the effective date of a Change in Control, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the * [              ] month period following the effective date of such Change in Control, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]


[Double Trigger] * [ If (a) upon the consummation of a Change in Control this Option is assumed, or a substantially equivalent award is substituted, by the acquiring or succeeding corporation (in accordance with Section 8(b)(2)(i) of the Plan) and (b) within * [12] months following such Change in Control the Participant’s status as a Service Provider is terminated by the acquiring or succeeding corporation without Cause (as defined in Section 3(e) below), then, immediately upon the effective date of such termination, this Option shall vest and become exercisable as to [partial acceleration: that portion of the Total Number of Shares that otherwise would have vested during the * [              ] month period following the effective date of such termination, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ] OR [full acceleration: 100% of the Total Number of Shares, it being understood that in no event shall the Participant be entitled to exercise the Option to purchase greater than the Total Number of Shares as a result of this provision. ]

3. Exercise of Option .

(a) Form of Exercise . Each election to exercise this Option shall be in writing in substantially the form of the Notice of Stock Option Exercise attached to this Agreement as Exhibit A , signed by the Participant, and received by the Company at its principal office, accompanied by this Agreement, and payment in full in the manner provided in the Plan. The Participant may purchase less than the number of Shares subject to this Option; provided that , no partial exercise of this Option may be for any fractional share.

(b) Continuous Relationship with the Company Required . Except as otherwise provided in this Section 3, this Option may not be exercised unless the Participant, at the time of the exercise of this Option, is, and has been at all times since the Grant Date, a Service Provider to or of the Company or any subsidiary of the Company as defined in Section 424 (f) of the Code (an “ Eligible Participant ”).

(c) Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this Option shall terminate * [ three months ] after such cessation (but in no event after the Final Exercise Date); provided that, this Option shall be exercisable only to the extent that the Participant was entitled to exercise this Option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentiality provisions of any employment agreement, confidentiality and nondisclosure agreement, or other agreement between the Participant and the Company, the right to exercise this Option shall terminate immediately upon such violation.

(d) Exercise Period Upon Death or Disability . If the Participant dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Final Exercise Date while the Participant is an Eligible Participant and the Company has not terminated such relationship for “Cause” (as defined below), this Option shall be exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee); provided that, this Option shall be exercisable only to the extent that this Option was exercisable by the Participant on the date of the Participant’s death or disability, and further provided that this Option shall not be exercisable after the Final Exercise Date.

(e) Termination for Cause . If, prior to the Final Exercise Date, the Participant’s status as a Service Provider is terminated by the Company for Cause (as defined below), the right to exercise this Option shall terminate immediately upon the effective date of such termination. If the Participant is party

 

2


to an agreement with the Company that contains an applicable definition of “cause”, “ Cause ” shall have the meaning ascribed to such term in such agreement. Otherwise, “ Cause ” shall mean willful misconduct by the Participant or willful failure by the Participant to perform the Participant’s responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant shall be considered to have been discharged for “Cause” if the Company determines, within 30 days after the Participant’s resignation, that discharge for cause was warranted.

4. Restrictions on Transfer; Rights of First Refusal and Stockholder Agreements .

(a) Bylaws . The Participant acknowledges and agrees that the Shares are subject to the provisions of the Company’s Bylaws, as amended from time to time (the “Bylaws”), including without limitation, all restrictions on transfer and rights of first refusal described in the Bylaws. The Participant may inspect the Bylaws at the Company’s principal office.

(b) Legend . Any certificate representing Shares shall bear a legend substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

“The securities represented by this certificate, and the transfer thereof, are subject to the restriction on transfer provisions of the Bylaws of the Company, a copy of which is on file in, and may be examined at, the principal office of the Company.”

(c) Stockholder Agreements . The Participant acknowledges and agrees that [the Company may condition the issuance of the Shares upon the Participant joining and becoming a party to such stockholder agreements, which may impose certain contractual rights and obligations on the Shares, as may be entered into from time to time by and among the Company and certain holders of the Company’s capital stock.

5. Agreement in Connection with Public Offering .

The Participant agrees, in connection with the initial underwritten public offering of the Company’s securities pursuant to a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”): (i) not to sell, make short sale of, loan, grant any options for the purchase of, or otherwise dispose of any shares of Common Stock held by the Participant (other than those shares included in the offering) without the prior written consent of the Company or the underwriters managing such initial underwritten public offering of the Company’s securities for a period of 180 days from the effective date of such registration statement, which period may be extended upon the request of the underwriters for an additional period of up to fifteen (15) days if the Company issues or proposes to issue an earnings or other public release within fifteen (15) days of the expiration of the 180-day lockup period, and (ii) to execute any agreement reflecting clause (i) above as may be requested by the Company or the managing underwriters at the time of such offering.

The Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters of such offering which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested, by the Company or the underwriters of such offering, the Participant shall provide, within 10 days of such request, such information as may be required by the Company or such underwriters in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 5 shall not apply to a registration relating solely

 

3


to employee benefits plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of the applicable period. Participant agrees that any transferee of this Option or Shares pursuant to this Agreement shall be bound by this Section 5.

6. Tax Matters .

(a) Withholding . No Shares shall be issued pursuant to the exercise of this Option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding or other taxes required by law to be withheld in respect of this Option.

(b) Code Section 409A . The Exercise Price is intended to be not less than the Fair Market Value of the Common Stock on the Grant Date. The Company has determined the Fair Market Value of the Common Stock in good faith and using the reasonable application of a reasonable valuation method, for purposes of determining the Exercise Price. Notwithstanding this, the Internal Revenue Service may assert that the Fair Market Value of the Common Stock on the Grant Date was greater than the Exercise Price. Under Code Section 409A, if the Exercise Price is less than the Fair Market Value of the Common Stock as of the Grant Date, this Option may be treated as a form of deferred compensation and the Participant may be subject to an additional twenty percent (20%) tax, plus interest and possible penalties. The Participant acknowledges that the Company has advised the Participant to consult with a tax adviser regarding the potential impact of Code Section 409A and that the Company, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify this Agreement in any manner and delay the payment of any amounts payable pursuant to this Agreement to the minimum extent necessary to meet the requirements of Code Section 409A, as amplified by any Internal Revenue Service or U.S. Treasury Department regulations or guidance as the Company deems appropriate or advisable.

7. Nontransferability of Option . This Option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this Option shall be exercisable only by the Participant.

8. Provisions of the Plan . This Option is subject to the provisions of the Plan, a copy of which is furnished to the Participant with this Option.

9 Entire Agreement; Governing Law . The Plan and the Notice are incorporated herein by reference. This Agreement, the Notice and the Plan constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof. 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 the internal laws of the State of Florida (without reference to conflict of law provisions), as to all other matters.

10. Amendment . Except as set forth in Section 6(b), this Agreement may not be modified or amended in any manner adverse to the Participant’s interest except by means of a writing signed by the Company and Participant.

11. No Guarantee of Continued Service . THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF OPTIONS PURSUANT TO THE VESTING SCHEDULE SET FORTH HEREIN AND IN THE NOTICE ARE EARNED ONLY BY CONTINUING SERVICE AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS

 

4


OPTION OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED SERVICE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE PARTICIPANT’S SERVICE WITH OR WITHOUT CAUSE.

*  *  *  *  *  *  *  *  *  *  *

 

5


Exhibit A

APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTICE OF NONSTATUTORY STOCK OPTION EXERCISE

2011 STOCK INCENTIVE PLAN

The undersigned (the “ Participant ”) has previously been awarded a nonstatutory stock option (the “ Option ”) to purchase shares (the “ Shares ”) of the common stock of Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), pursuant to the Company’s 2011 Stock Incentive Plan (the “ Plan ”), and hereby notifies the Company of the Participant’s desire to exercise the Option on the terms set forth herein:

 

PARTICIPANT INFORMATION:          OPTION INFORMATION:  
Name:  

 

         Grant Date:  

 

 
Address:  

 

        

Exercise Price Per

Share:

  $               
 

 

            
Taxpayer            Total Shares Covered    
ID#:  

 

         by Option:  

 

 

 

EXERCISE INFORMATION:  
Number of Shares Being Purchased:  

 

 
Aggregate Exercise Price:   $                
Form of Payment (check all that apply):  

¨ Check for $              made payable to “Applied Genetic Technologies Corporation”

 

¨ Cash in the amount of $             

Please register the Shares in my name as follows:  

 

 
  (Print name as it is to appear on stock certificate)


REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANT:

The Participant hereby represents and warrants to the Company that, as of the date hereof:

1. I am purchasing the Shares for my own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act of 1933 (the “ Securities Act ”), or any rule or regulation under the Securities Act.

2. I have had such opportunity as I have deemed adequate to obtain from representatives of the Company such information as is necessary to permit me to evaluate the merits and risks of my investment in the Company.

3. 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.

4. 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.

5. I acknowledge that I am acquiring the Shares subject to all other terms of the Plan, including the Notice of Nonstatutory Stock Option and related Nonstatutory Stock Option Agreement.

6. I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Shares at this time. I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me.

7. I acknowledge that the Shares remain subject to the Company’s right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Nonstatutory Stock Option and related Nonstatutory Stock Option Agreement.

8. I understand that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

 

(Print Participant Name)

 

(Signature)
 
Date:  

 


EXHIBIT C

Summary of Restricted Stock Purchase and Restricted Stock

Purchase Agreement


AMENDMENT NO. 1

TO THE

APPLIED GENETIC TECHNOLOGIES CORPORATION

2011 STOCK INCENTIVE PLAN

Effective November 14, 2012, in accordance with resolutions adopted by (i) the Board of Directors of Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), on November 14, 2012, and (ii) the stockholders of the Company on November 14, 2012, the Applied Genetic Technologies Corporation 2011 Stock Incentive Plan (the “ Plan ”), is hereby amended as follows:

Section 4(a) of the Plan is amended by deleting the first sentence in its entirety and substituting the following in lieu thereof:

“(a) Subject to adjustment under Section 8, Awards may be made under the Plan for up to 11,644,489 shares of the common stock of the Company, $0.001 par value per share (the “ Common Stock ”).”


AMENDMENT NO. 2

TO THE

APPLIED GENETIC TECHNOLOGIES CORPORATION

2011 STOCK INCENTIVE PLAN

Effective April 9, 2013, in accordance with resolutions adopted by (i) the Board of Directors of Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), on April 9, 2013, and (ii) the stockholders of the Company on April 9, 2013, the Applied Genetic Technologies Corporation 2011 Stock Incentive Plan (the “ Plan ”), is hereby amended as follows:

Section 4(a) of the Plan is amended by deleting the first sentence in its entirety and substituting the following in lieu thereof:

“(a) Subject to adjustment under Section 8, Awards may be made under the Plan for up to 25,283,337 shares of the common stock of the Company, $0.001 par value per share (the “ Common Stock ”).”

Exhibit 10.17

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

Void after

May 2, 2017

APPLIED GENETIC TECHNOLOGIES CORPORATION

WARRANT TO PURCHASE SHARES

T HIS W ARRANT is issued to [                    ] (the “ Holder ”) by A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION , a Delaware corporation (the “ Company ”), pursuant to the terms of that certain Subscription Agreement dated [                    ], in connection with the Company’s issuance to the holder of this Warrant of a Convertible Promissory Note (the “ Note ”).

1. Purchase of Shares . The holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2. Definitions .

(a) Exercise Price . The exercise price per Share shall be either (i) the amount per share paid by purchasers of the New Preferred (as defined in the Note) or (ii) prior to the issuance of the New Preferred, the price per share obtained by dividing (A) $42,207,883 by (B) the number of fully diluted shares of the Company as of the date of such exercise (such price, as adjusted from time to time, is herein referred to as the “ Exercise Price ”).

(b) Exercise Period . This Warrant shall be exercisable, in whole or in part, until the expiration of this Warrant pursuant to Section 12 hereof.

(c) Warrant Coverage Amount . The term “ Warrant Coverage Amount ” shall mean that amount which equals 20% of the principal amount of the Note.

(d) The Shares . The term “ Shares ” shall mean either (i) shares of the New Preferred or (ii) prior to the issuance of the New Preferred, shares of the Company’s Series A-1 Preferred Stock, par value $0.001 per share (or, at the election of the Holder, shares of the Company’s Series A-1 A Preferred Stock, par value $0.001 per share).

(e) Change of Control . The term “Change of Control” shall mean a transaction or series of transactions resulting in the (i) acquisition of greater than 50% of the voting equity interests of the Company by means of stock purchase, share exchange or other form of corporate reorganization, (ii) acquisition, consolidation, merger or like transaction involving the Company in which the shareholders of the Company immediately prior to such transaction own less than 50% of the voting power of the surviving entity, or (iii) sale, lease, license, transfer or other conveyance of all or substantially all of the assets of the Company.


3. Method of Exercise . While this Warrant remains outstanding and exercisable in accordance with the terms hereof, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. Certificates for Shares . Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

5. Net Issuance Provision . In lieu of exercising pursuant to Section 3 above, at the Holder’s option, while this Warrant remains outstanding and exercisable during the Exercise Period, Holder may exercise this Warrant by surrender of this Warrant as determined below (“ Net Issuance ”). If the Holder elects the Net Issuance method, the Company will issue Shares in accordance with the following formula:

 

X =    Y (A-B)   
   A   
Where:
X =    the number of Shares to be issued to the Holder.
Y =    the number of Shares requested to be exercised under this Warrant Agreement.
A =    the fair market value of one (1) Share.
B =    the Exercise Price.

 

HLG: 340660

 

- 2 –


For purposes of the above calculation, current fair market value of a Share shall mean:

(i) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s registration statement relating to such public offering has been declared effective by the Securities and Exchange Commission (the “ SEC ”), then the fair market value per share shall be the initial “ Price to Public ” specified in the final prospectus with respect to the offering;

(ii) if this Warrant is exercised after, and not in connection with the Company’s initial public offering; and

a. if traded on a securities exchange, the fair market value shall be deemed to be the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined; or

b. if actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid and asked prices quoted on the Nasdaq system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined.

(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the Nasdaq System or the over-the-counter market, the current fair market value of a Share shall be determined in good faith by the Board of Directors of the Company (including a majority of the directors appointed to the Board of Directors by the holders of the Company’s preferred stock).

Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant representing the remaining number of shares purchasable thereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein, including, but not limited to, the Exercise Period.

6. Issuance of Shares . The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. Following the authorization of the New Preferred and during the Exercise Period, the Company will reserve from its authorized and unissued New Preferred a sufficient number of Shares to provide for the issuance of New Preferred upon exercise of this Warrant.

7. Adjustment of Exercise Price and Number of Shares . The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances . If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per

 

HLG: 340660

 

- 3 –


share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 7(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

(b) Reclassification, Reorganization and Consolidation . In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 6(a) above, and including conversion of the Shares), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment . When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

8. No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

9. Representations of the Company . The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

10. Restrictive Legend . The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER

 

HLG: 340660

 

- 4 –


MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

11. Rights of Stockholders . No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

12. Expiration of Warrant; Notice of Certain Events Terminating This Warrant .

(a) This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i) May 2, 2017; or

(ii) Any Change of Control of the Company.

(b) The Company shall provide at least ten (10) days prior written notice of any event set forth in Section 11(a)(ii).

13. Notices . All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth in the Subscription Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.

14. Governing Law . This Warrant 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 the internal laws of the State of Florida (without reference to conflict of law provisions), as to all other matters.

 

HLG: 340660

 

- 5 –


15. Rights and Obligations Survive Exercise of Warrant . Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

16. Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company, at its expense, shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

Issued this 2nd day of May, 2012.

 

A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION
/s/ Susan B. Washer
By:   Susan B. Washer
Title:   President and Chief Executive Officer

 

HLG: 340660

 

- 6 –


EXHIBIT A

NOTICE OF EXERCISE

 

TO: APPLIED GENETIC TECHNOLOGIES CORPORATION

1. The undersigned hereby elects to purchase                  Shares of                      pursuant to the terms of the attached Warrant.

2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

 

(Name)

 

 

(Address)

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

 

   

 

    (Signature)
   

 

    (Name)

 

   

 

(Date)     (Title)

 

HLG: 340660

 

- 7 –

Exhibit 10.18

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED.

Void after

March 11 th , 2014

APPLIED GENETIC TECHNOLOGIES CORPORATION

WARRANT TO PURCHASE SHARES

T HIS W ARRANT is issued to [                    ] (the “ Holder ”) by A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION , a Delaware corporation (the “ Company ”), pursuant to the terms of that certain Subscription Agreement dated as of [                    ], in connection with the Company’s issuance to the holder of this Warrant a Convertible Promissory Note (the “ Note ”).

1. Purchase of Shares . The holder of this Warrant is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to the number of fully paid and nonassessable Shares (as defined below), that equals the quotient obtained by dividing (a) the Warrant Coverage Amount (as defined below) by (b) the Exercise Price (as defined below).

2. Definitions .

(a) Exercise Price . The exercise price for the Shares shall be an amount per share paid by purchasers of shares of Preferred Stock of the Company issued in the next equity financing of the Company (the “ New Preferred ”) (such price, as adjusted from time to time, is herein referred to as the “ Exercise Price ”).

(b) Exercise Period . This Warrant shall be exercisable, in whole or in part, until the expiration of this Warrant pursuant to Section 12 hereof.

(c) Warrant Coverage Amount . The term “Warrant Coverage Amount” shall mean that amount which equals 20.2% of the principal amount of the Note.

(d) The Shares . The term “Shares” shall mean shares of the New Preferred or, at the option of the Holder, shares of a series of the Company’s preferred stock that are equivalent in all respects to the shares of New Preferred, but have only limited voting rights on terms specified by the Holder.

(e) Change of Control . The term “Change of Control” shall mean a transaction or series of transactions resulting in the (i) acquisition of greater than 50% of the voting equity interests of the Company by means of stock purchase, share exchange or other form of corporate reorganization, (ii) acquisition, consolidation, merger or like transaction involving the Company in which the shareholders of the Company immediately prior to such transaction own less than 50% of the voting power of the surviving entity, or (iii) sale, lease, license, transfer or other conveyance of all or substantially all of the assets of the Company.

AGTC 0309-09


3. Method of Exercise . While this Warrant remains outstanding and exercisable in accordance with the terms hereof, the holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by:

(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company at its principal offices; and

(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased.

4. Certificates for Shares . Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of the subscription notice.

5. Net Issuance Provision . In lieu or exercising pursuant to Section 3 above, at the Holder’s option, while this Warrant remains outstanding and exercisable during the Exercise Period, Holder may exercise this Warrant by surrender of this Warrant as determined below (“ Net Issuance ”). If the Holder elects the Net Issuance method, the Company will issue Common Stock in accordance with the following formula:

 

X =    Y (A-B)   
   A   

Where:

 

  X = the number of shares of Common Stock to be issued to the Holder.

 

  Y = the number of shares of Common Stock requested to be exercised under this Warrant Agreement.

 

  A = the fair market value of one (1) share of Common Stock.

 

  B = the Exercise Price.

For purposes of the above calculation, current fair market value of Common Stock shall mean with respect to each share of Common Stock:

(i) if the exercise is in connection with an initial public offering of the Company’s Common Stock, and if the Company’s registration statement relating to such public

 

- 2 –


offering has been declared effective by the Securities and Exchange Commission (the “ SEC ”), then the fair market value per share shall be the initial “ Price to Public ” specified in the final prospectus with respect to the offering;

(ii) if this Warrant is exercised after, and not in connection with the Company’s initial public offering; and

a. if traded on a securities exchange, the fair market value shall be deemed to be the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined; or

b. if actively traded over-the-counter, the fair market value shall be deemed to be the average of the closing bid and asked prices quoted on the Nasdaq system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined.

(iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the Nasdaq System or the over-the-counter market, the current fair market value of Common Stock shall be determined in good faith by the Board of Directors of the Company (including a majority of the directors appointed to the Board of Directors by the holders of the Company’s preferred stock).

Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant representing the remaining number of shares purchasable thereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein, including, but not limited to, the Exercise Period.

6. Issuance of Shares . The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. Following the authorization of the New Preferred and during the Exercise Period, the Company will reserve from its authorized and unissued New Preferred a sufficient number of Shares to provide for the issuance of New Preferred upon exercise of this Warrant.

7. Adjustment of Exercise Price and Number of Shares . The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

(a) Subdivisions, Combinations and Other Issuances . If the Company shall at any time prior to the expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 6(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

- 3 –


(b) Reclassification, Reorganization and Consolidation . In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 6(a) above, and including conversion of the Shares), then the Company shall make appropriate provision so that the holder of this Warrant shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

(c) Notice of Adjustment . When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

8. No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

9. Representations of the Company . The Company represents that all corporate actions on the part of the Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.

10. Restrictive Legend .

The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY

 

- 4 –


THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

11. Rights of Stockholders . No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

12. Expiration of Warrant; Notice of Certain Events Terminating This Warrant .

(a) This Warrant shall expire and shall no longer be exercisable upon the earlier to occur of:

(i) March 11 th , 2014; or

(ii) Any Change of Control of the Company.

(b) The Company shall provide at least ten (10) days prior written notice of any event set forth in Section 11(a)(ii).

13. Notices . All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (i) if to the Holder, at the Holder’s address as set forth in the Subscription Agreement, and (ii) if to the Company, at the address of its principal corporate offices (attention: President), or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.

14. Governing Law . This Warrant 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 the internal laws of the State of Florida (without reference to conflict of law provisions), as to all other matters.

15. Rights and Obligations Survive Exercise of Warrant . Unless otherwise provided herein, the rights and obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

 

- 5 –


16. Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company, at its expense, shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

Issued this 11 th day of March, 2009.

 

A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION
/s/ Susan B. Washer

 

By:   Susan B. Washer
Title:   President and Chief Executive Officer

 

- 6 –


EXHIBIT A

NOTICE OF EXERCISE

 

TO: APPLIED GENETIC TECHNOLOGIES CORPORATION

1. The undersigned hereby elects to purchase                  Shares of                      pursuant to the terms of the attached Warrant.

2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

 
  (Name)  
 

 

 
 

 

 
  (Address)  

4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

 

   

 

    (Signature)
   

 

    (Name)

 

   

 

(Date)     (Title)

Exhibit 10.19

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER. PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

Company: Applied Genetic Technologies Corporation, a Delaware corporation

Number of Shares: 62,125

Class of Stock: Series A-1 Preferred

Warrant Price: $0.9658 per share

Issue Date: Is the Warrant Effective Date, which is the date in which the Holder executes this Warrant

Expiration Date: The 10th anniversary after the Issue Date

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the company (the “Company”) at the Warrant Price all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE .

1.1 Method of Exercise . Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other from of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right . In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

1.3 Fair Market Value . If the Company’s common stock is traded in a public market and the shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

 

ATLANTA:4752965.2


1.4 Delivery of Certificate and New Warrant . Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.

1.5 Replacement of Warrants . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6 Treatment of Warrant Upon Acquisition of Company .

1.6.1 “ Acquisition ”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.6.2 Treatment of Warrant at Acquisition .

(a) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is not an asset sale and in which the sole consideration is cash, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(b) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (i) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition. As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

(c) Upon the closing of any Acquisition other than those particularly described in subsections (a) and (b) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

 

  2   ATLANTA:4752965.2


ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2 Reclassification, Exchange, Combinations or Substitution . Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Diluting Issuances . The Warrant Price and the number of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Certificate of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to the Holder.

2.4 No Impairment . The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

2.6 Certificate as to Adjustments . Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

 

  3   ATLANTA:4752965.2


ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than (i) the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold and (ii) the fair market value of the Shares as of the date of this Warrant.

(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Capitalization Table previously provided to Holder remains true and complete as of the Issue Date.

3.2 Notice of Certain Events . If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of any of its stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.3 Registration Under Securities Act of 1933, as amended . The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall have any S-3 and incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Company’s Investor Rights Agreement or similar agreement. The provisions set forth in the Company’s Investor Rights Agreement or similar agreement relating to the above in effect as of the Issue Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification, or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to the Holder.

3.4 No Shareholder Rights . Except as provided in this Warrant, the Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

 

  4   ATLANTA:4752965.2


ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER . The Holder represents and warrants to the Company as follows:

4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by the Holder will be acquired for investment for the Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2 Disclosure of Information . The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access.

4.3 Investment Experience . The Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. The Holder has experience as an investor in securities of companies in the development stage and acknowledges that the Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4 Accredited Investor Status . The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5 The Act . The Holder understands that this Warrant and the Shares issuable upon exercise or conversion hereof have not been registered un the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. The Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the 1933 Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

ARTICLE 5. MISCELLANEOUS .

5.1 Term : This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

5.2 Legends . This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER

 

  5   ATLANTA:4752965.2


SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder’s parent company) or any other affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4 Transfer Procedure . Upon receipt by Holder of the executed Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares, Holder’s parent company, by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

5.5 Notices . All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to the Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

SVB Financial Group

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405

 

  6   ATLANTA:4752965.2


Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

Applied Genetic Technologies Corporation

12085 Research Dr., Suite 110

Alachua, FL 32615

Attn: Sue Washer, Chief Executive Officer

Telephone: (386) 462.2204

Facsimile: (386) 462.0875

5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

5.7 Attorney’s Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

5.8 Automatic Conversion upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Exercise Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to the Holder.

5.9 Counterparts . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

5.10 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

 

“COMPANY”
Applied Genetic Technologies Corporation
By:  

 

Name:  

 

  (Print)
Title:  

 

“HOLDER”
Silicon Valley Bank
By:  

 

Name:  

 

Title:  

 

Warrant Effective Date:  

 

 

  7   ATLANTA:4752965.2


APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase                  shares of the Series A-1 Preferred Stock of Applied Genetic Technologies Corporation pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                      of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing the shares in the name specified below:

 

 

 

 
  Holders Name  
 

 

 
 

 

 
  (Address)  

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

HOLDER:

 

By:  

 

Name:  

 

Title:  

 

Date:  

 

 

ATLANTA:4752965.2


APPENDIX 2

ASSIGNMENT

For value received, Silicon Valley Bank hereby sells, assigns and transfers unto

 

Name:    SVB Financial Group
Address:    3003 Tasman Drive (HA-200)
   Santa Clara, CA 95054
Tax ID: 91-1962278

that certain Warrant to Purchase Stock issued by Applied Genetic Technologies Corporation (the “Company”), on             , 2005 [insert Issue Date] (the “Warrant”) together with all rights, title and interest therein.

 

SILICON VALLEY BANK
By:  

 

Name:  

 

Title:  

 

Date: [insert Issue Date]                     

By its execution below, and for the benefit of the Company, SVB Financial Group makes each of the representations and warranties set forth in Article 4 of the Warrant as of the date hereof.

 

SVB FINANCIAL GROUP
By:  

 

Name:  

 

Title:  

 

 

ATLANTA:4752965.2

Exhibit 10.20

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE: SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

WARRANT TO PURCHASE STOCK

Company; Applied Genetic Technologies Corporation, a Delaware corporation

Number of Shares: 38,828

Class of Stock: Series A-1 Preferred

Warrant Price; $0.9658 per share

Issue Date: Is the Warrant Effective Date, which is the date in which the Holder executes this Warrant

Expiration Date: The 10th anniversary after the Issue Date

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, SILICON VALLEY BANK (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of the company (the “Company”) at the Warrant Price all as set forth above and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

ARTICLE 1. EXERCISE .

1.1 Method of Exercise . Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Article 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account designated by the Company), or other from of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right . In lieu of exercising this Warrant as specified in Article 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share, The fair market value of the Shares shall be determined pursuant to Article 1.3.

1.3 Fair Market Value . If the Company’s common stock is traded in a public market and the shares are common stock, the fair market value of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the “price to public” per share price specified in the final prospectus relating to such offering). If the Company’s common stock is traded in a public market and the Shares are preferred stock, the fair market value of a Share shall be the closing price of a share of the Company’s common stock reported for the business day immediately before Holder delivers its Notice of Exercise to the Company (or, in the instance where the Warrant is exercised immediately prior to the effectiveness of the Company’s initial public offering, the initial “price to public” per share price specified in the final prospectus relating to such offering), in both cases, multiplied by the number of shares of the Company’s common stock into which a Share is convertible. If the Company’s common stock is not traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant . Promptly after Holder exercises or converts this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the Shares not so acquired.


1.5 Replacement of Warrants . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, or surrender and cancellation of this Warrant, the Company shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

1.6 Treatment of Warrant Upon Acquisition of Company .

1.6.1 “ Acquisition ”. For the purpose of this Warrant, “Acquisition” means any sale, license, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving; entity after the transaction.

1.6.2 Treatment of Warrant at Acquisition .

(a) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is not an asset sale and in which the sole consideration is cash, either (a) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant will expire upon the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(b) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition that is an “arms length” sale of all or substantially all of the Company’s assets (and only its assets) to a third party that is not an Affiliate (as defined below) of the Company (a “True Asset Sale”), either (i) Holder shall exercise its conversion or purchase right under this Warrant and such exercise will be deemed effective immediately prior to the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will continue until the Expiration Date if the Company continues as a going concern following the closing of any such True Asset Sale. The Company shall provide the Holder with written notice of its request relating to the foregoing (together with such reasonable information as the Holder may request in connection with such contemplated Acquisition giving rise to such notice), which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition. As used herein “ Affiliate ’’ shall mean any person or entity that owns or controls directly or indirectly ten (10) percent or more of the stock of Company, any person or entity that controls or is controlled by or is under common control with such persons or entities, and each of such person’s or entity’s officers, directors, joint venturers or partners, as applicable.

(c) Upon the closing of any Acquisition other than those particularly described in subsections (a) and (b) above, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price and/or number of Shares shall be adjusted accordingly.

ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits. Etc. If the Company declares or pays a dividend on the Shares payable in common stock, or other securities, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend

 

2


occurred. If the Company subdivides the Shares by reclassification or otherwise into a greater number of shares or takes any other action which increase the amount of stock into which the Shares are convertible, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2 Reclassification, Exchange, Combinations or Substitution . Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Certificate of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder an amendment to this Warrant setting forth the number and kind of such new securities or other property issuable upon exercise or conversion of this Warrant as a result of such reclassification, exchange, substitution or other event that results in a change of the number and/or class of securities issuable upon exercise or conversion of this Warrant. The amendment to this Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Article 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Diluting Issuances . The Warrant Price and the number of Shares Issuable upon exercise of this Warrant or, if the Shares are Preferred Stock, the number of shares of common stock issuable upon conversion of the Shares, shall be subject to adjustment, from time to time in the manner set forth in the Company’s Certificate of Incorporation as if the Shares were issued and outstanding on and as of the date of any such required adjustment. The provisions set forth for the Shares in the Company’s Certificate of Incorporation relating to the above in effect as of the Issue Date may not be amended, modified or waived, without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as, such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to the Holder.

2.4 No Impairment . The Company shall not by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article against impairment.

2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the fair market value of a full Share.

2.6 Certificate as to Adjustments . Upon each adjustment of the Warrant Price, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

 

3


ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than (i) the price per share at which the Shares were last issued in an arms-length transaction in which at least $500,000 of the Shares were sold and (ii) the fair market value of the Shares as of the date of this Warrant.

(b) All Shares which may be issued upon the exercise of the purchase right represented by this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Capitalization Table previously provided to Holder remains true and complete as of the Issue Date.

3.2 Notice of Certain Events . If the Company proposes at any time (a) to declare any dividend or distribution upon any of its stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for sale additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of any of its stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, license, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder: (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of common stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of common stock will be entitled to exchange their common stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.3 Registration Under Securities Act of 1933, as amended . The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall have any S-3 and incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Company’s Investor Rights Agreement or similar agreement. The provisions set forth in the Company’s Investor Rights Agreement or similar agreement relating to the above in effect as of the Issue Date may not be amended, modified or waived without the prior written consent of Holder unless such amendment, modification or waiver affects the rights associated with the Shares in the same manner as such amendment, modification, or waiver affects the rights associated with all other shares of the same series and class as the Shares granted to the Holder.

3.4 No Shareholder Rights . Except as provided in this Warrant the Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER . The Holder represents and warrants to the Company as follows:

4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by the Holder will be acquired for investment for the Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act Holder also represents that the Holder has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4


4.2 Disclosure of Information . The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder has access.

4.3 Investment Experience . The Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. The Holder has experience as an investor in securities of companies in the development stage and acknowledges that the Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that the Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables the Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4 Accredited Investor Status . The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5 The Act . The Holder understands that this Warrant and the Shares issuable; upon exercise or conversion hereof have not been registered un the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. The Holder understands that this Warrant and the Shares issued upon any exercise or conversion hereof must be held indefinitely unless subsequently registered under the 1933 Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

ARTICLE 5. MISCELLANEOUS .

5.1 Term : This Warrant is exercisable in whole or in part at any time and from time to time on or before the Expiration Date.

5.2 Legends . This Warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to Silicon Valley Bancshares (Holder’s parent company) or any other affiliate of Holder. Additionally, the Company shall also not require an opinion of counsel if

 

5


there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

5.4 Transfer Procedure . Upon receipt by Holder of the executed Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares, Holder’s parent company, by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). The Company may refuse to transfer this Warrant or the Shares to any person who directly competes with the Company, unless, in either case, the stock of the Company is publicly traded.

5.5 Notices . All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may (or on the first business day after transmission by facsimile) be, in writing by the Company or such holder from time to time. Effective upon receipt of the fully executed Warrant and the initial transfer described in Article 5.4 above, all notices to the Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

SVB Financial Group

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405

Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

Applied Genetic Technologies Corporation

12085 Research Dr., Suite 110

Alachua, FL 32615

Attn: Sue Washer, Chief Executive Officer

Telephone: (386) 462.2204

Facsimile; (386) 462.0875

5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

5.7 Attorney’s Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

5.8 Automatic Conversion upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Exercise Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be converted pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised or converted, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such conversion to the Holder.

 

6


5.9 Counterparts . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

5.10 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

 

“COMPANY”
Applied Genetic Technologies Corporation
By:   /s/ Susan B. Washer
Name:  

Susan B. Washer

  (Print)
Title:  

President & CEO

“HOLDER”
Silicon Valley Bank
By:   /s/ Thomas Armstrong
Name:  

Thomas Armstrong

Title:  

Relationship Manager

Warrant Effective Date:  

6/30/06

 

7


APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase                  shares of the Series A-1 Preferred Stock of Applied Genetic Technologies Corporation pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

1. Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                      of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing the shares in the name specified below:

 

 

Holders Name

 

 

(Address)

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

HOLDER:

 

By:  

 

Name:  

 

Title:  

 

Date:  

 


APPENDIX 2

ASSIGNMENT

For value received, Silicon Valley Bank hereby sells, assigns and transfers unto

 

Name:      SVB Financial Group
Address:      3003 Tasman Drive (HA-200)
     Santa Clara, CA 95054
Tax ID: 91-1962278

that certain Warrant to Purchase Stock issued by Applied Genetic Technologies Corporation (the “Company”), on             , 2006 (the “Warrant”) together with all rights, title and interest therein.

 

SILICON VALLEY BANK
By:  

 

Name:  

 

Title:  

 

Date: [insert Issue Date]                    

By its execution below, and for the benefit of the Company, SVB Financial Group makes each of the representations and warranties set forth in Article 4 of the Warrant as of the date hereof.

 

SVB FINANCIAL GROUP
By:  

 

Name:  

 

Title:  

 

 

 

 

 

LOGO

 

Exhibit 10.21

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

WARRANT TO PURCHASE STOCK

 

Corporation:    Applied Genetic Technologies Corporation
Number of Shares:    51,771
Class of Stock:    Series A-1 Preferred
Initial Exercise Price:    $0.9658 per share
Issue Date:    July 6, 2010
Expiration Date:    July 6, 2017

T HIS W ARRANT C ERTIFIES T HAT , for good and valuable consideration, the receipt of which is hereby acknowledged, S QUARE 1 B ANK or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “ Shares ”) of the corporation (the “ Company ”) at the initial exercise price per Share (the “ Warrant Price ”) all as set forth above and as adjusted pursuant to Article 2 of this warrant, subject to the provisions and upon the terms and conditions set forth in this warrant.

ARTICLE 1

EXERCISE

1.1 Method of Exercise. Holder may exercise this warrant by delivering this warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right. In lieu of exercising this warrant as specified in Section 1.1, Holder may from time to time convert this warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.

1.3 Fair Market Value. If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this warrant has not been fully exercised or converted and has not expired, a new warrant representing the Shares not so acquired.

 

 

 

 

 

 

 

LOGO

 


 

 

 

 

LOGO

 

1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this warrant, a new warrant of like tenor.

1.6 Repurchase on Sale, Merger, or Consolidation of the Company.

1.6.1 “ Acquisition .” For the purpose of this warrant, “Acquisition” means (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or (b) any reorganization, consolidation, merger or sale of the voting securities of the Company or any other transaction where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.6.2 Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations of this warrant, then this warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly. The Company shall use reasonable efforts to cause the surviving corporation to assume the obligations of this warrant.

1.6.3 Nonassumption. If upon the closing of any Acquisition the successor entity does not assume the obligations of this warrant and Holder has not otherwise exercised this warrant in full, then Holder shall have the option either to (a) deem this warrant to have been automatically converted pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition on the same terms as other holders of the same class of securities of the Company; or (b) require the Company to purchase this warrant for cash upon the closing of the Acquisition for an amount per Share equal to two (2) times the Warrant Price.

ARTICLE 2

ADJUSTMENTS TO THE SHARES

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, or subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.

2.2 Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the

 

 

 

 

 

 

 

LOGO

 

 

2.


 

 

 

 

LOGO

 

securities issuable upon exercise or conversion of this warrant, Holder shall be entitled to receive, upon exercise or conversion of this warrant, the number and kind of securities and property that Holder would have received for the Shares if this warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Articles of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.

2.4 Adjustments for Diluting Issuances. In the event of the issuance (a “ Diluting Issuance ”) by the Company after the Issue Date of securities at a price per share less than the Warrant Price, then the number of shares of common stock issuable upon conversion of the Shares shall be adjusted in accordance with those provisions of the Company’s Articles (Certificate) of Incorporation that apply to Diluting Issuances.

2.5 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

2.6 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder amount computed by multiplying the fractional interest by the fair market value of a full Share.

ARTICLE 3

REPRESENTATIONS AND COVENANTS OF THE COMPANY

3.1 Representations and Warranties. The Company hereby represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this warrant is not greater than the fair market value of the Shares as of the date of this warrant.

 

 

 

 

 

 

 

LOGO

 

 

3.


 

 

 

 

LOGO

 

(b) All Shares which may be issued upon the exercise of the purchase right represented by this warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Company’s capitalization table attached to this warrant is true and complete as of the Issue Date.

3.2 Notice of Certain Events. The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of common stock; or (d) the merger or consolidation with or into any other corporation, or sale, lease, license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.

3.3 Information Rights. So long as the Holder holds this warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiques to the shareholders of the Company, (b) within one hundred eighty (180) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements.

3.4 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be “Registrable Securities”, and Holder shall be a “Holder” under the Investor Rights Agreement among the Company and other persons dated as of November 25, 2003, as amended by that First Amendment to Investor Rights Agreement dated as of February 10, 2004, and that Second Amendment to Investor Rights Agreement dated as of September 7, 2005.

ARTICLE 4

MISCELLANEOUS

4.1 Term: Exercise Upon Expiration. This warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above; provided, however, that if the Company completes its initial public offering within the three-year period immediately prior to the Expiration Date, the Expiration Date shall automatically be extended until the third anniversary of the effective date of the Company’s initial public offering.

 

 

 

 

 

 

 

LOGO

 

 

4.


 

 

 

 

LOGO

 

If this warrant has not been exercised prior to the Expiration Date, this warrant shall be deemed to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.

4.2 Legends. This warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

4.3 Compliance with Securities Laws on Transfer. This warrant and the Shares issuable upon exercise of this warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144 (d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this warrant or the Shares issuable upon exercise of this warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.

4.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to the Holder shall be addressed as follows:

Square 1 Bank

Attn: Warrant Administrator

406 Blackwell Street, Suite 240

Crowe Building

Durham, NC 27701

4.6 Amendments. This warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

 

 

 

 

 

 

 

LOGO

 

 

5.


 

 

 

 

LOGO

 

4.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

4.8 Governing Law. This warrant shall be governed by and construed in accordance with the laws of the State of North Carolina, without giving effect to its principles regarding conflicts of law.

 

A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION
By:   LOGO
 

 

Name:  

Susan B. Washer

Title:  

President & CEO

 

 

 

 

 

 

 

LOGO

 

 

6.


 

 

 

 

LOGO

 

A PPENDIX 1

NOTICE OF EXERCISE

1. The undersigned hereby elects to purchase                  shares of the                      stock of A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION pursuant to the terms of the attached warrant, and tenders herewith payment of the purchase price of such shares in full.

1. The undersigned hereby elects to convert the attached warrant into shares in the manner specified in the warrant. This conversion is exercised with respect to                      of the shares covered by the warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:

Square 1 Bank

Attn: Warrant Administrator

406 Blackwell Street, Suite 240

Fowler Building

Durham, NC 27701

3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.

 

S QUARE 1 B ANK or Registered Assignee

 

(Signature)

 

(Date)

 

 

 

 

 

 

 

LOGO

 

Exhibit 10.22

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

SECOND WARRANT TO PURCHASE STOCK

 

Corporation:    Applied Genetic Technologies Corporation
Number of Shares:    276,968
Class of Stock:    Series B-1 Preferred
Initial Exercise Price:    As determined pursuant to Section 2.1
Issue Date:    August 31, 2012
Expiration Date:    August 31, 2019

T HIS S ECOND W ARRANT C ERTIFIES T HAT , for good and valuable consideration, the receipt of which is hereby acknowledged, S QUARE 1 B ANK or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “ Shares ”) of the corporation (the “ Company ”) at the initial exercise price per Share (the “ Warrant Price ”) all as set forth above and as adjusted pursuant to Article 2 of this warrant, subject to the provisions and upon the terms and conditions set forth in this warrant.

ARTICLE 1

EXERCISE

1.1 Method of Exercise . Holder may exercise this warrant by delivering this warrant and a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right . In lieu of exercising this warrant as specified in Section 1.1, Holder may from time to time convert this warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other securities otherwise issuable upon exercise of this warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.

1.3 Fair Market Value . If the Shares are traded regularly in a public market, the fair market value of the Shares shall be the closing price of the Shares (or the closing price of the Company’s stock into which the Shares are convertible) reported for the business day immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant . Promptly after Holder exercises or converts this warrant, the Company shall deliver to Holder certificates for the Shares acquired and, if this warrant has not been fully exercised or converted and has not expired, a new warrant representing the Shares not so acquired.


1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this warrant, a new warrant of like tenor.

1.6 Repurchase on Sale, Merger, or Consolidation of the Company.

1.6.1 “ Acquisition . ” For the purpose of this warrant, “Acquisition” means (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company, or (b) any reorganization, consolidation, merger or sale of the voting securities of the Company or any other transaction where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

1.6.2 Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations of this warrant, then this warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Warrant Price shall be adjusted accordingly. The Company shall use reasonable efforts to cause the surviving corporation to assume the obligations of this warrant.

1.6.3 Nonassumption. If upon the closing of any Acquisition the successor entity does not assume the obligations of this warrant and Holder has not otherwise exercised this warrant in full, then Holder shall have the option either to (a) deem this warrant to have been automatically converted pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition on the same terms as other holders of the same class of securities of the Company; or (b) require the Company to purchase this warrant for cash upon the closing of the Acquisition for an amount per Share equal to two (2) times the Warrant Price.

ARTICLE 2

ADJUSTMENTS TO THE SHARES

2.1 Warrant Price. The initial Warrant Price shall be equal to the lowest price per share paid by any investor in the Company’s preferred stock equity financing currently contemplated as of the Issue Date (the “ Series B-1 Financing ”). Following the occurrence of the Series B-1 Financing, the Company shall execute, within ten (10) Business Days after the Holder’s request, an amended and restated warrant that clarifies the Warrant Price.

2.2 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock payable in common stock, or other securities, or subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this warrant, for

 

2.


each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.

2.3 Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this warrant, Holder shall be entitled to receive, upon exercise or conversion of this warrant, the number and kind of securities and property that Holder would have received for the Shares if this warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company’s Articles of Incorporation upon the closing of a registered public offering of the Company’s common stock. The Company or its successor shall promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.3 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events.

2.4 Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.

2.5 Adjustments for Diluting Issuances. In the event of the issuance (a “ Diluting Issuance ”) by the Company after the Issue Date of securities at a price per share less than the Warrant Price, then the number of shares of common stock issuable upon conversion of the Shares shall be adjusted in accordance with those provisions of the Company’s Articles (Certificate) of Incorporation that apply to Diluting Issuances.

2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

2.7 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the Number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall eliminate such fractional share interest by paying Holder amount computed by multiplying the fractional interest by the fair market value of a full Share.

 

3.


ARTICLE 3

REPRESENTATIONS AND COVENANTS OF THE COMPANY

3.1 Representations and Warranties. The Company hereby represents and warrants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this warrant is not greater than the fair market value of the Shares as of the date of this warrant.

(b) All Shares which may be issued upon the exercise of the purchase right represented by this warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

(c) The Company’s capitalization table attached to this warrant is true and complete as of the Issue Date.

3.2 Notice of Certain Events. The Company shall provide Holder with not less than 10 days prior written notice, including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any reclassification or recapitalization of common stock; or (d) the merger or consolidation with or into any other corporation, or sale, lease, license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.

3.3 Information Rights. So long as the Holder holds this warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly after mailing, copies of all communiques to the shareholders of the Company, (b) within one hundred eighty (180) days after the end of each fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized standing and (c) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements.

3 .4 Registration Under Securities Act of 1933, as amended. The Company agrees that the Shares or, if the Shares are convertible into common stock of the Company, such common stock, shall be “Registrable Securities”, and Holder shall be a “Holder” under the Investor Rights Agreement among the Company and other persons dated as of November 25, 2003, as amended by that First Amendment to Investor Rights Agreement dated as of February 10, 2004, and that Second Amendment to Investor Rights Agreement dated as of September 7, 2005.

 

4.


ARTICLE 4

MISCELLANEOUS

4.1 Term: Exercise Upon Expiration. This warrant is exercisable in whole or in part, at any time and from time to time on or before the Expiration Date set forth above; provided, however, that if the Company completes its initial public offering within the three-year period immediately prior to the Expiration Date, the Expiration Date shall automatically be extended until the third anniversary of the effective date of the Company’s initial public offering. If this warrant has not been exercised prior to the Expiration Date, this warrant shall be deemed to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.

4.2 Legends. This warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

4.3 Compliance with Securities Laws on Transfer. This warrant and the Shares issuable upon exercise of this warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144 (d) and (e) in reasonable detail, the selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder’s notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this warrant or the Shares issuable upon exercise of this warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving the Company notice of the portion of the warrant being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or reissuance shall be required if the transfer is to an affiliate of Holder.

4.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first- class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to the Holder shall be addressed as follows:

Square 1 Bank

Attn: Warrant Administrator

406 Blackwell Street, Suite 240

Crowe Building

Durham, NC 27701

 

5.


4.6 Amendments. This warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

4.7 Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

4.8 Governing Law. This warrant shall be governed by and construed in accordance with the laws of the State of North Carolina, without giving effect to its principles regarding conflicts of law.

 

A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION
By:   /s/ Susan B. Washer
 

 

Name:  

Susan B. Washer

Title:  

President & CEO

 

6.


A PPENDIX 1

NOTICE OF EXERCISE

1. The undersigned hereby elects to purchase                          shares of the                          stock of A PPLIED G ENETIC T ECHNOLOGIES C ORPORATION pursuant to the terms of the attached warrant, and tenders herewith payment of the purchase price of such shares in full.

1. The undersigned hereby elects to convert the attached warrant into shares in the manner specified in the warrant. This conversion is exercised with respect to                          of the shares covered by the warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:

Square 1 Bank

Attn: Warrant Administrator

406 Blackwell Street, Suite 240

Fowler Building

Durham, NC 27701

3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.

 

S QUARE 1 B ANK or Registered Assignee

 

(Signature)

 

(Date)

Exhibit 10.23

INDEMNIFICATION AGREEMENT

T HIS I NDEMNIFICATION A GREEMENT (this “ Agreement ”) is made and entered into as of November     , 2012 between Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), and [Director] (“ Indemnitee ”).

RECITALS:

W HEREAS , highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

W HEREAS , the Board of Directors of the Company (the “ Board ”) has determined that, in order to attract and retain qualified individuals to serve on its Board or in other capacities, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The certificate of incorporation of the Company authorizes and the Bylaws of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”). The Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

W HEREAS , the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons to serve on the Board and to serve the Company in other capacities;

W HEREAS , the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

W HEREAS , it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

W HEREAS , this Agreement is a supplement to and in furtherance of the certificate of incorporation and Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;

W HEREAS , Indemnitee does not regard the protection available under the Company’s certificate of incorporation, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and

W HEREAS , Indemnitee is a representative of [Fund Name] and has certain rights to indemnification and/or insurance provided by [Fund Name] which Indemnitee and [Fund Name] intend to be secondary to the primary obligation of the Company to indemnify Indemnitee as provided herein, with the Company’s acknowledgement and agreement to the foregoing being a material condition to Indemnitee’s willingness to serve on the Board.


AGREEMENT:

N OW , T HEREFORE , in consideration of Indemnitee’s agreement to serve as an officer or director after the date hereof, the parties hereto agree as follows:

1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by the DGCL, as such may be amended from time to time. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to indemnify Indemnitee to any greater extent than may be required by the DGCL, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a) , Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and, subject to Section 6(h) , amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b) , Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Delaware Court (defined below) shall determine that such indemnification may be made.

(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

(d) Indemnification of Appointing Stockholder. If (i) Indemnitee is or was affiliated with one or more venture capital funds that has invested in the Company (an “ Appointing Stockholder ”), (ii) the Appointing Stockholder is, or is threatened to be made, a party to or a participant in any Proceeding, and (iii) the Appointing Stockholder’s involvement in the Proceeding results from any claim based on the Indemnitee’s service to the Company as a director or other fiduciary of the Company, the Appointing Stockholder will be entitled to indemnification hereunder for Expenses to the same extent as Indemnitee, and the terms of this Agreement as they relate to procedures for indemnification of

 

2


Indemnitee and advancement of Expenses shall apply to any such indemnification of Appointing Stockholder. The rights provided to the Appointing Stockholder under this Section 1(d) shall (i) be suspended during any period during which the Appointing Stockholder does not have a representative on the Company’s Board and (ii) terminate on an initial public offering of the Company’s Common Stock; provided, however, that in the event of any such suspension or termination, the Appointing Stockholder’s rights to indemnification will not be suspended or terminated with respect to any Proceeding based in whole or in part on facts and circumstances occurring at any time prior to such suspension or termination regardless of whether the Proceeding arises before or after such suspension or termination. The Company and Indemnitee agree that the Appointing Stockholder is an express third party beneficiary of the terms of this Section 1(d) .

2. Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and, subject to Section 6(h) , amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

3. Contribution.

(a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), to the fullest extent permitted under applicable law the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), to the fullest extent permitted under applicable law the Company shall contribute to the amount of Expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to applicable law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if

 

3


joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c) To the fullest extent permitted under applicable law, the Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an what would otherwise be an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

4. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness, or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

5. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance to the extent not prohibited by applicable law all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence each of the Expenses incurred by Indemnitee for which he seeks advancement and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided , however , that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination made by the Company that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (and as to which all rights of appeal therefrom have been exhausted or lapsed). This Section shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9 .

6. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware.

 

4


Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of the Board: (i) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum, or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (ii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (iii) if so directed by the Board, by the stockholders of the Company.

(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c) . The Independent Counsel shall be selected by the Board and written notice of such selection shall be given to the Indemnitee. Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “ Independent Counsel ” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected by the Board shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c) , regardless of the manner in which such Independent Counsel was selected or appointed.

(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification

 

5


is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e) To the maximum extent permitted by applicable law, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall to the fullest extent permitted by applicable law be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

(g) Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and

 

6


uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(i) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

7. Remedies of Indemnitee.

(a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in the Delaware Court of Indemnitee’s entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a) . The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b) .

(c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7 , absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) In the event that Indemnitee, pursuant to this Section 7 , seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

(e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses

 

7


and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if Indemnitee’s request is preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any such Expenses if Indemnitee ultimately is determined not to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

8. Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation of the Company, the Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate of Incorporation of the Company, Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c) The Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided by [Fund Name] and certain of its affiliates (collectively, the “ Fund Indemnitors ”). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of Expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and the Certificate of Incorporation or Bylaws of the Company (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and, (iii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any

 

8


and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee agree that the Fund Indemnitors are express third party beneficiaries of the terms hereof.

(d) Except as provided in paragraph (c) above, in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee (other than against the Fund Indemnitors), who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(e) Except as provided in paragraph (c) above, the Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(f) Except as provided in paragraph (c) above, the Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

9. Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to indemnify Indemnitee in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision, provided, that the foregoing shall not affect the rights of Indemnitee or the Fund Indemnitors set forth in Section 8(c) above; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(c) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including without limitation any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board of the Company authorized Indemnitee to bring the Proceeding (or to bring any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

10. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and

 

9


their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

11. Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee

12. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

(c) The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

13. Definitions . For purposes of this Agreement:

(a) Corporate Status ” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(b) Delaware Court ” means the Court of Chancery of the State of Delaware.

(c) Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) Enterprise ” means the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(e) Expenses ” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(f) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under

 

10


similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(g) Proceeding ” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

14. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Further, the invalidity or unenforceability of any provision hereof as to either Indemnitee or Appointing Stockholder shall in no way affect the validity or enforceability of any provision hereof as to the other. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee and Appointing Stockholder indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent: (x) to Indemnitee at the address set forth below Indemnitee’s signature hereto, and (y) to the Company at the address set forth below the Company’s signature hereto, or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same

 

11


Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20. Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) irrevocably appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, The Corporation Service, 2711 Centreville Road, Suite 400, Wilmington, Delaware 19808, as its agent in the State of Delaware for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

21. Entire Agreement . This Agreement and the Company’s certificate of incorporation and Bylaws constitute 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. Upon the effectiveness of this Agreement, any prior indemnification agreement between the parties shall terminate and be of no further force and effect and shall be superseded and replaced in its entirety by this Agreement.

* * * * * *

 

12


I N W ITNESS W HEREOF , the parties hereto have executed this Agreement on and as of the day and year first above written.

 

COMPANY:
APPLIED GENETIC TECHNOLOGIES CORPORATION
By:  

 

  Susan B. Washer
  President and Chief Executive Officer
Address:   11801 Research Drive
  Suite D
  Alachua, FL 32615
INDEMNITEE:

 

Name:  
Address:  

 

 

 

 

 

 

 

 

 

Facsimile:  

 

E-mail:  

 

Applied Genetic Technologies Corporation

Indemnification Agreement

- Signature Page -

Exhibit 10.24

INDEMNIFICATION AGREEMENT

T HIS I NDEMNIFICATION A GREEMENT (this “ Agreement ”) is made and entered into as of November 15, 2012 between Applied Genetic Technologies Corporation, a Delaware corporation (the “ Company ”), and [Director] (“ Indemnitee ”).

RECITALS:

W HEREAS , highly competent persons have become more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

W HEREAS , the Board of Directors of the Company (the “ Board ”) has determined that, in order to attract and retain qualified individuals to serve on its Board or in other capacities, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The certificate of incorporation of the Company authorizes and the Bylaws of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (“ DGCL ”). The Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

W HEREAS , the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons to serve on the Board and to serve the Company in other capacities;

W HEREAS , the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

W HEREAS , it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

W HEREAS , this Agreement is a supplement to and in furtherance of the certificate of incorporation and Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and

W HEREAS , Indemnitee does not regard the protection available under the Company’s certificate of incorporation, Bylaws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified.

AGREEMENT:

N OW , T HEREFORE , in consideration of Indemnitee’s agreement to serve as an officer or director after the date hereof, the parties hereto agree as follows:

1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest extent permitted by the DGCL, as such may be amended from time to


time. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to indemnify Indemnitee to any greater extent than may be required by the DGCL, as such may be amended from time to time. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

(a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a) , Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and, subject to Section 6(h) , amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b) , Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by the Indemnitee, or on the Indemnitee’s behalf, in connection with such Proceeding if the Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Delaware Court (defined below) shall determine that such indemnification may be made.

(c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law, as such may be amended from time to time, against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section 1(c) and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

2. Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and, subject to Section 6(h) , amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful.

 

2


3. Contribution.

(a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), to the fullest extent permitted under applicable law the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

(b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), to the fullest extent permitted under applicable law the Company shall contribute to the amount of Expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction or events from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to applicable law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicable law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

(c) To the fullest extent permitted under applicable law, the Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

(d) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an what would otherwise be an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

4. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness,

 

3


or is made (or asked) to respond to discovery requests, in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

5. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance to the extent not prohibited by applicable law all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence each of the Expenses incurred by Indemnitee for which he seeks advancement and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided , however , that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination made by the Company that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (and as to which all rights of appeal therefrom have been exhausted or lapsed). This Section shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9 .

6. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to the Company, or to provide such a request in a timely fashion, shall not relieve the Company of any liability that it may have to Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of the Company.

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of the Board: (i) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum, or by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (ii) if there are no Disinterested Directors or if the Disinterested Directors so direct, by independent legal counsel in a written opinion to the Board, a copy of which shall be delivered to the Indemnitee, or (iii) if so directed by the Board, by the stockholders of the Company.

 

4


(c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c) . The Independent Counsel shall be selected by the Board and written notice of such selection shall be given to the Indemnitee. Indemnitee may, within 10 days after such written notice of selection shall have been given, deliver to the Company a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “ Independent Counsel ” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected by the Board shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Indemnitee to the Company’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c) , regardless of the manner in which such Independent Counsel was selected or appointed.

(d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(e) To the maximum extent permitted by applicable law, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise (as hereinafter defined), including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall to the fullest extent permitted by applicable law be deemed to have

 

5


been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

(g) Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

(i) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

7. Remedies of Indemnitee.

(a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee

 

6


is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in the Delaware Court of Indemnitee’s entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a) . The Company shall not oppose Indemnitee’s right to seek any such adjudication.

(b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b) .

(c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7 , absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s misstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) In the event that Indemnitee, pursuant to this Section 7 , seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

(e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if Indemnitee’s request is preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any such Expenses if Indemnitee ultimately is determined not to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be.

(f) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

8. Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.

(a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation of the Company, the Bylaws, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Certificate of Incorporation of the Company,

 

7


Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.

9. Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to indemnify Indemnitee in connection with any claim made against Indemnitee:

(a) for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law; or

(c) in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including without limitation any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board of the Company authorized Indemnitee to bring the Proceeding (or to bring any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

 

8


10. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives.

11. Security. To the extent requested by Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee

12. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

(c) The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

13. Definitions . For purposes of this Agreement:

(a) Corporate Status ” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving at the express written request of the Company.

(b) Delaware Court ” means the Court of Chancery of the State of Delaware.

(c) Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) Enterprise ” means the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(e) Expenses ” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, a request to provide discovery in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding and any federal, state, local or

 

9


foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(f) Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(g) Proceeding ” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of any inaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

14. Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Further, the invalidity or unenforceability of any provision hereof as to either Indemnitee or Appointing Stockholder shall in no way affect the validity or enforceability of any provision hereof as to the other. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee and Appointing Stockholder indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

16. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

17. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days

 

10


after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent: (x) to Indemnitee at the address set forth below Indemnitee’s signature hereto, and (y) to the Company at the address set forth below the Company’s signature hereto, or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

18. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

20. Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) irrevocably appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, The Corporation Service, 2711 Centreville Road, Suite 400, Wilmington, Delaware 19808, as its agent in the State of Delaware for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

21. Entire Agreement . This Agreement and the Company’s certificate of incorporation and Bylaws constitute 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. Upon the effectiveness of this Agreement, any prior indemnification agreement between the parties shall terminate and be of no further force and effect and shall be superseded and replaced in its entirety by this Agreement.

* * * * * *

 

11


I N W ITNESS W HEREOF , the parties hereto have executed this Agreement on and as of the day and year first above written.

 

COMPANY:
APPLIED GENETIC TECHNOLOGIES CORPORATION
By:  

 

  Susan B. Washer
  President and Chief Executive Officer
Address:   11801 Research Drive
  Suite D
  Alachua, FL 32615
INDEMNITEE:

 

Name:  
Address:  

 

 

 

 

 

 

 

Facsimile:  

 

E-mail:  

 

Applied Genetic Technologies Corporation

Indemnification Agreement

- Signature Page -

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the use in this Registration Statement on Form S-1 of Applied Genetic Technologies Corporation of our report dated November 4, 2013, relating to our audits of the financial statements appearing in the Prospectus, which is part of this Registration Statement.

We also consent to the reference to our firm under the caption “Experts” in such Prospectus.

/s/ McGladrey LLP

Raleigh, North Carolina

January 10, 2014