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As filed with the Securities and Exchange Commission on January 24, 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

 

 

A CHAOGEN , I NC .

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   2834   68-0533693
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

7000 Shoreline Court, Suite 371

South San Francisco, CA 94080

(650) 800-3636

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

 

 

Kenneth J. Hillan, M.B., Ch.B.

7000 Shoreline Court, Suite 371

South San Francisco, CA 94080

(650) 800-3636

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

 

 

Copies to:

Mark V. Roeder, Esq.

Latham & Watkins LLP

140 Scott Drive

Menlo Park, CA 94025

(650) 328-4600

   

Bruce K. Dallas, Esq.

Davis Polk & Wardwell LLP

1600 El Camino Real

Menlo Park, CA 94025

(650) 752-2000

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

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

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, 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, 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 12b-2 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)(2)
  Amount of
Registration Fee

Common stock, $0.001 par value

  $74,750,000   $9,628

 

 

 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes offering price of shares that the underwriters have the option to purchase.

 

 

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

 

 

 


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

 

SUBJECT TO COMPLETION, DATED JANUARY 24, 2014

PRELIMINARY PROSPECTUS

        Shares

 

LOGO

Common Stock

 

 

This is the initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $         and $         per share.

We have applied to have our common stock listed on The NASDAQ Global Market under the symbol “AKAO.”

The underwriters have an option to purchase a maximum of                     additional shares of common stock from us to cover over-allotments, if any.

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

Investing in our common stock involves a high degree of risk. See “ Risk Factors ” beginning on page 11.

 

      

Price to Public

    

Underwriting
Discounts and
Commissions (1)

    

Proceeds to
Achaogen

Per Share

     $                            $                            $                      

Total

     $      $      $
(1) See “Underwriting” beginning on page 162 for additional information regarding underwriting compensation.

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

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

 

Credit Suisse   Cowen and Company
William Blair   Needham & Company

The date of this prospectus is                , 2014


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TABLE OF CONTENTS

 

     Page  

P ROSPECTUS S UMMARY

     1   

R ISK F ACTORS

     11   

C AUTIONARY N OTE R EGARDING F ORWARD -L OOKING S TATEMENTS

     53   

U SE OF P ROCEEDS

     55   

D IVIDEND P OLICY

     56   

C APITALIZATION

     57   

D ILUTION

     60   

S ELECTED C ONSOLIDATED F INANCIAL D ATA

     63   

M ANAGEMENT S D ISCUSSION AND A NALYSIS OF F INANCIAL C ONDITION AND R ESULTS OF O PERATIONS

     65   

B USINESS

     85   

M ANAGEMENT

     125   

E XECUTIVE AND D IRECTOR C OMPENSATION

     133   

C ERTAIN R ELATIONSHIPS AND R ELATED P ARTY T RANSACTIONS

     145   

P RINCIPAL S TOCKHOLDERS

     148   

D ESCRIPTION OF C APITAL S TOCK

     150   

S HARES E LIGIBLE FOR F UTURE S ALE

     155   

M ATERIAL U.S. F EDERAL I NCOME T AX C ONSEQUENCES TO N ON -U.S. H OLDERS

     158   

U NDERWRITING

     162   

L EGAL  M ATTERS

     167   

E XPERTS

     167   

W HERE Y OU C AN F IND M ORE I NFORMATION

     167   

I NDEX TO C ONSOLIDATED F INANCIAL S TATEMENTS

     F-1   

 

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including                 , 2014 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

 

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PROSPECTUS SUMMARY

This summary does not contain all of the information you should consider before buying our common stock. You should read the entire prospectus carefully, especially the “Risk Factors” section beginning on page 11 and our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock.

Unless the context requires otherwise, references in this prospectus to “Achaogen,” “we,” “us” and “our” refer to Achaogen, Inc., and our consolidated subsidiary.

Overview

We are a clinical-stage biopharmaceutical company passionately committed to the discovery, development, and commercialization of novel antibacterials to treat multi-drug resistant, or MDR, gram-negative infections. We are developing plazomicin, our lead product candidate, for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including carbapenem-resistant Enterobacteriaceae, or CRE. In 2013, the Centers for Disease Control and Prevention identified CRE as a “nightmare bacteria” and an immediate public health threat that requires “urgent and aggressive action.” We expect to initiate a Phase 3 superiority trial of plazomicin in the first quarter of 2014. Through the Special Protocol Assessment procedure, the U.S. Food and Drug Administration, or FDA, has agreed that the design and planned analyses of our single pivotal Phase 3 trial adequately address objectives in support of a New Drug Application. We have also received FDA fast track designation for the development and regulatory review of plazomicin to treat serious and life-threatening CRE infections. Our plazomicin program is funded in part with a contract from the Biomedical Advanced Research and Development Authority for up to $103.8 million. We have global commercialization rights to plazomicin, which has patent protection in the United States extending through 2031. Plazomicin is the first clinical candidate from our gram-negative antibiotic discovery engine, and we have other programs in early and late preclinical stages focused on other MDR gram-negative infections.

According to government agencies and physician groups, including the Centers for Disease Control and Prevention, or CDC, and the Infectious Disease Society of America, one of the greatest needs for new antibiotics is to treat infections caused by CRE and other drug-resistant gram-negative pathogens. CRE are strains of Enterobacteriaceae that are resistant to many types of antibiotics, including carbapenems, one of the last lines of defense against gram-negative bacteria, leading to mortality rates of up to 50% in patients with bloodstream infections. We estimate that there were approximately 110,000 cases of CRE infections in the United States and five major markets in the European Union in 2013, with approximately one-fourth of these being bloodstream infections or pneumonia. Based on the significant increase in resistance rates in recent years, we anticipate CRE will continue to be a major health problem. For example, CDC surveillance data indicates that the rate of carbapenem resistance in Klebsiella species, a type of Enterobacteriaceae, increased from 1.6% to 10.4% in the hospital setting in the United States between 2001 and 2011. In Italy, Klebsiella pneumoniae carbapenem resistance rates almost doubled from 16% in 2010 to 31% in 2012.

CRE are one of many types of MDR gram-negative pathogens threatening patients. Bacteria such as Pseudomonas aeruginosa , Acinetobacter baumannii , and extended-spectrum beta-lactamase producing Enterobacteriaceae each pose “serious” resistance threats, according to the CDC, and also drive the need for new, safe, and effective antibiotics. The CDC estimates that the excess annual cost resulting from antibiotic-resistant infections in the United States is as high as $20 billion. According to an estimate from a 2012 study of over 5,500 U.S. patients, the average incremental per-patient hospital cost for antibiotic-resistant healthcare-associated infections, as compared to antibiotic-susceptible infections, was over $15,000. In response to these threats, government agencies such as the Biomedical Advanced Research and Development Authority, the U.S. Department of Defense, and the U.S. National Institutes of Health are providing significant funding to support the discovery and development of new antibiotics.

 

 

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Our efforts to develop novel drugs that combat MDR gram-negative infections are led by our executive team that has over 60 years of combined industry experience at companies such as Genentech and Gilead Sciences, and a proven track record of leadership, global registration, and lifecycle management for over 20 products. The executive team is headed by Dr. Kenneth Hillan, who has held research and product development leadership roles during his career at Genentech for multiple products, including Rituxan ® and Lucentis ® .

Plazomicin

Our most advanced product candidate is plazomicin, a novel semi-synthetic aminoglycoside designed by our scientists to overcome clinically relevant aminoglycoside resistance mechanisms. Aminoglycosides have been used successfully for the treatment of serious bacterial infections for more than 50 years. As a class, aminoglycosides have several important characteristics including rapid bactericidal activity, well-described pharmacokinetics, a lack of metabolism in humans, and excellent solubility and stability. However, the spread of resistance to currently marketed aminoglycosides has decreased their clinical utility. We developed plazomicin by chemically modifying an existing aminoglycoside, sisomicin, a natural product isolated from bacteria, to shield the regions of the molecule that are targeted by the enzymes responsible for aminoglycoside resistance. As a result of these modifications, plazomicin remains active against many MDR pathogens where most other major drug classes, including commercially available aminoglycosides such as gentamicin and amikacin, have limited activity. Based on this profile, we are developing plazomicin as an intravenous therapy for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including CRE, which the CDC considers to be one of the top three urgent resistance threats to public health.

We consider the following to be key attributes that support the clinical utility and commercial value of plazomicin:

 

   

Potent in vitro activity and in vivo efficacy in nonclinical studies against MDR Enterobacteriaceae, including CRE.

 

   

Demonstration of comparable efficacy to levofloxacin and acceptable safety in a Phase 2 clinical trial in patients with complicated urinary tract infections caused primarily by non-MDR Enterobacteriaceae.

 

   

Improved dosing strategy as compared to existing aminoglycosides, and individualized patient dosing using an in vitro assay.

 

   

Potential to demonstrate a mortality benefit over currently available therapy in the treatment of life-threatening CRE infections.

 

   

Potential to reduce the healthcare costs associated with the treatment of such infections.

Our pivotal Phase 3 trial is a pathogen-specific trial that will enroll patients with a high risk of mortality and, if successful, provide clinical evidence of the superiority of plazomicin versus the best currently available therapy for life-threatening bloodstream infections and pneumonia due to CRE. Unlike most antibiotic trials, which are designed to show non-inferiority to the current standard of care, our trial is a superiority trial with a primary efficacy endpoint of all-cause mortality at 28 days. Through the Special Protocol Assessment procedure, the FDA has agreed on the design and planned analyses of our pivotal Phase 3 trial. We expect to report top-line data from our Phase 3 trial in the first half of 2017, with interim analyses projected to occur in 2015 and 2016. The FDA has granted us fast track designation for plazomicin for the treatment of serious and life-threatening CRE infections. We believe our planned development program, if successful, will also be acceptable to support a marketing application for plazomicin in the European Union.

We believe that plazomicin has the potential to become the new standard of care for the treatment of CRE, based on the attributes outlined above. We intend to achieve our pricing and reimbursement objectives through

 

 

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demonstration of a mortality benefit in CRE patients as well as pharmacoeconomic analyses that demonstrate significant cost savings to the healthcare system with the use of plazomicin. We plan to commercialize plazomicin with a targeted U.S. sales force to promote plazomicin to hospital-based healthcare professionals in resistance hotspots. In key markets outside of the United States, including Europe, Asia, and Latin America, we believe we can maximize the value of plazomicin through licensing full product rights to one or more commercialization partners who have local market expertise.

Our Antibacterial Discovery and Development Engine

Since we commenced operations in 2004, we have focused on the discovery and development of antibiotics, including plazomicin, to treat gram-negative infections. Through our work on multiple antibiotic classes, we have developed proprietary know-how about the relationship between chemical structure and potency against gram-negative organisms, which are a subset of bacterial organisms that are encircled by an outer membrane and do not react in the “Gram” dye stain test. Our progress in discovering and developing gram-negative product candidates has been achieved through:

 

   

Knowledge of gram-negative antibiotic chemistry. We are able to engineer the chemical structure of molecules to avoid resistance mechanisms and to penetrate the double membranes of gram-negative pathogens.

 

   

Specialized compound libraries . Our chemistry libraries are designed to contain compounds that have the necessary properties for penetration of gram-negative bacteria and are used in screening campaigns against clinical isolates of MDR gram-negative pathogens.

 

   

Microbiology capabilities in clinically important pathogens. Our microbiological and molecular genetic expertise with key gram-negative pathogens allows us to rapidly validate new antibacterial targets, determine the mode of action of our new agents, and progress promising molecules to advanced testing.

 

   

Use of nonclinical data to predict clinical outcomes . We leverage animal data and computational modeling techniques to predict the clinical efficacy of our early developmental candidates.

 

   

Collaborations with industry-leading advisors and scientific experts . We have established relationships with advisors who include experts in antibacterial drug development and academic researchers in the field of antibiotic pharmacology.

 

 

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Research and Development Pipeline

In addition to plazomicin, our research and development pipeline includes two antipseudomonal programs, which are programs that specifically target infections caused by Pseudomonas aeruginosa . The first is a program to discover and develop small molecule inhibitors of LpxC, which is an enzyme essential for the synthesis of the outer membrane of gram-negative bacteria, and the second is a therapeutic antibody program. We are also pursuing small molecule research programs targeting other essential gram-negative enzymes. The following table summarizes the status of plazomicin and our other research programs:

LOGO

Our Strategy

Our strategy is to discover, develop, and commercialize new antibacterials for the treatment of gram-negative bacterial infections. Key elements of our strategy are as follows:

 

   

Complete our pivotal Phase 3 superiority trial of plazomicin in the treatment of CRE infections and obtain regulatory approval in both the United States and the European Union.

 

   

Demonstrate improved clinical benefit and pharmacoeconomic advantages of our product candidates over existing therapies.

 

   

Commercialize our products directly, either alone or with support from a commercialization partner, in the United States and through commercialization partners elsewhere.

 

   

Establish and leverage collaborations with non-commercial organizations for scientific expertise and funding support.

 

   

Build a portfolio of differentiated products for the treatment of MDR gram-negative infections.

 

 

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Risks Related to Our Business

Our ability to implement our current business strategy is subject to numerous risks, including those described in the section entitled “Risk Factors” immediately following this prospectus summary. These risks include, among others:

 

   

We have a limited operating history, have incurred net losses in each year since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

 

   

We are substantially dependent on the success of our lead product candidate, plazomicin.

 

   

Our pivotal Phase 3 superiority trial for plazomicin is subject to a number of specific risks that may affect the outcome of the trial, including the lack of a prior clinical trial in patients with CRE infections and challenges in enrolling an adequate number of patients with rare infections.

 

   

We may not be able to obtain regulatory approval for plazomicin or any other product candidate, or for our in vitro assay for plazomicin.

 

   

We will need substantial additional funding.

 

   

Even if plazomicin, or any other product candidate, obtains regulatory approval, it may not achieve the level of market acceptance by physicians, patients, hospitals, third-party payors, and others in the medical community necessary for commercial success.

 

   

We may not be able to obtain adequate coverage and reimbursement from government and other third-party payors for plazomicin.

 

   

Our use of government funding adds uncertainty to our research and commercialization efforts and subjects us to additional requirements and costs.

 

   

If our intellectual property for plazomicin or any future product candidates is not adequate, we may not be able to compete effectively.

Corporate Information

We were incorporated in Delaware in 2002 and commenced operations in 2004. Our principal executive offices are located at 7000 Shoreline Court, Suite 371, South San Francisco, California 94080, and our telephone number is (650) 800-3636. Our website address is http://www.achaogen.com. The information contained in, or that can be accessed through, our website is not part of this prospectus.

Achaogen and the Achaogen logo are our trademarks. Each of the other trademarks, trade names, or service marks appearing in this prospectus belongs to its respective holder.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

   

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

 

   

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

 

 

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reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration 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 may use these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

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

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

 

 

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The Offering

 

Common stock offered by us

                 shares

 

Common stock to be outstanding after this offering

                 shares

 

Option to purchase additional shares

The underwriters have a 30-day option to purchase a maximum of                  additional shares of common stock to cover over-allotments, if any.

 

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $         million, or approximately $         million if the underwriters exercise their option to purchase additional shares of common stock in full, at an assumed initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We currently expect to use approximately $         of the net proceeds from this offering, in combination with the expected funding from our BARDA contract, to support our planned registration program for plazomicin and any remaining proceeds to fund our other research and development activities, and for working capital and general corporate expenditures, which may include scheduled repayments of our outstanding loan. See “Use of Proceeds” beginning on page 55.

 

Risk factors

See “Risk Factors” beginning on page 11 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.

 

NASDAQ Global Market symbol

“AKAO”

 

 

The number of shares of common stock to be outstanding after this offering is based on 118,577,787 shares of common stock outstanding as of December 31, 2013 and excludes the following:

 

   

15,461,893 shares of common stock issuable upon exercise of stock options outstanding under our Amended and Restated 2003 Stock Plan, at a weighted-average exercise price of $0.52 per share;

 

   

1,398,910 shares of common stock reserved for issuance pursuant to future awards under our Amended and Restated 2003 Stock Plan that will become available for issuance under our 2014 Equity Incentive Award Plan upon the effectiveness of the registration statement to which this prospectus relates;

 

   

                 additional shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the effectiveness of the registration statement to which this prospectus relates;

 

   

10,000 shares of common stock issuable upon the exercise of a warrant outstanding to purchase common stock, at an exercise price of $0.14 per share, which warrant was exercised in January 2014; and

 

 

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445,028 shares of common stock issuable upon the exercise of warrants outstanding to purchase convertible preferred stock, assuming their conversion into warrants to purchase common stock immediately prior to the completion of this offering, at a weighted-average exercise price of $1.12 per share, which warrants are expected to remain outstanding following the completion of this offering.

Except as otherwise indicated, all information in this prospectus:

 

   

reflects the conversion immediately prior to the completion of this offering of all of our outstanding shares of convertible preferred stock into an aggregate of 114,256,264 shares of common stock, which includes 9,174,314 shares of common stock issuable upon conversion of the shares of Series D convertible preferred stock issued in November 2013;

 

   

reflects a                 -for-                 reverse stock split of our capital stock to be effected prior to the effectiveness of the registration statement of which this prospectus is a part;

 

   

assumes the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering; and

 

   

assumes that the underwriters do not exercise their option to purchase additional shares of common stock.

 

 

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Summary Consolidated Financial Data

The following summary consolidated financial data for the years ended December 31, 2011 and 2012 are derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary consolidated financial data for the nine months ended September 30, 2012 and 2013 and as of September 30, 2013 are derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus and are not necessarily indicative of results to be expected for the full year. The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position as of September 30, 2013 and the results of operations for the nine months ended September 30, 2012 and 2013. You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our historical results are not necessarily indicative of our future results.

 

     Year Ended December 31,     Nine Months Ended
September 30,
 
     2011     2012     2012     2013  
                 (unaudited)  
     (in thousands, except share and per share amounts)  

Consolidated Statement of Operations Data:

        

Contract revenue

   $ 22,474      $ 17,941      $ 13,971      $ 12,320   

Operating expenses:

        

Research and development

     35,210        26,581        23,036        16,685   

General and administrative

     7,979        7,349        5,668        5,418   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     43,189        33,930        28,704        22,103   

Loss from operations

     (20,715     (15,989     (14,733     (9,783

Interest expense and other, net

     (166     (2,427     (1,799     (1,104

Interest income and other, net

     15        51        47        261   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (20,866   $ (18,365   $ (16,485   $ (10,626
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share, basic and diluted(1)

   $ (5.97   $ (4.80   $ (4.39   $ (2.50
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used to compute net loss per common share, basic and diluted(1)

     3,494,897        3,828,104        3,755,025        4,243,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per common share, basic and diluted(1)

     $ (0.21     $ (0.10
    

 

 

     

 

 

 

 

(1)   See Note 2 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per common share and pro forma net loss per common share.

The table below presents our consolidated balance sheet data as of September 30, 2013:

 

   

on an actual basis;

 

   

on a pro forma basis to give effect to:

 

   

the issuance and sale of 9,174,314 shares of our Series D convertible preferred stock in November 2013 with gross proceeds to us of $10.0 million, and the conversion of such shares into common stock as described below;

 

   

the conversion immediately prior to the completion of this offering of all of our outstanding shares of convertible preferred stock into an aggregate of 114,256,264 shares of common stock, which includes the 9,174,314 shares of common stock issuable upon conversion of the shares of Series D convertible preferred stock issued in November 2013;

 

 

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the exercise of a common stock warrant for 10,000 shares at an exercise price of $0.14 per share in January 2014, which shares are excluded from the number of shares outstanding as of September 30, 2013 on an actual basis;

 

   

the reclassification to additional paid-in capital of our convertible preferred stock warrant liabilities included in other long-term liabilities in connection with the conversion of our outstanding convertible preferred stock warrants into common stock warrants immediately prior to the completion of this offering; and

 

   

the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering; and

 

   

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

 

     As of September 30, 2013
     Actual     Pro Forma     Pro Forma
As  Adjusted(1)
     (unaudited)
     (in thousands)

Consolidated Balance Sheet Data:

      

Cash and cash equivalents

   $ 8,212      $ 18,212     

Working capital

     2,147        12,147     

Total assets

     13,821        23,821     

Notes payable

     7,786        7,786     

Other long-term liabilities

     176        —       

Convertible preferred stock

     122,287        —       

Accumulated deficit

     (126,238     (126,238  

Total stockholders’ (deficit) equity

     (122,317     10,146     

 

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

 

 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. Before deciding to invest in our common stock, you should carefully consider each of the following risk factors and all other information set forth in this prospectus and any related free writing prospectus. The following risks and the risks described elsewhere in this prospectus, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” could materially harm our business, financial condition, operating results, cash flow and prospects. If that occurs, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Capital Requirements

We have a limited operating history, have incurred net losses in each year since our inception and anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.

We are a clinical-stage biopharmaceutical company with a limited operating history. We have not generated any revenue from the sale of products and have incurred losses in each year since we commenced operations in 2004. All of our product candidates are in development, and none has been approved for sale. In the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2013, we derived all of our revenue from government contracts for research and development. Our net losses for the years ended December 31, 2011 and 2012 were $20.9 million and $18.4 million, respectively. Our net loss for the nine months ended September 30, 2013 was $10.6 million. As of September 30, 2013, we had an accumulated deficit of $126.2 million.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we conduct our pivotal Phase 3 superiority trial of our lead product candidate, plazomicin, seek marketing approval for plazomicin, and continue the development of our other product candidates. Our expenses will also increase substantially if and as we:

 

   

conduct additional clinical trials for our product candidates;

 

   

continue to discover and develop additional product candidates;

 

   

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

 

   

establish a manufacturing and supply chain sufficient for commercial quantities of any product candidates for which we may obtain marketing approval;

 

   

maintain, expand and protect our intellectual property portfolio;

 

   

hire additional clinical, scientific and commercial personnel;

 

   

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company; and

 

   

acquire or in-license other product candidates and technologies.

If our product candidates fail to demonstrate safety and efficacy in clinical trials, do not gain regulatory approval, or do not achieve market acceptance following regulatory approval and commercialization, 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 prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or when, if ever, we will become profitable.

 

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We are substantially dependent on the success of our lead product candidate, plazomicin, which is in Phase 3 clinical development. If we are unable to develop, obtain marketing approval for and successfully commercialize plazomicin or experience significant delays in doing so, our business could be materially harmed.

We currently have no products approved for sale, and since 2007, we have invested a significant portion of our efforts and financial resources in the development of plazomicin. Our future success is substantially dependent on our ability to successfully develop, obtain regulatory approval for and, ultimately, successfully commercialize plazomicin. In the first quarter of 2014, we expect to initiate a pivotal Phase 3 superiority trial to evaluate the efficacy and safety of plazomicin in treating patients with serious gram-negative bacterial infections due to carbapenem-resistant Enterobacteriaceae, or CRE. We have not conducted a clinical trial of plazomicin in patients with CRE infections, and we have no direct clinical evidence that plazomicin is effective in treating CRE infections in humans. Our Phase 2 trial evaluated the efficacy of plazomicin compared with levofloxacin in patients with complicated urinary tract infections, or cUTI. Our ability to develop, obtain regulatory approval for, and successfully commercialize plazomicin effectively will depend on several factors, including the following:

 

   

successful completion of our Phase 3 trial or other clinical trials, which will depend substantially upon the satisfactory performance of third-party contractors;

 

   

successful achievement of the objectives of our Phase 3 trial for plazomicin, including the demonstration of a mortality benefit, pharmacoeconomic benefits and a favorable risk-benefit outcome;

 

   

receipt of marketing approvals from the U.S. Food and Drug Administration, or FDA, and similar regulatory authorities outside the United States;

 

   

establishing commercial manufacturing and supply arrangements;

 

   

establishing a commercial infrastructure;

 

   

identifying and successfully establishing one or more collaborations to commercialize plazomicin;

 

   

acceptance of the product by patients, the medical community and third-party payors;

 

   

establishing market share while competing with other therapies;

 

   

successfully executing our pricing and reimbursement strategy;

 

   

a continued acceptable safety and adverse event profile of the product following regulatory approval; and

 

   

qualifying for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims covering the product.

In addition, our product development program includes the development of an in vitro assay, which must itself be approved or cleared for marketing by the FDA and certain other foreign regulatory agencies before we may commercialize plazomicin in the associated markets. If we are unable to develop or receive marketing approval for plazomicin or the in vitro assay in a timely manner or at all, we could experience significant delays or an inability to commercialize plazomicin, which would materially and adversely affect our business, financial condition, and results of operations.

Clinical drug development involves a lengthy and expensive process with uncertain outcomes that may lead to delayed timelines and increased cost, and may prevent us from being able to complete clinical trials.

Clinical testing is expensive, can take many years to complete, and its outcome is inherently uncertain. The results of preclinical and clinical studies of our product candidates may not be predictive of the results of later-stage clinical trials. For example, the positive results generated to date in nonclinical and clinical studies for plazomicin do not ensure that our Phase 3 trial will demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through preclinical studies and initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant

 

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setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks.

Although we expect to initiate our pivotal Phase 3 superiority trial for plazomicin in the first quarter of 2014, we cannot be certain that the trial, or any other future clinical trials for plazomicin or other product candidates, will begin on time, not need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all, or that any interim analyses with respect to such trials will be completed on schedule or support continued clinical development of the associated product candidate.

Clinical trials can be delayed or aborted for a variety of reasons, including delay or failure:

 

   

to obtain regulatory approval to commence a trial;

 

   

to reach agreement on acceptable terms with prospective contract research organizations, or 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;

 

   

to obtain institutional review board, or IRB, approval at each site;

 

   

to recruit suitable patients to participate in a trial;

 

   

to have patients complete a trial or return for post-treatment follow-up;

 

   

of clinical sites to adhere to trial protocols or continue to participate in a trial;

 

   

to address any patient safety concerns that arise during the course of a trial;

 

   

to address any conflicts with new or existing laws or regulations;

 

   

to add a sufficient number of clinical trial sites; or

 

   

to manufacture sufficient quantities of product candidate for use in clinical trials.

Enrollment delays in our clinical trials may result in increased development costs for our product candidates, slow down or halt our product development and approval processes, and jeopardize our ability to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain additional financing if needed. Although we will continue to look for opportunities for faster regulatory approval of plazomicin or our other product candidates, including potential additional clinical trials, we cannot guarantee that such opportunities will arise, that the FDA or other regulatory authorities will agree with any proposals we make or that such proposals, even if approved, will be successful.

We could also encounter delays if a clinical trial is suspended or terminated by us upon recommendation of the data monitoring committee for such trial, by the IRBs of the institutions in which such trials are being conducted, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial 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 drug, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial.

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate revenue from the sale of any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval processes, and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may significantly harm our business, financial condition and prospects significantly.

 

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Our pivotal Phase 3 trial for plazomicin is subject to a number of specific risks that may affect the outcome of the trial, including the lack of a prior clinical trial in patients with CRE infections and challenges in enrolling an adequate number of patients with rare infections.

Our pivotal Phase 3 trial for plazomicin is subject to a number of specific risks arising from our clinical program and the design of the trial. We have not conducted a clinical trial of plazomicin in patients with CRE infections or with bloodstream infections or pneumonia, who are the subjects of our Phase 3 trial, and we have no direct clinical evidence that plazomicin is effective in treating CRE infections in humans. Our Phase 2 trial demonstrated that plazomicin was as effective as the comparator drug in treating cUTI arising from non-CRE bacteria. Although we believe that plazomicin will be effective in treating CRE infections in humans based upon our nonclinical in vitro and in vivo animal model study results, together with our Phase 2 trial results, these results are not necessarily predictive of the results in humans and we cannot guarantee that plazomicin will demonstrate the expected efficacy in our Phase 3 trial patients. We also cannot guarantee that the projections made from our pharmacokinetic and pharmacodynamic models we developed from our nonclinical and clinical plazomicin studies will be validated in our Phase 3 trial.

Because our pivotal Phase 3 trial for plazomicin is enrolling patients with rare infections, finding a sufficient number of suitable patients with CRE infections to enroll in the trial will be a potential challenge. In addition, we may face competition in enrolling suitable patients as a result of other companies conducting clinical trials for antibiotic product candidates treating similar infections, resulting in slower than anticipated enrollment in our trial. Enrollment delays in this trial may result in increased development costs for plazomicin, or slow down or halt our product development and approval process for plazomicin.

Our Phase 3 trial also involves dosing of patients with plazomicin for longer durations (7–14 days) than in our Phase 1 and 2 trials at the comparable dosage (up to five days), which may lead to additional or more severe adverse events than were reported in our Phase 1 and 2 trials, including as a result of toxicity in the kidneys, inner ear, or hypotension. See the risk factor entitled “ Serious adverse events or undesirable side effects or other unexpected properties of plazomicin or any other product candidate may be identified during development or after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval .”

Our Phase 3 trial will use a superiority design rather than a non-inferiority design. In order to meet our primary endpoint, we must show that plazomicin is superior to the comparator therapy with respect to all-cause mortality at 28 days. This is a different standard than most other antibiotic clinical trials, which are designed to show that the antibiotic is not inferior to the comparator therapy. We may be unable to demonstrate superiority or the anticipated pharmacoeconomic benefits of plazomicin therapy in our Phase 3 trial. Our choice of a mortality endpoint means that success will depend to a significant degree on the accuracy of our assumptions about mortality rates in the comparator and plazomicin arms of our Phase 3 trial. Although we believe we have been conservative in our assumptions, if, for example, patients in the comparator arm of our trial have significantly lower mortality than we expect, we may find that our trial is unfeasible or may have to enroll more patients at additional cost and delay.

Any failure to meet our endpoints in the Phase 3 trial or adequately address safety concerns would jeopardize our ability to obtain regulatory approval for and commercialize plazomicin and significantly harm our business, financial condition, and prospects.

See also the risk factor entitled “ Clinical drug development involves a lengthy and expensive process with uncertain outcomes that may lead to delayed timelines and increased cost, and may prevent us from being able to complete clinical trials .”

 

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If we fail to demonstrate the safety and efficacy of plazomicin or any other product candidate that we develop to the satisfaction of the FDA or comparable foreign regulatory authorities we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of plazomicin or such other product candidate. This would adversely impact our ability to generate revenue, our business and our results of operations.

We are not permitted to commercialize, market, promote, or sell any product candidate in the United States without obtaining marketing approval from the FDA or in other countries without obtaining approvals from comparable foreign regulatory authorities, such as the European Medicines Agency, or EMA, and we may never receive such approvals. To gain approval to market a drug product, we must complete extensive preclinical development and clinical trials that demonstrate the safety and efficacy of the product for the intended indication to the satisfaction of the FDA or other regulatory authority.

We have not previously submitted a New Drug Application, or NDA, to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that plazomicin will be successful in clinical trials or receive regulatory approval. Further, plazomicin may not receive regulatory approval even if it is successful in clinical trials. If we do not receive regulatory approval for plazomicin, we may not be able to continue our operations. Even if we successfully obtain regulatory approval to market plazomicin, our revenue will be dependent, in part, upon our or a commercial partner’s ability to obtain regulatory approval of an in vitro assay to be used with plazomicin, as well as upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights.

The FDA or any foreign regulatory agencies can delay, limit, or deny approval of plazomicin for many reasons, including:

 

   

our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory agency that plazomicin is safe and effective for the requested indication;

 

   

the FDA’s or the applicable foreign regulatory agency’s disagreement with the interpretation of data from preclinical studies or clinical trials;

 

   

our inability to demonstrate that the clinical and other benefits of plazomicin outweigh any safety or other perceived risks;

 

   

the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical or clinical studies;

 

   

the FDA’s or the applicable foreign regulatory agency’s non-approval of the formulation, labeling or the specifications of plazomicin;

 

   

the FDA’s or the applicable foreign regulatory agency’s failure to approve the manufacturing processes or facilities of third-party manufacturers with which we contract; or

 

   

the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.

Even if we eventually complete clinical testing and receive approval of an NDA or foreign regulatory filing for plazomicin, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials which may be required after approval. The FDA or the applicable foreign regulatory agency also may approve plazomicin for a more limited indication or a narrower patient population than we originally requested, and the FDA, or applicable foreign regulatory agency, may not approve the labeling that we believe is necessary or desirable for the successful commercialization of plazomicin. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of plazomicin and would materially adversely impact our business and prospects. Any other product candidate we advanced to the marketing approval stage would also be subject to the risks delineated above.

 

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Although we have entered into a Special Protocol Assessment agreement with the FDA relating to our pivotal Phase 3 superiority trial of plazomicin, and have obtained feedback from the EMA through their scientific advice procedure, this agreement and feedback do not guarantee any particular outcome with respect to regulatory review of the pivotal trial or with respect to regulatory approval of plazomicin.

In September 2013, the protocol for our pivotal Phase 3 superiority trial of plazomicin was reviewed and agreed upon by the FDA under a Special Protocol Assessment agreement, or SPA, which creates a written agreement between the sponsoring company and the FDA regarding clinical trial design and other clinical trial issues, such as the trial endpoints, that can be used to support approval of a product candidate. The SPA is intended to provide assurance that if the agreed upon clinical trial protocols are followed and the clinical trial endpoints are achieved, the data may serve as the primary basis for an efficacy claim in support of an NDA. Agreement on an SPA is not a guarantee of approval, and there is no assurance that the design of, or data collected from, the trial will be adequate to obtain the requisite regulatory approval. The SPA is not binding on the FDA if public health concerns unrecognized at the time the SPA was entered into become evident, if other new scientific concerns regarding product safety or efficacy arise, if the information provided by the sponsoring company in the SPA request changes or is found to be false or misleading or omit relevant facts, or if the sponsoring company fails to comply with the agreed upon clinical trial protocols. Moreover, SPA agreements do not address all of the variables and details that may go into planning for or conducting a clinical trial, and any change in the protocol for a clinical trial can invalidate the SPA agreement. In addition, upon written agreement of both parties, the SPA may be changed, and the FDA retains significant latitude and discretion in interpreting the terms of an SPA and any resulting trial data. As a result, we do not know how the FDA will interpret the parties’ respective commitments under the SPA, how it will interpret the data and results from the pivotal Phase 3 superiority trial, whether the FDA will require that we conduct or complete one or more additional clinical trials to support potential approval, including the completion of our ongoing clinical trial of plazomicin, or whether plazomicin will receive any regulatory approvals.

Similarly, we have solicited feedback on our planned development program for plazomicin through the EMA’s scientific advice procedure and believe that our program, if successful, will be acceptable to support a marketing application in the European Union, or EU. However, this feedback is not a guarantee of approval, and we do not know how the EMA will interpret the data and results from our Phase 3 trial and other elements of our development program, whether they will require that we conduct one or more additional clinical trials or nonclinical studies to support potential approval, or whether plazomicin will receive any regulatory approvals in the EU.

Serious adverse events or undesirable side effects or other unexpected properties of plazomicin or any other product candidate may be identified during development or after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval.

Serious adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us, an institutional review board, or regulatory authorities to interrupt, delay or halt our clinical trials and could result in a more restrictive label, the imposition of distribution or use restrictions or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. If plazomicin or any of our other product candidates are associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.

To date, plazomicin has generally been well tolerated in clinical trials conducted in healthy subjects, subjects with renal impairment, and in patients with complicated urinary tract infections, and there have been no

 

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reports of serious adverse events related to plazomicin in our completed clinical trials. However, our planned pivotal Phase 3 superiority trial for plazomicin will involve more extended dosing (7–14 days) than our Phase 1 and 2 trials at the comparable dosage (up to five days), which may lead to additional or more severe adverse events than were reported in our Phase 1 and 2 trials. Toxicity in the kidneys and inner ear are the most significant identified risks for plazomicin, which are well-known risks for the aminoglycoside class of antibiotics. Hypotension is also a potential risk for plazomicin.

Undesirable side effects or other unexpected adverse events or properties of plazomicin or any of our other product candidates could arise or become known either during clinical development or, if approved, after the approved product has been marketed. If such an event occurs during development, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of, or deny approval of, plazomicin or our other product candidates. If such an event occurs after plazomicin or such other product candidates are approved, a number of potentially significant negative consequences may result, including:

 

   

regulatory authorities may withdraw the approval of such product;

 

   

regulatory authorities may require additional warnings on the label or impose distribution or use restrictions;

 

   

regulatory authorities may require one or more post-market studies;

 

   

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

 

   

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 the affected product candidate, if approved, or could substantially increase commercialization costs and expenses, which could delay or prevent us from generating revenue from the sale of our products and harm our business and results of operations.

We cannot predict when bacteria may evolve resistance to plazomicin, which could affect the revenue potential for plazomicin.

We are developing plazomicin to treat multi-drug resistant infections. The bacteria responsible for these infections evolve quickly and readily transfer their resistance mechanisms within and between species. We cannot predict when bacterial resistance to plazomicin may become prevalent.

As with some other commercially available aminoglycosides, plazomicin is not active against organisms expressing a resistance mechanism known as ribosomal methyltransferase. Although occurrence of this resistance mechanism among CRE is currently rare outside of certain countries in Asia, there have been isolated cases of infections by bacteria carrying ribosomal methyltransferase elsewhere, including in the United States. We cannot predict whether ribosomal methyltransferase will become widespread in regions where we intend to market plazomicin if it is approved. The growth of MDR infections in community settings or in countries with poor public health infrastructures, or the potential use of plazomicin outside of controlled hospital settings, could contribute to the rise of plazomicin resistance. If resistance to plazomicin becomes prevalent, our ability to generate revenue from plazomicin could suffer.

Failure to successfully validate, develop and obtain regulatory clearance or approval for our in vitro assay could harm our product development strategy.

An important element of our clinical development strategy for plazomicin is the development of an in vitro assay to measure levels of plazomicin in the blood, which will enable patients to receive safe and efficacious

 

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doses of plazomicin. In collaboration with ARK Diagnostics, Inc., or ARK, we are co-developing such an assay, which will be utilized during our pivotal Phase 3 superiority trial as well as in connection with the commercialization of plazomicin, if approved.

In vitro diagnostic assays are subject to regulation by the FDA and comparable foreign regulatory authorities as medical devices and therefore require separate regulatory clearance or approval prior to commercialization. An in vitro diagnostic that is required for safe and effective use of a drug is referred to as a companion diagnostic. The clinical development of novel therapeutics with a companion diagnostic is complex from an operational and regulatory perspective because of the need for both the drug and the diagnostic to receive regulatory clearance or approval. Specifically, on July 14, 2011, the FDA issued for comment a draft guidance document addressing the development and approval processes for “In Vitro Companion Diagnostic Devices.” According to the draft guidance, for novel therapeutic products such as plazomicin, a companion diagnostic device should be developed and approved or cleared contemporaneously with the therapeutic. If the regulatory clearance or approval process for our diagnostic assay is delayed, our ability to commercialize plazomicin could be delayed until we receive regulatory clearance or approval for the companion diagnostic.

It may be necessary to resolve issues such as selectivity/specificity, analytical validation, reproducibility, or clinical validation of our assay during the development and regulatory approval process. We, ARK or our future collaborators may encounter difficulties in developing, obtaining regulatory approval for and manufacturing assays similar to those we face with respect to our drug product candidates themselves, including issues with achieving regulatory clearance or approval, or producing sufficient quantities of the assay with appropriate quality standards. Failure to overcome these hurdles could have an adverse effect on our ability to obtain regulatory approval for or to obtain market acceptance for and to commercialize our assay or plazomicin.

We will be dependent on ARK to develop and manufacture our in vitro assay for our pivotal Phase 3 superiority trial for plazomicin, and may become dependent on ARK to commercialize such in vitro assay.

We will be dependent on the sustained cooperation and effort of ARK in the development and manufacture of our in vitro assay for plazomicin for our pivotal Phase 3 superiority trial, including in the generation of analytical data for regulatory approval of such assay. We have also agreed to negotiate with ARK for a commercialization agreement for the in vitro assay, and have agreed that any such commercialization agreement would provide ARK with the first right to commercialize the assay in the United States and the EU, and to manufacture and supply the assay worldwide for commercialization, while we would have the first right to commercialize the assay in any other country or territory, in addition to rights to commercialize the assay in the United States and the EU if ARK elects not to do so. Should we enter into such an agreement with ARK, we will be dependent on ARK with respect to such manufacturing and supply and with respect to commercialization in the U.S. and the EU. This will reduce our control over these activities but does not relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards with respect to the assay.

If ARK does not successfully carry out its contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated study plans and protocols, we may not be able to complete, or may be delayed in completing, clinical trials required to support approval of our product candidates and clearance or approval of the assay. We or ARK may encounter difficulties in developing the assay for commercial application in one or more countries, including issues in relation to automation, selectivity/specificity, analytical validation, reproducibility, or clinical validation of such assay. If we do not enter into such a commercialization agreement with ARK, and ARK elects not to participate in the commercialization of the assay in the U.S. and/or the EU, we would have to find an alternative collaborator, which we may not be able to do on commercially reasonable terms, or at all. If ARK or any such alternative collaborator does not perform its contractual duties or obligations, experiences work stoppages, does not meet expected deadlines, terminates its agreements with us or needs to be replaced, or if they otherwise do not meet our expectations for development, manufacture or commercialization of the assay, we may need to enter into new arrangements with one or more alternative third parties for development, manufacture or commercialization of the assay or an alternative assay. We may not be able to do so on commercially reasonably

 

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terms, or within the terms of the commercialization agreement without amending such terms, or at all, which could adversely impact our business and results of operations.

We will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate our product development, other operations or commercialization efforts.

Developing biopharmaceutical products, including conducting preclinical studies and clinical trials, is an expensive and highly uncertain process that takes years to complete. We expect our expenses to increase substantially as we conduct our pivotal Phase 3 superiority trial of our lead product candidate, plazomicin, seek marketing approval for plazomicin and continue the development of our other product candidates. If we obtain marketing approval of plazomicin, we also expect to incur significant sales, marketing, manufacturing and supply expenses.

As of September 30, 2013, we had working capital of $2.1 million and cash and cash equivalents of $8.2 million. Assuming we receive the full amount of allocated funding under our contract with the Biomedical Advanced Research and Development Authority, or BARDA, together with the proceeds from this offering, we expect such funds will be sufficient to fund our Phase 3 trial of plazomicin through receipt of top-line data. However, our operating plan may change as a result of factors currently unknown to us, and we may need to seek additional funds sooner than planned. We anticipate that we will need to raise substantial additional financing in the future to fund our operations, including for obtaining marketing approval for plazomicin.

We may obtain additional financing through public or private equity offerings, debt financings, a credit facility or strategic collaborations. Additional financing may not be available to us when we need it or it may not be available to us on favorable terms, if at all. In addition, although we currently anticipate being able to generate additional financing through non-dilutive means, we may be unable to do so. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. Our future financing requirements will depend on many factors, some of which are beyond our control, including:

 

   

continued funding under our contract with BARDA;

 

   

the size and type of the nonclinical and clinical trials that we decide to pursue in the development of our product candidates, including plazomicin;

 

   

the type, number, costs and results of the product candidate development programs which we are pursuing or may choose to pursue in the future;

 

   

the rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities;

 

   

the timing of, and costs involved in, seeking and obtaining FDA and other regulatory approvals;

 

   

our ability to enter into additional collaboration, licensing or other arrangements and the terms and timing of such arrangements;

 

   

the costs of preparing, filing, prosecuting, maintaining and enforcing any patent claims and other intellectual property rights, including litigation costs and the results of such litigation;

 

   

the emergence of competing technologies and other adverse market developments;

 

   

the resources we devote to marketing, and, if approved, commercializing our product candidates;

 

   

the scope, progress, expansion, and costs of manufacturing our product candidates;

 

   

our ability to enter into additional government contracts, or other collaborative agreements, to support the development of our product candidates and development efforts;

 

   

the amount of funds we receive in this offering; and

 

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the costs associated with being a public company.

Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions.

If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves.

If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

Although a substantial amount of our efforts will focus on our pivotal Phase 3 superiority trial and potential approval of our lead product candidate, plazomicin, a key element of our strategy is to discover, develop and commercialize a portfolio of therapeutics to treat multi-drug resistant bacterial infections. We are seeking to do so through our internal research programs and are exploring, and intend to explore in the future, strategic partnerships for the development of new products. Other than plazomicin, all of our other potential product candidates remain in the discovery and preclinical stages.

Research programs to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following:

 

   

the research methodology used may not be successful in identifying potential product candidates;

 

   

we may be unable to successfully modify candidate compounds to be active in gram-negative bacteria or defeat bacterial resistance mechanisms or identify viable product candidates in our screening campaigns;

 

   

competitors may develop alternatives that render our product candidates obsolete;

 

   

product candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;

 

   

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

 

   

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

 

   

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

 

   

the development of bacterial resistance to potential product candidates may render them ineffective against target infections.

We withdrew ACHN-975, one of the product candidates from our LpxC inhibitor development program, from clinical trials due to inflammation at the infusion site in some of our Phase 1 subjects. Although we are exploring reformulations and prodrugs of ACHN-975 to address the issue, we cannot guarantee that these efforts will be successful or that any alternative backup compounds we turn to will avoid the issue or otherwise prove to be viable product candidates. We would have to submit a new Investigational New Drug application for any modified or backup compound we seek to advance to clinical trials, which would incur further delay.

 

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If we are unsuccessful in identifying and developing additional product candidates, our potential for growth may be impaired.

Even if a product candidate does obtain regulatory approval it may never achieve market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community necessary for commercial success and the market opportunity may be smaller than we estimate.

Even if we obtain FDA or other regulatory approvals, and are able to launch plazomicin or any other product candidate commercially, the product candidate may not achieve market acceptance among physicians, patients, hospitals (including pharmacy directors) and third-party payors and, ultimately, may not be commercially successful. Market acceptance of any product candidate for which we receive approval depends on a number of factors, including:

 

   

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

 

   

relative convenience and ease of administration;

 

   

the clinical indications for which the product candidate is approved;

 

   

the potential and perceived advantages and disadvantages of the product candidates, including cost and clinical benefit relative to alternative treatments;

 

   

the willingness of physicians to prescribe the product;

 

   

the willingness of hospital pharmacy directors to purchase our products for their formularies;

 

   

acceptance by physicians, operators of hospitals and treatment facilities and parties responsible for reimbursement of the product;

 

   

the availability of adequate coverage and reimbursement by third-party payors and government authorities;

 

   

the effectiveness of our sales and marketing efforts;

 

   

the strength of marketing and distribution support;

 

   

limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling or an approved risk evaluation and mitigation strategy;

 

   

whether the product is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;

 

   

the approval of other new products for the same indications;

 

   

the timing of market introduction of the approved product as well as competitive products;

 

   

adverse publicity about the product or favorable publicity about competitive products;

 

   

the emergence of bacterial resistance to the product candidate; and

 

   

the rate at which resistance to other drugs in the target infections grow.

Any failure by plazomicin or any other product candidate that obtains regulatory approval to achieve market acceptance or commercial success would adversely affect our business prospects.

The availability of adequate third-party coverage and reimbursement for newly approved products is uncertain, and failure to obtain adequate coverage and reimbursement from government and other third-party payors could impede our ability to market any future products we may develop and could limit our ability to generate revenue.

There is significant uncertainty related to the third-party payor coverage and reimbursement of newly approved medical products. The commercial success of our future products in both domestic and international

 

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markets depends on whether third-party coverage and reimbursement is available for our future products. Governmental payors, including Medicare and Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to manage their healthcare expenditures by limiting both coverage and the level of reimbursement of new drugs and biologics and, as a result, they may not cover or provide adequate reimbursement for our future products. These payors may not view our future products as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow our future products to be marketed on a competitive basis.

Third-party payors are exerting increasing influence on decisions regarding the use of, and coverage and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, are challenging the prices charged for medical products and services, and many third-party payors limit or delay coverage and reimbursement for newly approved healthcare products. In particular, third-party payors may limit the covered indications. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated revenue from the sale of our product candidates. If we decrease the prices for our product candidates because of competitive pressures or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

In addition, to the extent that our product candidates will be used in a hospital inpatient setting, hospitals often receive fixed reimbursement for all of a patient’s care, including the cost of our drug products and in vitro assay, based on the patient’s diagnosis. For example, Medicare reimbursement for hospital inpatient stays is generally made under a prospective payment system that is determined by a classification system known as the Medicare severity diagnosis-related groups, or MS-DRGs. Our patients’ access to adequate coverage and reimbursement by government and private insurance plans is central to the acceptance of our future products. We may be unable to sell our products on a profitable basis if third-party payors reduce their current levels of payment, or if our costs of production increase faster than increases in reimbursement levels.

We are developing our lead product candidate plazomicin for the treatment of serious CRE infections, which constitute a growing but relatively small patient population. Antibiotics have historically been marketed towards broad patient populations at relatively low prices. We intend to seek pricing and reimbursement for plazomicin based on the superior mortality benefit and pharmacoeconomic advantages over existing treatments we will seek to demonstrate in our Phase 3 trial. If we are unable to demonstrate such benefits, or if governmental or other third-party payors do not view the benefits as worth the cost, we will be unable to achieve our pricing and reimbursement objectives and our prospects for revenue and profitability will suffer.

We rely on third parties to conduct some of our preclinical studies and all of our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our product candidates.

We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct our preclinical studies and clinical trials on our product candidates in compliance with applicable regulatory requirements. These third parties are not our employees and, except for restrictions imposed by our contracts with such third parties, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our preclinical studies and clinical trials, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol and the applicable legal, regulatory, and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as current good clinical practices, or cGCPs, for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. If we or any of our third party contractors fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory

 

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authorities may require us to perform additional clinical trials before approving our marketing applications. In addition, we are required to report certain financial interests of our third party investigators if these relationships exceed certain financial thresholds and meet other criteria. The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by principal investigators who previously served or currently serve as scientific advisors or consultants to us from time to time and receive cash compensation in connection with such services. Our clinical trials must also generally be conducted with products produced under current good manufacturing practice, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Many of the third parties with whom we contract may also have relationships with other commercial entities, some of which may compete with us. If the third parties conducting our preclinical studies or our clinical trials do not perform their contractual duties or obligations or comply with regulatory requirements we may need to enter into new arrangements with alternative third parties. This could be costly, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated, and we may not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable product candidate, or to commercialize such product candidate being tested in such studies or trials. If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative third party contractors or to do so on commercially reasonable terms. 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, financial condition and prospects.

We rely on third-party contract manufacturing organizations to manufacture and supply plazomicin and other product candidates for us, as well as certain raw materials used in the production thereof. If one of our suppliers or manufacturers fails to perform adequately we may be required to incur significant delays and costs to find new suppliers or manufacturers.

We currently have limited experience in, and we do not own facilities for, manufacturing our product candidates, including plazomicin. We rely upon third-party manufacturing organizations to manufacture and supply our product candidates and certain raw materials used in the production thereof. Some of our key components for the production of plazomicin have a limited number of suppliers. In particular, sisomicin, the aminoglycoside precursor for plazomicin, is supplied by a single manufacturer in China for which we do not have a commercial supply agreement.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMP regulations for manufacture of our drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

We do not have commercial supply agreements with our suppliers. In the event that we and our suppliers cannot agree to the terms and conditions for them to provide clinical and commercial supply needs, we would not be able to manufacture our product or candidates until a qualified alternative supplier is identified, which could also delay the development of, and impair our ability to commercialize, our product candidates.

Our third party suppliers may not be able to meet our supply needs or timelines and this may negatively affect our business. A majority of the manufacturing process is operated internationally, and therefore may be

 

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subject to similar risks of the sort described by the risk factor entitled “ A variety of risks associated with international operations could materially adversely affect our business .”

The failure of third-party manufacturers or suppliers to perform adequately or the termination of our arrangements with any of them may adversely affect our business.

We may be subject to costly product liability claims related to our clinical trials and product candidates and, if we are unable to obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of our insurance coverage, a material liability claim could adversely affect our financial condition.

Because we conduct clinical trials with human patients, we face the risk that the use of our product candidates may result in adverse side effects to patients in our clinical trials. We face even greater risks upon any commercialization of our product candidates. Although we have product liability insurance, which covers our clinical trials for up to $5.0 million, our insurance may be insufficient to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product liability insurance coverage for our advanced clinical trials that we plan to initiate. We do not know whether we will be able to continue to obtain product liability coverage and obtain expanded coverage if we require it, on acceptable terms, if at all. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage. Where we have provided indemnities in favor of third parties under our agreements with them, there is also a risk that these third parties could incur liability and bring a claim under such indemnities. An individual may bring a product liability claim against us alleging that one of our product candidates or products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in:

 

   

withdrawal of clinical trial volunteers, investigators, patients or trial sites;

 

   

the inability to commercialize our product candidates;

 

   

decreased demand for our product candidates;

 

   

regulatory investigations that could require costly recalls or product modifications;

 

   

loss of revenue;

 

   

substantial costs of litigation;

 

   

liabilities that substantially exceed our product liability insurance, which we would then be required to pay ourselves;

 

   

an increase in our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, if at all;

 

   

the diversion of management’s attention from our business; and

 

   

damage to our reputation and the reputation of our products.

Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

If we fail to establish an effective distribution process, which includes utilizing cold chain logistics for plazomicin and the associated in vitro assay, our business may be adversely affected.

We do not currently have the infrastructure necessary for distributing pharmaceutical products to patients. We intend to contract with a third-party logistics company to warehouse these products and distribute them, and we will require plazomicin and the associated in vitro assay to be maintained at a controlled temperature for some of the distribution chain. Failure to secure contracts with a logistics company could negatively impact the

 

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distribution of plazomicin or the in vitro assay. If we are unable to effectively establish and manage the distribution process, the commercial launch and sales of plazomicin and the associated in vitro assay will be delayed or severely compromised and our results of operations may be harmed.

In addition, the use of third party distributors, including with respect to cold chain logistics for plazomicin and the associated in vitro assay, involves certain risks, including, but not limited to, risks that distributors or pharmacies will:

 

   

not provide us with accurate or timely information regarding their inventories, the number of patients who are using plazomicin or the in vitro assay, or complaints regarding them;

 

   

not effectively sell or support plazomicin or the associated in vitro assay with sufficient cold storage;

 

   

reduce their efforts or discontinue to sell or support plazomicin or the in vitro assay;

 

   

not devote the resources necessary to sell plazomicin or the in vitro assay in the volumes and within the time frames that we expect;

 

   

be unable to satisfy financial obligations to us or others; or

 

   

cease operations.

Plazomicin is still undergoing evaluation for, and we expect our in vitro assay will have, a room temperature shelf life. Currently cold chain is required and if we do not effectively maintain our cold chain supply logistics, then we may experience an unusual number of product returns or out of date product. Any such failure may result in decreased product sales and lower product revenue, which would harm our business.

We currently have no sales and marketing staff or distribution organization. If we are unable to develop a sales and marketing and distribution capability on our own or through third parties, we will not be successful in commercializing our future products.

We currently have no sales, marketing or distribution organization or history. To achieve commercial success for any approved product candidate, we must either develop a sales, marketing and distribution organization or outsource these functions to third parties. If we rely on third parties for marketing and distributing our approved products, any revenue we receive will depend upon the efforts of third parties, which may not be successful and are only partially within our control, and our product revenue may be lower than if we directly marketed or sold our products. If we are unable to enter into arrangements with third parties to sell, market and distribute product candidates for which we have received regulatory approval on acceptable terms or at all, we will need to market these products ourselves. This is likely to be expensive and logistically difficult, as it would require us to build our own sales, marketing and distribution capacity. We have no historical operations in this area, and if such efforts were necessary, we may not be able to successfully commercialize our future products. If we are not successful in commercializing our future products, either on our own or through third parties, any future product revenue will be materially and adversely affected.

We face substantial competition and our competitors may discover, develop or commercialize products faster or more successfully than us.

The development and commercialization of new drug products is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to plazomicin and other product candidates that we may seek to develop or commercialize in the future. There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of multi-drug resistant infections. Potential competitors also include academic institutions, government agencies and other public and private research organizations. Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, safer or less costly than plazomicin or any other product

 

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candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.

There are a variety of available therapies marketed for the treatment of multi-drug resistant infections that we would expect would compete with plazomicin, including tigecycline, which is marketed by Pfizer as Tygacil, other aminoglycosides that are generically available (such as gentamicin, amikacin, tobramycin), and polymixins that are generically available (colistin and polymixin B). Many of the available therapies are well-established and widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. If plazomicin is approved, it may be priced at a premium over other competitive products. This may limit plazomicin’s adoption for MDR gram-negative infections.

There are also a number of products in clinical development by third parties to treat multi-drug resistant infections. Forest Laboratories and AstraZeneca are developing ceftazidime/avibactam and ceftaroline/avibactam for pneumonia and complicated urinary and intra-abdominal infections. Tetraphase Pharmaceuticals is developing eravacycline for complicated urinary and intra-abdominal infections. The Medicines Company is developing Carbavance™ for complicated urinary tract infections and MDR gram-negative infections, including CRE. We may also eventually face competition from products currently in the research or preclinical development stage. If our competitors obtain marketing approval from the FDA or comparable foreign regulatory authorities for their product candidates more rapidly than us, it could result in our competitors establishing a strong market position before we are able to enter the market.

In July 2012, the Food and Drug Administration Safety and Innovation Act was passed, which included the Generating Antibiotics Incentives Now Act, or the GAIN Act. The GAIN Act provides incentives for the development of new, qualified infectious disease products, including adding five years to the otherwise applicable regulatory exclusivity period. These incentives, along with government contract funding and other incentives for antibiotic research, may result in more competition in the market for new antibiotics.

Many of our competitors have materially greater name recognition and financial, manufacturing, marketing, research and drug development resources than we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in preclinical and clinical testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors.

Finally, the success of any product that is successfully commercialized will depend in large part on our ability to prevent competitors from launching a generic version that would compete with such product. If such competitors are able to establish that our patents are invalid or not infringed by the generic version of our product, they may be able to launch a generic product prior to the expected expiration of our relevant patents, and any generic competition could have a material adverse effect on our business, results of operations, financial condition and prospects.

We may attempt to form collaborations in the future with respect to our product candidates, but we may not be able to do so, which may cause us to alter our development and commercialization plans.

We may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect to our programs that we believe will complement or augment our existing business. For example, we currently intend to identify one or more strategic partners for the commercialization of plazomicin, and we may also attempt to find one or more strategic partners for the development or commercialization of one or more of our other product candidates. We face significant competition in seeking appropriate strategic partners, and the negotiation process to secure appropriate terms is time-consuming and complex. We may not be

 

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successful in our efforts to establish such a strategic partnership for any product candidates and programs on terms that are acceptable to us, or at all.

Any delays in identifying suitable collaborators and entering into agreements to develop or commercialize our product candidates could negatively impact the development or commercialization of our product candidates in geographic regions where we do not have development and commercialization infrastructure. Absent a collaboration partner, we would need to 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 are unable to do so, we may not be able to develop our product candidates or bring them to market and our business may be materially and adversely affected.

We may be unable to realize the potential benefits of any collaboration.

Even if we are successful in entering into a collaboration with respect to the development or commercialization of one or more product candidates, there is no guarantee that the collaboration will be successful. Collaborations may pose a number of risks, including:

 

   

collaborators often have significant discretion in determining the efforts and resources that they will apply to the collaboration, and may not commit sufficient resources to the development, marketing or commercialization of the product or products that are subject to the collaboration;

 

   

collaborators may not perform their obligations as expected;

 

   

collaborators may cease to devote resources to the development or commercialization of our product candidates if the collaborators view our product candidates as competitive with their own products or product candidates;

 

   

disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the course of development, might cause delays or termination of the development or commercialization of product candidates, and might result in legal proceedings, which would be time-consuming, distracting and expensive;

 

   

collaborators may be impacted by changes in their strategic focus or available funding, or business combinations involving them, which could cause them to divert resources away from the collaboration;

 

   

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

 

   

the collaborations may not result in us achieving revenue to justify such transactions; and

 

   

collaborations may be terminated and, if terminated, may result in a need for us to raise additional capital to pursue further development or commercialization of the applicable product candidate.

As a result, a collaboration may not result in the successful development or commercialization of our product candidates.

Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our loan agreement and we may be required to repay the outstanding indebtedness in an event of default, which could have a materially adverse effect on our business.

As of September 30, 2013, we had $7.8 million of indebtedness outstanding under our loan and security agreement with Silicon Valley Bank and Oxford Finance LLC. The loan agreement subjects us to various customary covenants, including requirements as to financial reporting and insurance, and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property,

 

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to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock, or to redeem capital stock. Our business may be adversely affected by these restrictions on our ability to operate our business.

Additionally, we may be required to repay the outstanding indebtedness under the loan facility if an event of default occurs under the loan agreement. Under the loan agreement, an event of default will occur if, among other things, we fail to make payments under the loan agreement; we breach any of our covenants under the loan agreement, subject to specified cure periods with respect to certain breaches; a lender determines in good faith that we are unable to satisfy our obligations under the loan agreement as they become due and that our principal investors do not intend to fund amounts necessary to satisfy such obligations; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would permit the holder of indebtedness to accelerate the maturity of such indebtedness or that could have a material adverse change on us. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In this case, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant to others, rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Oxford Finance LLC could also exercise its rights as collateral agent to take possession of and to dispose the collateral of the loan for the benefit of the lenders, which collateral includes all of our property other than our intellectual property. Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.

We may need to grow our organization, and we may experience difficulties in managing growth.

As of September 30, 2013, we had 38 employees. We will need to expand our managerial, operational, financial and other resources in order to manage our operations and clinical trials, continue our development activities, commercialize plazomicin or other product candidates and transition to becoming a public reporting company. Our management and personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our business strategy requires that we:

 

   

manage our pivotal Phase 3 superiority trial, which is expected to be conducted at multiple trial sites, and manage any other clinical trials;

 

   

manage our internal discovery and development efforts effectively while carrying out our contractual obligations to licensors, contractors, government agencies, any future collaborators and other third parties;

 

   

continue to improve our operational, financial and management controls, reporting systems and procedures; and

 

   

identify, recruit, maintain, motivate and integrate additional employees.

If we are unable to expand our managerial, operational, financial and other resources to the extent required to manage our development and commercialization activities, our business will be materially adversely affected.

We are highly dependent on the services of our Chief Executive Officer, Kenneth J. Hillan, M.B., Ch.B. and our ability to attract and retain qualified personnel.

We may not be able to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the San Francisco Bay Area. We are highly dependent on the principal members of our management and scientific staff, particularly our Chief Executive Officer, Dr. Hillan. If we are not able to retain Dr. Hillan or are not able to attract, on acceptable terms, additional qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow. Although we have executed employment agreements with each member of our current executive management team, including Dr. Hillan, we may not be able to retain their services as expected. In addition to the competition for personnel, the San Francisco Bay Area in particular is characterized by a high cost of living. Although we historically have

 

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not had any material difficulty attracting experienced personnel to our company, we could in the future have such difficulties and may be required to expend significant financial resources in our employee recruitment and retention efforts.

In addition, we have scientific and clinical advisors who assist us in formulating our product development and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development of products that may compete with ours.

If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.

Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we do business.

Our third-party manufacturers’ activities and our own activities involve the controlled storage, use and disposal of hazardous materials, including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous compounds. We and our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials. Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and/or interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines. If such unexpected costs are substantial, this could significantly harm our financial condition and results of operations.

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

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

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

We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates:

 

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(1) FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA; (2) manufacturing standards; (3) federal and state healthcare fraud and abuse laws and regulations; or (4) laws that require the true, complete and accurate reporting of financial information or data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws 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 civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Requirements associated with being a public company will increase our costs significantly, as well as divert significant company resources and management attention.

Prior to this offering, we have not been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or the other rules and regulations of the SEC or any securities exchange relating to public companies. We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will be required in order to adequately prepare for being a public company could be material, particularly after we cease to be an “emerging growth company.” Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance, we may be subject to sanctions by regulatory authorities.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and, beginning with our annual report for the year ending December 31, 2015, provide a management report on the internal control over financial reporting. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We will be evaluating our internal controls systems to allow management to report on, and eventually our independent auditors will attest to, the effectiveness of the operation of our internal controls. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and eventual auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. The aforementioned auditor attestation requirements will not apply to us until we are no longer an “emerging growth company.”

 

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To date, we have not conducted a review of our internal controls for the purpose of providing the reports required by these rules. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC or The NASDAQ Stock Market LLC, or NASDAQ. Any such action could adversely affect our financial results or investors’ confidence in us and could cause our stock price to fall. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources and could materially adversely affect our stock price. Deficient internal controls could also cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, which could have a negative effect on our stock price.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

A variety of risks associated with international operations could materially adversely affect our business.

Certain of our existing suppliers are located outside of the United States, including our sole source supplier for sisomicin, a key raw material for the production of plazomicin, which is located in China, and for which we do not have a commercial supply agreement. Additionally, if plazomicin is approved for commercialization outside the United States we will likely seek to enter into agreements with third parties to market plazomicin outside the United States. We are, or we expect that we will be, subject to additional risks related to these international business relationships, including:

 

   

different regulatory requirements for drug approvals in foreign countries;

 

   

differing United States and foreign drug import and export rules;

 

   

reduced protection for intellectual property rights in certain foreign countries;

 

   

unexpected changes in tariffs, trade barriers and regulatory requirements;

 

   

different reimbursement systems;

 

   

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 revenue, and other obligations incident to doing business in another country;

 

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potential liability resulting from development work conducted by these third parties; and

 

   

business interruptions resulting from geopolitical events, including war and terrorism, or natural disasters.

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

Our corporate headquarters is located in the San Francisco Bay Area, which in the past has experienced severe earthquakes. We do not carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our information technology systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Furthermore, integral parties in our supply chain are geographically concentrated and operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse events. If such an event were to affect our supply chain, it could have a material adverse effect on our business.

Risks Related to Our United States Government Contracts

Our use of government funding for certain of our programs adds uncertainty to our research and commercialization efforts with respect to those programs and may impose requirements that increase the costs of commercialization and production of product candidates developed under those government-funded programs.

Our development of plazomicin as a countermeasure for diseases caused by antibiotic-resistant pathogens and biothreats is currently being funded in significant part through a contract with BARDA. We have also received funding in the past for other programs from the U.S. Department of Defense’s Defense Threat Reduction Agency, or DTRA, and from the National Institute of Health’s National Institute of Allergy and Infectious Diseases, or NIAID, division. Contracts funded by the U.S. government and its agencies, including our contract with BARDA, include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:

 

   

terminate agreements, in whole or in part, for any reason or no reason;

 

   

reduce or modify the government’s obligations under such agreements without the consent of the other party;

 

   

claim rights, including intellectual property rights, in products and data developed under such agreements;

 

   

audit contract-related costs and fees, including allocated indirect costs;

 

   

suspend the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

 

   

impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements;

 

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suspend or debar the contractor from doing future business with the government;

 

   

control and potentially prohibit the export of products; and

 

   

pursue criminal or civil remedies under the False Claims Act, or FCA, the False Statements Act and similar remedy provisions specific to government agreements.

We may not have the right to prohibit the U.S. government from using or allowing others to use certain technologies developed by us, and we may not be able to prohibit third party companies, including our competitors, from using those technologies in providing products and services to the U.S. government. The U.S. government generally obtains the right to royalty-free use of technologies that are developed under U.S. government contracts. For further information, see “ Risks Related to Intellectual Property —Provisions in our United States government contracts, including our contract with BARDA, may affect our intellectual property rights.

In addition, government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

 

   

specialized accounting systems unique to government contracts;

 

   

mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent;

 

   

public disclosures of certain contract information, which may enable competitors to gain insights into our research program; and

 

   

mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements.

If we fail to maintain compliance with these requirements, we may be subject to potential contract or FCA liability and to termination of our contracts.

We are dependent on our BARDA contract to fund our pivotal Phase 3 superiority trial of plazomicin, and if we do not receive all of the funds under this contract, we may be forced to suspend or terminate this program or obtain alternative sources of funding.

We expect a significant portion of the funding for our pivotal Phase 3 superiority trial of plazomicin to come from our BARDA contract. BARDA may terminate our contract at any time for convenience and there can be no assurances that this contract will not be terminated. Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the development of antibacterial products such as plazomicin. Although we intend to use a portion of the proceeds from this offering to fund our plazomicin development program, any reduction or delay in BARDA funding may force us to suspend or terminate the program or seek alternative funding, which may not be available on non-dilutive terms, terms favorable to us or at all. Further, although our BARDA contract contains an unexercised option for additional funding to support, among other things, our planned additional safety trial of plazomicin, we have not determined the dollar amount of this option and cannot make any assurances as to when or whether the option will be exercised.

United States government agencies have special contracting requirements that give them the ability to unilaterally control our contracts.

U.S. government contracts typically contain unfavorable termination provisions and are subject to audit and modification by the government at its sole discretion, which will subject us to additional risks. These risks include the ability of the U.S. government to unilaterally:

 

   

audit and object to our BARDA contract-related costs and fees, and require us to reimburse all such costs and fees;

 

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suspend or prevent us for a set period of time from receiving new contracts or extending our existing contracts based on violations or suspected violations of laws or regulations;

 

   

cancel, terminate or suspend our contracts based on violations or suspected violations of laws or regulations;

 

   

terminate our contracts if in the government’s interest, including if funds become unavailable to the applicable governmental agency;

 

   

reduce the scope and value of our contract; and

 

   

change certain terms and conditions in our contract.

The U.S. government will be able to terminate any of its contracts with us, either for convenience or if we default by failing to perform in accordance with or to achieve the milestones set forth in the contract schedules and terms. Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed and settlement expenses on the work completed prior to termination. Except for the amount of services received by the government, termination-for-default provisions do not permit these recoveries and would make us liable for excess costs incurred by the U.S. government in procuring undelivered items from another source.

The United States government’s determination to award a future contract or contract option may be challenged by an interested party, such as another bidder, at the United States Government Accountability Office, or the GAO, or in federal court. If such a challenge is successful, our BARDA contract or any future contract we may be awarded may be terminated.

The laws and regulations governing the procurement of goods and services by the U.S. government provide procedures by which other bidders and interested parties may challenge the award of a government contract. If we are awarded a government contract, such challenges or protests could be filed even if there are not any valid legal grounds on which to base the protest. If any such protests are filed, the government agency may decide to suspend our performance under the contract while such protests are being considered by the GAO or the applicable federal court, thus potentially delaying delivery of payment. In addition, we could be forced to expend considerable funds to defend any potential award. If a protest is successful, the government may be ordered to terminate any one or more of our contracts and reselect bids. The government agencies with which we have contracts could even be directed to award a potential contract to one of the other bidders.

Our business is subject to audit by the United States government, including under our contracts with BARDA and DTRA, and a negative outcome in an audit could adversely affect our business.

U.S. government agencies such as the Department of Health and Human Services, or DHHS, the Defense Contract Audit Agency, or the DCAA, routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.

The DHHS and the DCAA also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be paid, while such costs already paid must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

 

   

termination of contracts;

 

   

forfeiture of profits;

 

   

suspension of payments;

 

   

fines; and

 

   

suspension or prohibition from conducting business with the U.S. government.

 

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In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could cause our stock price to decrease.

There is no assurance that we will receive payment from DTRA for additional expenses related to our LpxC inhibitor program, and the audit being conducted in connection with our proposal for such payments may require us to refund a portion of past payments.

In November 2012, DTRA terminated for convenience a contract with us that provided funding for our LpxC inhibitor program. In connection with the termination, we are seeking payment from DTRA for additional expenses we have incurred. We cannot be certain that we will be able to prevail upon DTRA to make such payments or that we would be successful in any subsequent legal proceeding to challenge DTRA’s decision.

In connection with our claim for payment from DTRA, we are undergoing an audit by the DCAA of the expenses for which we are seeking payment, as well as of $33.4 million previously paid to us under the DTRA contract. The results of the audit may lead certain expenses to be disallowed under the contract, which may reduce the size of any payment we may receive from DTRA, or may require us to refund some of the previously paid amounts we received from DTRA, which would adversely affect our financial position and results of operations.

Laws and regulations affecting government contracts make it more costly and difficult for us to successfully conduct our business.

We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under our BARDA contract. These laws and regulations affect how we conduct business with government agencies. Among the most significant government contracting regulations that affect our business are:

 

   

the Federal Acquisition Regulations, or FAR, and agency-specific regulations supplemental to the FAR, which comprehensively regulate the procurement, formation, administration and performance of government contracts;

 

   

business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute and Foreign Corrupt Practices Act;

 

   

export and import control laws and regulations; and

 

   

laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

Any changes in applicable laws and regulations could restrict our ability to maintain our existing BARDA contract and obtain new contracts, which could limit our ability to conduct our business and materially adversely affect our results of operations.

Risks Related to Intellectual Property

If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our product candidates may be adversely affected.

We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. In particular, our success depends in large part

 

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on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates. However, we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection.

Further, the patentability of inventions, and the validity, enforceability and scope of patents in the biotechnology and pharmaceutical field involve complex legal and scientific questions and can be uncertain. As a result, patent applications that we own or license may fail to result in issued patents in the United States or in other foreign countries for many reasons. For example, there is no assurance that we were the first to invent or the first to file patent applications in respect of the inventions claimed in our patent applications. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. We may also be unaware of certain prior art relating to our patent applications and patents, which could prevent a patent from issuing from a pending patent application, or result in an issued patent being invalidated. Even if patents have issued, or do successfully issue, from patent applications, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced. Changes to the patent laws in the United States and other jurisdictions could also diminish the value of our patents and patent applications or narrow the scope of our patent protection.

Furthermore, certain of the patents that we license from the University of Washington are co-owned by Novartis. The exclusivity of our license from the University of Washington is therefore subject to Novartis’ rights to use the licensed patents and technology for its own purposes, and to grant licenses to others to do so. We therefore rely primarily on our owned patent rights to provide patent protection for ACHN-975. However, none of these owned patent rights have yet issued, and if these fail to result in issued patents, our competitive position could be adversely affected.

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.

In addition to the protection afforded by patents, we rely on confidential proprietary information, including trade secrets, and know-how to develop and maintain our competitive position. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. We seek to protect our confidential proprietary information, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and collaborators. These agreements are designed to protect our proprietary information. However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Further, the laws of some foreign countries, including China, where we currently source raw materials for plazomicin, do not

 

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protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our technology or product candidates, including interference or derivation proceedings before the U.S. Patent and Trademark Office, or USPTO. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. We may also elect to enter into license agreements in order to settle patent infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other fees that could be significant. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

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

Competitors may infringe or otherwise violate our patents, the patents of our licensors, or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims that we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property rights. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, in whole or in part, or may refuse to stop the other party in such infringement proceeding 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 proceedings could put one or more of our patents at risk of being invalidated,

 

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held unenforceable or interpreted narrowly, and could put any of our patent applications at risk of not yielding an issued patent.

Interference or derivation proceedings provoked by third parties or brought by the USPTO or any foreign patent authority may be necessary to determine the priority of inventions or other matters of inventorship with respect to our patents or patent applications. We may also become involved in other proceedings, such as re-examination or opposition proceedings, before the USPTO or its foreign counterparts relating to our intellectual property or the intellectual property rights of others. An unfavorable outcome in any such proceedings could require us to cease using the related technology or to attempt to license rights to it from the prevailing party, or could cause us to lose valuable intellectual property rights. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Litigation or other proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may also become involved in disputes with others regarding the ownership of intellectual property rights. For example, we jointly develop intellectual property with certain parties, and disagreements may therefore arise as to the ownership of the intellectual property developed pursuant to these relationships. If we are unable to resolve these disputes, we could lose valuable intellectual property rights.

We may not be able to prevent misappropriation of our trade secrets or confidential information, 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. In addition, there could 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 substantial adverse effect on the price of our common stock.

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/or 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 market 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. Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

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

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

 

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If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates from third parties, we could lose license rights that are important to our business.

While the primary patent family covering plazomicin is Achaogen-owned, our development and commercialization of plazomicin is subject to our license agreement with Isis Pharmaceuticals, Inc., and a portion of the patent portfolio for our LpxC inhibitor program, including ACHN-975, is in-licensed from the University of Washington. Under our existing license agreements, we are subject to various obligations, including diligence obligations with respect to development and commercialization activities, payment obligations for achievement of certain milestones and royalties on product sales, as well as other material obligations. If we fail to comply with any of these obligations or otherwise breach our license agreements, our licensing collaborators may have the right to terminate the applicable license in whole or in part. The loss of our license agreement with Isis Pharmaceuticals, Inc. could materially adversely affect our ability to proceed with the development or potential commercialization of plazomicin as currently planned, while the loss of our license agreement with the University of Washington could materially adversely affect our ability to proceed with any development or potential commercialization of our LpxC inhibitor program, including ACHN-975.

The risks described elsewhere pertaining to our patents and other intellectual property rights also apply to the intellectual property rights that we license, and any failure by us or our licensors to obtain, maintain and enforce these rights could have a material adverse effect on our business. In some cases we do not have control over the prosecution, maintenance or enforcement of the patents that we license, and may not have sufficient ability to consult and input into the patent prosecution and maintenance process with respect to such patents, and our licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain and enforce the licensed patents.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business or permit us to maintain our competitive advantage. The following examples are illustrative:

 

   

others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of the patents that we own or license;

 

   

we or our licensors or collaborators might not have been the first to make the inventions covered by an issued patent or pending patent application that we own or license;

 

   

we or our licensors or collaborators might not have been the first to file patent applications covering an invention;

 

   

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

 

   

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

 

   

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

 

   

our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

   

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

 

   

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

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

 

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Obtaining and maintaining 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 USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. 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 noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to use our technologies and this circumstance would have a material adverse effect on our business.

Provisions in our United States government contracts, including our contract with BARDA, may affect our intellectual property rights.

Certain of our activities have been funded, and may in the future be funded, by the U.S. government. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to a nonexclusive license authorizing the government to use the invention. These rights may permit the government to disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the United States.

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 will be prosecuted and may also affect patent litigation. The USPTO has promulgated regulations and developed 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, did not come into effect until March 16, 2013. Accordingly, it is not yet 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.

We may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets of former or other employers.

Many of our employees and consultants, including our senior management, have been employed or retained by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants 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 these employees or consultants have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s or consultant’s former or other employer. We are not aware of any material threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If we

 

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fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of our marketing exclusivity for our product candidates, our business may be materially harmed.

Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, if any, one or more our U.S. patents covering our approved product(s) or the use thereof may be eligible for up to five years of patent term restoration under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product. Patent term extension also may be available in certain foreign countries upon regulatory approval of our product candidates. Nevertheless, we may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than we request.

If we are unable to obtain patent term extension or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

Risks Related to Government Regulation

The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining, or cause delays in obtaining, approvals for the commercialization of some or all of our product candidates, which will materially impair our ability to generate revenue.

The design, development, research, testing, manufacturing, labeling, storage, recordkeeping, approval, selling, import, export, advertising, promotion, and distribution of drug products are subject to extensive and evolving regulation by federal, state and local governmental authorities in the United States, principally by the FDA, and foreign regulatory authorities, with regulations differing from country to country. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. Neither we nor any future collaboration partner is permitted to market plazomicin or any other product candidate in the United States until we receive regulatory approval of an NDA from the FDA.

We have not submitted an application or obtained marketing approval for plazomicin or any other product candidate anywhere in the world. An NDA must include extensive preclinical and clinical data and supporting information to establish to the FDA’s satisfaction the product candidate’s safety and efficacy for each desired indication. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product candidate. Obtaining regulatory approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including:

 

   

warning letters;

 

   

civil and criminal penalties;

 

   

injunctions;

 

   

withdrawal of approved products;

 

   

product seizure or detention;

 

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product recalls;

 

   

total or partial suspension of production; and

 

   

refusal to approve pending NDAs or supplements to approved NDAs.

Prior to receiving approval to commercialize any of our product candidates in the United States or abroad, we and any applicable collaboration partners must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA and other regulatory authorities abroad, that such product candidates are safe and effective for their intended uses. Preclinical testing and clinical trials are long, expensive and uncertain processes. We may spend several years completing our testing for any particular product candidate, and failure can occur at any stage. Negative or inconclusive results or adverse medical events during a clinical trial could also cause the FDA or us to terminate a clinical trial or require that we repeat it or conduct additional clinical trials. Additionally, data obtained from preclinical studies and clinical trials can be interpreted in different ways and the FDA or other regulatory authorities may interpret the results of our studies and trials less favorably than we do. Even if we believe the preclinical or clinical data for a product candidate is promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Administering any product candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials of such product candidates and result in the FDA or other regulatory authorities denying approval of such product candidates for any or all targeted indications. The FDA or other regulatory authorities may determine that plazomicin or any other product candidate that we develop is not effective, or is only moderately effective, or has undesirable or unintended side effects, toxicities, safety profile or other characteristics that preclude marketing approval or prevent or limit commercial use. In addition, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

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

 

   

product candidate may not be deemed safe or effective;

 

   

FDA officials may not find the data from preclinical studies and clinical trials sufficient;

 

   

the FDA may request additional analyses, reports, data and studies;

 

   

the FDA may ask questions regarding, or adopt different interpretations of, data and results;

 

   

the FDA might not approve our or our third-party manufacturer’s processes or facilities; or

 

   

the FDA may change its approval policies or adopt new regulations.

Although we have received FDA fast track designation for our development of plazomicin to treat serious CRE infections, we cannot guarantee that we will experience a faster review or approval process compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

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

 

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Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our product candidates, when and if approved.

Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA and/or non-U.S. regulatory authorities. Any regulatory approval that we receive for our product candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies or surveillance to monitor the safety and efficacy of the product. In addition, if the FDA and/or non-U.S. regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to labeling, packaging, adverse event reporting, storage, distribution, advertising, promotion, recordkeeping and submission of safety and other post-market information. Manufacturers of our products and manufacturers’ facilities are required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA and to comply with requirements concerning advertising and promotion for our products. If we, any future collaboration partner or a regulatory authority 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, a regulatory authority may impose restrictions on that product, the collaboration partner, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing.

The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling and regulatory requirements. The FDA also imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not restrict the marketing of our products only to their approved indications, we may be subject to enforcement action for off-label marketing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:

 

   

warning letters or untitled letters;

 

   

mandated modifications to promotional materials or the required provision of corrective information to healthcare practitioners;

 

   

restrictions imposed on the product or its manufacturers or manufacturing processes;

 

   

restrictions imposed on the labeling or marketing of the product;

 

   

restrictions imposed on product distribution or use;

 

   

requirements for post-marketing clinical trials;

 

   

suspension of any ongoing clinical trials;

 

   

suspension of or withdrawal of regulatory approval;

 

   

voluntary or mandatory product recalls and publicity requirements;

 

   

refusal to approve pending applications for marketing approval of new products or supplements to approved applications filed by us;

 

   

restrictions on operations, including costly new manufacturing requirements;

 

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seizure or detention of our products;

 

   

refusal to permit the import or export of our products;

 

   

required entry into a consent decree, which can include imposition of various fines (including restitution or disgorgement of profits or revenue), reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

 

   

civil or criminal penalties; or

 

   

injunctions.

Widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of risk evaluation and mitigation strategies, or REMS, to ensure that the benefits of the drug outweigh its risks. In addition, because of the serious public health risks of high profile adverse safety events with certain products, the FDA may require, as a condition of approval, costly REMS programs.

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

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

We may seek a distribution and marketing collaborator for plazomicin or other product candidates commercialized outside of the United States. In order to market our product candidates in the European Economic Area, or EEA (which is comprised of the 28 Member States of the EU, plus Norway, Iceland and Liechtenstein), and many other foreign jurisdictions, we or our collaboration partners must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

 

   

the Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as for drugs produced through certain specified biotechnological processes (such as recombinant DNA technology, controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes including transformed mammalian cells, and hybridoma and monoclonal antibody methods), advanced therapy medicinal products, orphan medicinal products, and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

 

   

national MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

 

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Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

We have had limited interactions with foreign regulatory authorities, and approval procedures vary among countries and can involve additional clinical testing. In addition, the time required to obtain approval from foreign regulatory authorities may differ from that required to obtain FDA approval. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on our ability to obtain approval in other countries. The foreign regulatory approval process generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may or may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and even if we file, we may not receive necessary approvals to commercialize our product candidates in any market.

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

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

 

   

imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs”;

 

   

increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%;

 

   

requires collection of rebates for drugs paid by Medicaid managed care organizations;

 

   

addresses new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and for drugs that are line extension products;

 

   

requires manufacturers to participate in a coverage gap discount program, under which they 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; and

 

   

mandates a further shift in the burden of Medicaid payments to the states.

Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. On August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government programs. These reductions include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year,

 

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which went into effect on April 1, 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. 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 products once approved or additional pricing pressures.

We are subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could adversely affect our business, operations and financial condition.

Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The regulations that may affect our ability to operate include, without limitation:

 

   

the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

 

   

the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government, and which may apply to entities that provide coding and billing advice to customers;

 

   

federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

 

   

the federal physician sunshine requirements under the Affordable Care Act, which requires manufacturers of drugs, devices, biologics, and medical supplies to report annually to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members;

 

   

the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; 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 pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict 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.

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

 

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addition, recent healthcare reform legislation has strengthened these laws. For example, the recently enacted Affordable Care Act, among other things, amends the intent requirement of the Federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act 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 False Claims Act.

Achieving and sustaining compliance with these laws may prove costly. In addition, any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. 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, the exclusion from participation in federal and state healthcare programs, imprisonment, or the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Risks Related to Our Common Stock and This Offering

The price of our common stock may be volatile, and you may not be able to resell your shares at or above the initial public offering price.

The initial public offering price for the shares of our common stock sold in this offering has been determined by negotiation between the underwriters and us. This price may not reflect the market price of our common stock following this offering. You may be unable to sell your shares of common stock at or above the initial public offering price due to fluctuations in the market price of our common stock. Factors that could cause volatility in the market price of our common stock include, but are not limited to:

 

   

ability to commercialize or obtain regulatory approval for our product candidates, or delays in commercializing or obtaining regulatory approval;

 

   

announcements relating to our Phase 3 trial for plazomicin, including any periodic updates relating to enrollment of trial subjects, adverse events, site initiation, and timing of release of interim analyses and final trial results;

 

   

results from, or any delays in, clinical trial programs relating to our product candidates, including our Phase 3 trial for plazomicin;

 

   

any need to suspend or discontinue clinical trials due to side effects or other safety risks, or any need to conduct studies on the long-term effects associated with the use of our product candidates;

 

   

manufacturing issues related to our product candidates for clinical trials or future products for commercialization;

 

   

commercial success and market acceptance of our product candidates following regulatory approval;

 

   

undesirable side effects caused by product candidates after they have entered the market;

 

   

spread of bacterial resistance to our product candidates;

 

   

ability to discover, develop and commercialize additional product candidates;

 

   

announcements relating to collaborations that we may enter into with respect to the development or commercialization of our product candidates, or the timing of payments we may make or receive under these arrangements;

 

   

announcements relating to the receipt, modification or termination of government contracts or grants, or the timing of payments we may receive under these arrangements;

 

   

success of our competitors in discovering, developing or commercializing products;

 

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strategic transactions undertaken by us;

 

   

additions or departures of key personnel;

 

   

product liability claims related to our clinical trials or product candidates;

 

   

prevailing economic conditions;

 

   

business disruptions caused by earthquakes or other natural disasters;

 

   

disputes concerning our intellectual property or other proprietary rights;

 

   

FDA or other U.S. or foreign regulatory actions affecting us or our industry;

 

   

healthcare reform measures in the United States;

 

   

sales of our common stock by our officers, directors or significant stockholders;

 

   

future sales or issuances of equity or debt securities by us;

 

   

fluctuations in our quarterly operating results; and

 

   

the issuance of new or changed securities analysts’ reports or recommendations regarding us.

In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that have been often unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Based on the beneficial ownership of our common stock as of December 31, 2013, after this offering, our officers and directors, together with holders of 5% or more of our outstanding common stock before this offering and their respective affiliates, will beneficially own approximately         % of our common stock (assuming no exercise of the underwriters’ option to purchase additional shares of common stock). Accordingly, these stockholders will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with your interests. For example, these stockholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may take advantage of certain 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, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not

 

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previously approved. 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.

In addition, Section 102 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

If our existing stockholders or holders of our options or warrants sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market that these sales may occur could also cause the trading price of our common stock to decline. Based on the number of shares of common stock outstanding as of December 31, 2013, upon the completion of this offering, we will have outstanding a total of                 shares of common stock, assuming no exercise of the underwriters’ option to purchase additional shares of common stock. Of these shares, only the shares of common stock sold by us in this offering, plus any shares sold upon exercise of the underwriters’ option to purchase additional shares of common stock, will be freely tradable without restriction, unless held by our affiliates, in the public market immediately following this offering.

A total of                 shares of common stock are not subject to lock-up agreement with the underwriters and therefore will be eligible for sale in the public market 90 days after the date of this prospectus. We expect that the lock-up agreements with the underwriters pertaining to this offering will expire 180 days from the date of this prospectus. After the lock-up agreements expire, up to an additional                 shares of common stock will be eligible for sale in the public market, subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, with respect to shares held by directors, executive officers and other affiliates. The underwriters may, however, in their sole discretion, permit our officers, directors and other stockholders and the holders of our outstanding options and warrants who are subject to the lock-up agreements to sell shares prior to the expiration of the lock-up agreements. Sales of these shares, or perceptions that they will be sold, could cause the trading price of our common stock to decline.

In addition, based on the number of shares subject to outstanding awards under our Amended and Restated 2003 Stock Plan, or 2003 Plan, or available for issuance thereunder, as of December 31, 2013, and including the initial reserves under our 2014 Equity Incentive Award Plan, or 2014 Plan,                 shares of common stock that are either subject to outstanding options, outstanding but subject to vesting, or reserved for future issuance under the 2003 Plan or 2014 Plan 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. We also plan to file a registration statement permitting shares of common stock issued in the future pursuant to the 2003 Plan and 2014 Plan to be freely resold by plan participants in the public market, subject to the lock-up agreements, applicable vesting schedules and, for shares held by directors, executive officers and other affiliates, volume limitations under Rule 144 for shares. The 2014 Plan also contains a provision for the annual increase of the number of shares reserved for issuance under such plan, as described elsewhere in this prospectus, which shares we also intend to register. If the shares we may issue from time to time under the 2003 Plan, or 2014 Plan are sold, or if it is perceived that they will be sold, by the award recipient in the public market, the trading price of our common stock could decline.

 

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Certain holders of 114,115,833 shares of our common stock, warrants to purchase our capital stock and the 445,028 shares of common stock issuable upon exercise of those warrants will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described above. See “Description of Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Sales of such shares could also cause the trading price of our common stock to decline.

If there is no viable public market for our common stock, you may not be able to sell your shares at or above the initial public offering price.

Prior to this offering, there has been no public market for our common stock, and there can be no assurance that a regular trading market will develop and continue after this offering or that the market price of our common stock will not decline below the initial public offering price. The initial public offering price was determined through negotiations between us and the underwriters and may not be indicative of the market price of our common stock following this offering. Among the factors considered in such negotiations were prevailing market conditions, certain of our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. See “Underwriting” for additional information.

Investors in this offering will suffer immediate and substantial dilution of their investment.

If you purchase common stock in this offering, you will pay more for your shares than our pro forma as adjusted net tangible book value per share. Based upon an assumed initial public offering price of $        per share, the midpoint of the price range on the cover page of this prospectus, you will incur immediate and substantial dilution of $         per share, representing the difference between our assumed initial public offering price and our pro forma as adjusted net tangible book value per share. Based upon the assumed initial public offering price of $        per share, purchasers of common stock in this offering will have contributed approximately     % of the aggregate purchase price paid by all purchasers of our stock but will own only approximately     % of our common stock outstanding after this offering.

We have also issued warrants and options in the past to acquire common stock at prices significantly below the initial offering price. As of December 31, 2013, there were 430,275 shares of convertible preferred stock subject to outstanding warrants with a weighted-average exercise price of $1.16 per share (such warrants would be converted into warrants for 445,028 shares of common stock with a weighted-average exercise price of $1.12 as a result of this offering), 10,000 shares of common stock subject to an outstanding warrant with an exercise price of $0.14 per share (which warrant was exercised in January 2014) and 15,461,893 shares of common stock subject to outstanding options with a weighted-average exercise price of $0.52 per share. To the extent that these outstanding warrants and options are ultimately exercised, you will incur further dilution, and our stock price may decline.

Raising additional capital may cause dilution to our existing stockholders or involve the issuance of securities with rights, preferences and privileges senior to those of holders of our common stock.

To raise capital, we may from time to time issue additional shares of common stock at a discount from the then-current trading price of our common stock. As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. Whether or not we issue additional shares of common stock at a discount, any issuance of common stock will, and any issuance of other equity securities or of options, warrants or other rights to purchase common stock may, result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline. New investors could also gain rights, preferences and privileges senior to those of holders of our common stock, which could cause the price of our common stock to decline.

 

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

Our management will have broad discretion over the use of the net proceeds from this offering. Because of the number and variability of factors that will determine our use of such proceeds, you may not agree with how we allocate or spend the proceeds from this offering. We may pursue collaborations, clinical trials or discovery and development programs that do not result in an increase in the market value of our common shares and that may increase our losses. Our failure to allocate and spend the net proceeds from this offering effectively would have a material adverse effect on our financial condition and business. Until the net proceeds are used, they may be placed in investments that do not produce significant investment returns or that may lose value.

Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:

 

   

a classified board of directors so that not all directors are elected at one time;

 

   

a prohibition on stockholder action through written consent;

 

   

no cumulative voting in the election of directors;

 

   

the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director;

 

   

a requirement that special meetings of stockholders be called only by the board of directors, the chairman of the board of directors, the chief executive officer or, in the absence of a chief executive officer, the president;

 

   

an advance notice requirement for stockholder proposals and nominations;

 

   

directors may not be removed without cause and may only be removed with cause by the affirmative vote of 66 2/3% of all outstanding shares of our capital stock with the power to vote in the election of directors;

 

   

the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and

 

   

a requirement of approval of not less than 66 2/3% of all outstanding shares of our capital stock with the power to vote to amend any bylaws by stockholder action, or to amend specific provisions of our certificate of incorporation.

In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who, together with its affiliates, owns or within the last three years has owned 15% or more 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. Accordingly, Delaware law may discourage, delay or prevent a change in control of our company. Furthermore, our amended and restated certificate of incorporation will specify that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders. We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens

 

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of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.

Provisions in our charter and other provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future; therefore capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, the terms of any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

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

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

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this prospectus are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “potential” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

   

our expectations regarding the timing of initiation, enrollment and completion of our pivotal Phase 3 superiority trial for plazomicin, including our expectations regarding the timing of receipt and release of interim and full trial results;

 

   

our expectations regarding the timing of submission of an NDA for plazomicin following our pivotal Phase 3 superiority trial;

 

   

our expectations regarding the receipt of approvals to market plazomicin;

 

   

our expectations regarding the pricing, reimbursement and commercial potential of plazomicin and our other product candidates;

 

   

our expectations regarding our ability to validate, develop, and obtain regulatory approval for our in vitro assay to measure plazomicin levels;

 

   

the initiation, timing, progress and results of any preclinical studies and clinical trials we may initiate;

 

   

our ability to discover and develop additional product candidates and advance such product candidates through preclinical and clinical studies

 

   

our future research and development programs;

 

   

our ability to advance product candidates into, and successfully complete, clinical trials;

 

   

the implementation of our business model, strategic plans for our business, product candidates and technology;

 

   

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

 

   

estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

 

   

the timing or likelihood of regulatory filings and approvals or of alternative regulatory pathways for any of our product candidates;

 

   

our ability to establish collaborations or obtain additional government funding or receive funding under existing contracts;

 

   

our use of proceeds from this offering;

 

   

our financial performance; and

 

   

developments relating to our competitors and our industry.

Any forward-looking statements in this prospectus reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this prospectus. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

 

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This prospectus also contains estimates, projections and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, the incidence of certain medical conditions, statements that certain drugs, classes of drugs or dosages are the most widely prescribed in the United States or other markets, the perceptions and preferences of patients and physicians regarding certain therapies and other prescription, prescriber and patient data, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

 

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USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of              shares of our common stock in this offering will be approximately $         million, assuming an initial public offering price of $         per share (the midpoint of the price range shown on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds from this offering will be approximately $         million after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase or decrease in the assumed initial public offering price of $         would increase or decrease, respectively, our net proceeds by $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1,000,000 in the number of shares we are offering would increase or decrease, respectively, the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $         million, assuming the assumed initial public offering price stays the same. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may affect the amount of time prior to which we may need to seek additional capital.

We plan to use approximately $         million of the net proceeds from this offering in combination with the expected funding from our BARDA contract, to support our planned registration program for plazomicin. We plan to use the remainder to fund our other research and development activities, and for working capital and general corporate expenditures. We may use a portion of the proceeds to make scheduled payments of principal and interest on our outstanding loan with Oxford Finance LLC and Silicon Valley Bank, which is scheduled to be fully repaid by February 2015. For additional information related to our outstanding loan, including the interest rate and maturity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contrctual Obligations and Commitments—Notes Payable.”

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. Assuming we receive the full amount of funding from our BARDA contract, including under the unexercised option, we expect such funds, together with the proceeds from this offering, will be sufficient to fund our development of plazomicin through receipt of top-line data from our Phase 3 trial. We anticipate that we will need to raise substantial additional financing in the future to fund our operations, including for obtaining marketing approval for plazomicin. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the timing and speed of enrollment of our pivotal Phase 3 superiority trial of plazomicin, the status of our research and development programs, the continued receipt of funding under our contract with BARDA, and whether regulatory authorities require us to perform additional clinical trials of plazomicin in order to obtain marketing approvals. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds.

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

 

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DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our board of directors. In addition, unless waived, the terms of our loan from Silicon Valley Bank and Oxford Finance prohibit us from paying any cash dividends.

 

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CAPITALIZATION

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

 

   

on an actual basis;

 

   

on a pro forma basis to give effect to:

 

   

the issuance and sale of 9,174,314 shares of our Series D convertible preferred stock with gross proceeds to us of $10.0 million in November 2013, and the conversion of such shares into common stock as described below;

 

   

the conversion immediately prior to the completion of this offering of all of our outstanding shares of convertible preferred stock into an aggregate of 114,256,264 shares of common stock, which includes the 9,174,314 shares of common stock issuable upon conversion of the shares of Series D convertible preferred stock issued in November 2013;

 

   

the exercise of a common stock warrant for 10,000 shares at an exercise price of $0.14 per share in January 2014, which shares are excluded from the number of shares outstanding as of September 30, 2013 on an actual basis;

 

   

the reclassification to additional paid-in capital of our convertible preferred stock warrant liabilities included in other long-term liabilities in connection with the conversion of our outstanding convertible preferred stock warrants into common stock warrants, immediately prior to the completion of this offering; and

 

   

the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering.

 

   

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

 

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You should read this information together with our audited consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth under the heading “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

     As of September 30, 2013  
     Actual       Pro Forma       Pro Forma as
Adjusted(1)
 
           (unaudited)        
     (in thousands, except share and per share data)  

Cash and cash equivalents

   $ 8,212      $ 18,212      $     
  

 

 

   

 

 

   

 

 

 

Notes payable

   $ 7,786      $ 7,786      $ 7,786   

Other long-term liabilities

     176        —          —     

Convertible preferred stock, par value $0.001 per share: 132,202,910 shares authorized, 98,585,753 shares issued and outstanding, actual; no shares authorized, issued and outstanding pro forma and pro forma as adjusted

     122,287        —          —     

Stockholders’ equity (deficit):

      

Preferred stock, $0.001 par value per share: no shares authorized, issued and outstanding, actual;              shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

     —          —          —     

Common stock, par value $0.001 per share: 163,000,000 shares authorized, 4,321,523 shares issued and outstanding, actual;              shares authorized,              shares issued and outstanding pro forma;             shares issued and outstanding pro forma as adjusted

     4        119     

Additional paid-in capital

     3,917        136,265     

Accumulated deficit

     (126,238     (126,238  
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (122,317     10,146     
  

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 7,756      $ 17,932      $     
  

 

 

   

 

 

   

 

 

 

 

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

The number of shares of common stock issued and outstanding actual, pro forma and pro forma as adjusted in the table above excludes the following shares as of September 30, 2013:

 

   

15,461,893 shares of common stock issuable upon exercise of stock options outstanding under our Amended and Restated 2003 Stock Plan, at a weighted-average exercise price of $0.52 per share;

 

   

1,398,910 shares of common stock reserved for issuance pursuant to future awards under our Amended and Restated 2003 Stock Plan, will become available for issuance under our 2014 Equity Incentive Award Plan upon the effectiveness of the registration statement to which this prospectus relates;

 

   

                 additional shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the effectiveness of the registration statement to which this prospectus relates; and

 

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445,028 shares of common stock issuable upon the exercise of warrants outstanding to purchase convertible preferred stock, assuming their conversion into warrants to purchase common stock immediately prior to the completion of this offering, at a weighted-average exercise price of $1.12 per share, which warrants are expected to remain outstanding following the completion of this offering.

 

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DILUTION

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

Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding. Our historical net tangible book value as of September 30, 2013 was $(30,000), or $(0.01) per share. Our pro forma net tangible book value as of September 30, 2013 was $         million, or $         per share. Pro forma net tangible book value per share, before the issuance and sale of shares in this offering, gives effect to:

 

   

the issuance and sale of 9,174,314 shares of our Series D convertible preferred stock with gross proceeds to us of $10.0 million in November 2013, and the conversion of such shares into common stock as described below;

 

   

the conversion immediately prior to the completion of this offering of all of our outstanding shares of convertible preferred stock into an aggregate of 114,256,264 shares of common stock, which includes 9,174,314 shares of common stock issuable upon conversion of the shares of Series D convertible preferred stock issued in November 2013;

 

   

the exercise of a common stock warrant for 10,000 shares at an exercise price of $0.14 per share in January 2014, which shares are excluded from the number of shares outstanding as of September 30, 2013 on an actual basis;

 

   

the reclassification to additional paid-in capital of our convertible preferred stock warrant liabilities included in other long-term liabilities in connection with the conversion of our outstanding convertible preferred stock warrants into common stock warrants immediately prior to the completion of this offering; and

 

   

the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2013 would have been $         million, or $         per share. This represents an immediate increase in net tangible book value of $         per share to existing stockholders and an immediate dilution in net tangible book value of $         per share to purchasers of common stock in this offering, as illustrated in the following table:

 

Assumed initial public offering price per share

     $                

Historical net tangible book value per share as of September 30, 2013

   $ (0.01  

Pro forma increase in net tangible book value per share attributable to pro forma transactions and other adjustments described above, as of September 30, 2013

    

Pro forma net tangible book value per share as of September 30, 2013

    

Increase in pro forma net tangible book value per share attributable to new investors

    
  

 

 

   

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

    
    

 

 

 

Dilution per share to investors participating in this offering

     $     
    

 

 

 

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

 

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as adjusted net tangible book value by $         million, or $         per share, and the pro forma dilution 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $         per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $         per share and the dilution to new investors purchasing shares in this offering would be $         per share. We may also increase or decrease the number of shares we are offering. At the assumed offering price, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, an increase of 1,000,000 in the number of shares we are offering would increase our pro forma as adjusted net tangible book value by approximately $         million, or $         per share, and would decrease the pro forma dilution per share to investors in this offering by $         per share, and a decrease of 1,000,000 in the number of shares we are offering would decrease our pro forma as adjusted net tangible book value by approximately $         million, or $         per share, and would increase the pro forma dilution per share to investors in this offering by $         per share. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters fully exercise their option to purchase additional shares, pro forma as adjusted net tangible book value after this offering would increase to approximately $         per share, and there would be an immediate dilution of approximately $         per share to new investors.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The following table presents, on the pro forma as adjusted basis described above, as of September 30, 2013, the differences between the existing stockholders and the purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and preferred stock, cash received from the exercise of stock options and warrants and the value of any stock issued for services and the average price paid per share (in thousands, except per share amounts and percentages):

 

     Shares Purchased     Total Consideration     Average Price
per Share
 
     Number    Percent     Amount      Percent    

Existing stockholders

                   $                                 $                

New investors

            
  

 

  

 

 

   

 

 

    

 

 

   

Totals

        100   $           100   $     
  

 

  

 

 

   

 

 

    

 

 

   

If the underwriters exercise their option to purchase additional shares of our common stock in full, our existing stockholders would own     % and our new investors would own     % of the total number of shares of our common stock outstanding upon completion of this offering. The total consideration paid by our existing stockholders would be approximately $         million, or     %, and the total consideration paid by our new investors would be $         million, or     %.

The information and tables in this section are based on shares of common stock outstanding as of September 30, 2013 and exclude the following:

 

   

15,461,893 shares of common stock issuable upon exercise of stock options outstanding under our Amended and Restated 2003 Stock Plan, at a weighted-average exercise price of $0.52 per share;

 

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1,398,910 shares of common stock reserved for issuance pursuant to future awards under our Amended and Restated 2003 Stock Plan, will become available for issuance under our 2014 Equity Incentive Award Plan upon the effectiveness of the registration statement to which this prospectus relates;

 

   

                 additional shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective upon the effectiveness of the registration statement to which this prospectus relates; and

 

   

445,028 shares of common stock issuable upon the exercise of warrants outstanding to purchase convertible preferred stock, assuming their conversion into warrants to purchase common stock immediately prior to the completion of this offering, at a weighted-average exercise price of $1.12 per share, which warrants are expected to remain outstanding following the completion of this offering.

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statement of operations data for the years ended December 31, 2011 and 2012 and the selected consolidated balance sheet data as of December 31, 2011 and 2012 are derived from our audited consolidated financial statements included elsewhere in this prospectus.

The selected consolidated statement of operations data for the nine months ended September 30, 2012 and 2013 and the selected consolidated balance sheet data as of September 30, 2013 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial information has been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our consolidated financial position as of September 30, 2013 and the consolidated results of operations for the nine months ended September 30, 2012 and 2013.

Our historical results are not necessarily indicative of the results that may be expected in the future and interim results are not necessarily indicative of results to be expected for the full year. You should read the selected historical consolidated financial data below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.

 

     Year Ended December 31,     Nine Months Ended
September 30,
 
     2011     2012     2012     2013  
                 (unaudited)  
     (in thousands, except share and per share amounts)  

Consolidated Statement of Operations Data:

        

Contract revenue

   $ 22,474      $ 17,941      $ 13,971      $ 12,320   

Operating expenses:

        

Research and development

     35,210        26,581        23,036        16,685   

General and administrative

     7,979        7,349        5,668        5,418   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     43,189        33,930        28,704        22,103   

Loss from operations

     (20,715     (15,989     (14,733     (9,783

Interest expense and other, net

     (166     (2,427     (1,799     (1,104

Interest income and other, net

     15        51        47        261   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (20,866   $ (18,365   $ (16,485   $ (10,626
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share, basic and diluted(1)

   $ (5.97   $ (4.80   $ (4.39   $ (2.50
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used to compute net loss per common share, basic and diluted(1)

     3,494,897        3,828,104        3,755,025        4,243,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per common share, basic and
diluted(1)

     $ (0.21     $ (0.10
    

 

 

     

 

 

 

 

(1)   See Note 2 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per common share and pro forma net loss per common share.

 

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     As of December 31,     As of
September 30,
 
     2011     2012     2013  
                 (unaudited)  
           (in thousands)        

Consolidated Balance Sheet Data:

      

Cash and cash equivalents

   $ 12,528      $ 7,073      $ 8,212   

Working capital (deficit)

     10,760        (306     2,147   

Total assets

     19,478        13,266        13,821   

Notes payable

     3,947        10,847        7,786   

Other long-term liabilities

     126        237        176   

Convertible preferred stock

     100,354        100,354        122,287   

Accumulated deficit

     (97,247     (115,612     (126,238

Total stockholders’ deficit

     (95,216     (112,578     (122,317

 

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

You should read the following discussion and analysis of our financial condition and results of operations together with the section of this prospectus entitled “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company passionately committed to the discovery, development, and commercialization of novel antibacterials to treat multi-drug resistant, or MDR, gram-negative infections. We are developing plazomicin, our lead product candidate, for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including carbapenem-resistant Enterobacteriaceae, or CRE. In 2013, the Centers for Disease Control and Prevention identified CRE as a “nightmare bacteria” and an immediate public health threat that requires “urgent and aggressive action.” We expect to initiate a Phase 3 superiority trial of plazomicin in the first quarter of 2014. Through the Special Protocol Assessment procedure, the U.S. Food and Drug Administration, or FDA, has agreed that the design and planned analyses of our single pivotal Phase 3 trial adequately address objectives in support of a New Drug Application. We have also received FDA fast track designation for the development and regulatory review of plazomicin to treat serious and life-threatening CRE infections. Our plazomicin program is funded in part with a contract from the Biomedical Advanced Research and Development Authority for up to $103.8 million. We have global commercialization rights to plazomicin, which has patent protection in the United States extending through 2031. Plazomicin is the first clinical candidate from our gram-negative antibiotic discovery engine, and we have other programs in early and late preclinical stages focused on other MDR gram-negative infections.

Since commencing operations in 2004, we have devoted substantially all of our resources to identifying and developing our product candidates, including conducting preclinical studies and clinical trials and providing general and administrative support for these functions. In addition to plazomicin, our research team is focused on discovering medicines with novel mechanisms of action for serious infections caused by MDR Pseudomonas aeruginosa. We are taking a multifaceted approach to identify new antipseudomonal agents through our small molecule program, or LpxC inhibitor program, and therapeutic antibody discovery program. We expect to nominate at least one clinical candidate from our antipseudomonal program in 2014 and to file an investigational new drug application, or IND, in 2015. We also maintain an active discovery and development program in infections caused by gram-negative bacteria, drawing on knowledge gained through our work on LpxC inhibitors to identify compounds that bind and inhibit additional essential enzymes in the gram-negative outer membrane biosynthesis pathway.

We have financed our operations primarily through private placements of our equity securities, funding under our contracts with government agencies and certain debt related financing arrangements. We have never been profitable and have incurred net losses in each year since the commencement of our operations. Our net losses were $20.9 million and $18.4 million for the years ended December 31, 2011 and 2012, respectively, and $16.5 million and $10.6 million for the nine months ended September 30, 2012 and 2013, respectively. As of September 30, 2013, we had an accumulated deficit of $126.2 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and associated general and administrative costs. We expect to incur substantial losses from operations in the foreseeable future as we advance plazomicin and other product candidates through preclinical and clinical development, seek regulatory approval, and prepare for, and, if approved, proceed to commercialization.

 

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In July 2012, we initiated a restructuring that included a reduction in workforce, decrease in office and lab space occupied, and a related sublease of the vacated space resulting in an aggregate restructuring charge of $0.9 million. We have completed substantially all restructuring activities, and we recognized all anticipated restructuring charges in the year ended December 31, 2012 and nine months ended September 30, 2013. See Note 14 to our consolidated financial statements for additional information.

We have no manufacturing facilities and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party clinical research organizations, or CROs, to carry out our clinical development and we do not yet have a sales organization. We will need substantial additional funding to support our operating activities and adequate funding may not be available to us on acceptable terms, or at all.

Critical Accounting Policies and Use of Estimates

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

Revenue Recognition

We recognize revenue when: (i) evidence of an arrangement exists, (ii) fees are fixed or determinable, (iii) services have been delivered, and (iv) collectability is reasonably assured. We currently generate revenue solely from funding pursuant to government contracts. Our government contracts provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined period. Revenue from these government contracts are recognized in the period during which the related costs are incurred and the related services are rendered, provided that the applicable conditions under the government contracts have been met.

Funds received from third parties under contract arrangements are recorded as revenue if we are deemed to be the principal participant in the contract arrangements because the activities under the contracts are part of our development programs. If we are not the principal participant, the funds from contracts are recorded as a reduction to research and development expense. Contracts funds received are not refundable and are recognized when the related qualified research and development costs are incurred and when there is reasonable assurance that the funds will be received. Funds received in advance are recorded as deferred revenue. Management has determined that we are the principal participant under our government contract arrangements, and accordingly, we record amounts earned under the arrangements as revenue.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include certain payroll and personnel expenses, laboratory supplies, consulting costs, external contract research and development expenses, and allocated overhead, including rent, equipment depreciation, and utilities and relate to both programs sponsored by us as well as costs incurred pursuant to collaboration agreements and government contracts. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities on our behalf are deferred and expensed as the goods are delivered or the related services are performed.

 

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For certain research and development services where we have not yet been invoiced or otherwise notified of actual cost from the third-party contracted service providers, we are required to estimate the extent of the services that have been performed on our behalf and the associated costs incurred at each reporting period. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include services from:

 

   

contract research organizations and other service providers in connection with clinical studies;

 

   

contract manufacturers in connection with the production of clinical trial materials; and

 

   

vendors in connection with preclinical development activities.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage such studies and trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows and expense recognition. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which these services will be performed and the level of effort to be expended and costs to be incurred during each reporting period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. Our estimation of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting changes in estimates in any particular period. To date, there have been no material adjustments from our estimates to the amount actually incurred.

Stock-Based Compensation

Stock-based compensation costs related to stock options granted to employees are measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model for stock options with time-based vesting and Monte-Carlo simulations for market-based stock option awards. The estimated grant date fair value of our employee stock-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards except for our market-based stock options, which are recognized over the implicit service period derived from the Monte-Carlo simulation model. Stock options we grant to employees generally vest over four years.

For non-employee stock-based awards, the measurement date on which the estimated fair value of the stock-based award is calculated is equal to the earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached or (ii) the date at which the counterparty’s performance is complete. We recognize stock-based compensation expense for the estimated fair value of the vested portion of non-employee awards in our statements of operations and comprehensive loss.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. If we had made different assumptions, our stock-based compensation expense, net loss, and net loss per share of common stock could have been significantly different. These assumptions include:

 

   

Fair Value of our Common Stock. Because our stock is not publicly traded, we must estimate its fair value, as discussed in “—Common Stock Valuations” below.

 

   

Expected Term. We do not believe we are able to rely on our historical exercise and post-vesting termination activity to provide accurate data for estimating the expected term for use in determining the

 

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fair value-based measurement of our options. Therefore, we have opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

 

   

Expected Volatility. As we do not have a trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the weighted-average historic price volatility for a group of similar companies that are publicly traded based on daily price observations over a period equivalent to the expected term of the stock option grants. When selecting these public companies on which we based expected stock price volatility, we chose companies with comparable characteristics, including enterprise value, stages of clinical development, risk profiles and position within the industry. We did not rely on implied volatilities of traded options in our industry peers’ common stock because the volume of activity was relatively low. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

 

   

Risk-free Interest Rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options.

 

   

Expected Dividend Yield. We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

In addition to the assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation for our awards. We will continue to use judgment in evaluating the expected volatility, expected terms, and forfeiture rates utilized for our stock-based compensation calculations on a prospective basis.

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

 

     Year Ended December 31,    Nine Months Ended September 30,
     2011    2012    2012    2013

Expected term

   5.8 – 7.9 years    6.0 – 6.1 years    6.0 – 6.1 years    5.4 – 6.1 years

Expected volatility

   56% – 61%    56% – 69%    56% – 69%    68% – 69%

Risk-free interest rate

   1.1% – 2.6%    0.8% – 1.2%    0.9% – 1.2%    1.2% – 1.8%

Expected dividend yield

   0%    0%    0%    0%

Expected forfeiture rate

   6%    9%    7%    8%

The fair value of stock options granted to non-employees was estimated using the following assumptions for the periods presented:

 

     Year Ended December 31,    Nine Months Ended September 30,
     2011    2012    2012    2013

Remaining contractual term

   7.3 – 10.0 years    6.3 – 9.9 years    6.6 – 7.1 years    6.1 – 9.9 years

Expected volatility

   56% – 63%    56% – 70%    56% – 70%    68% – 69%

Risk-free interest rate

   1.6% – 3.4%    0.9% – 1.8%    1.0% – 1.4%    1.1% – 2.4%

Expected dividend yield

   0%    0%    0%    0%

During the period from January 1, 2012 through September 30, 2013, we granted stock options to purchase common stock that vest upon the achievement of market-based stock price targets. For these options, we estimated the fair value on the original grant date using a Monte-Carlo simulation, and we are recognizing the stock based compensation expense over the implicit service period as derived under that simulation.

 

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For the years ended December 31, 2011 and 2012, stock-based compensation expense was $0.9 million and $0.8 million, respectively. For the nine month periods ended September 30, 2012 and 2013, stock-based compensation expense was $0.6 million and $0.8 million, respectively. As of December 31, 2012 and September 30, 2013, we had approximately $2.1 million and $1.9 million, respectively, of total unrecognized compensation expense, net of related forfeiture estimates, which we expect to recognize over a weighted-average period of approximately 2.9 years and 2.7 years, respectively.

The intrinsic value of all outstanding options as of September 30, 2013 was $         million based on the estimated fair value of our common stock of $         per share, the midpoint of the price range set forth on the cover of this prospectus.

Common Stock Valuations

We are required to periodically estimate the fair value of our common stock when issuing stock options and computing our estimated stock based compensation expense. The fair value of our common stock was determined on a periodic basis by our board of directors, with the assistance of an independent third-party valuation expert. The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of significant levels of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different. In determining the fair value of our common stock, our board of directors considered valuation methods intended to comply with Section 409A of the Internal Revenue Code that create a presumption that the resulting valuation is reasonable for federal tax purposes.

The fair value of the common stock underlying our stock options was estimated at each grant date by our board of directors. Our board of directors intended all options granted to be exercisable at a price per share not less than the estimated per share fair value of our common stock underlying those options on the date of grant. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , which we refer to as the Practice Aid.

The methodology to determine the fair value of our common stock included estimating the fair value of the enterprise by employing the following widely accepted valuation methods:

 

   

Option Pricing Method (OPM) . Under the OPM, shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The values of the preferred and common stock are inferred by analyzing these options.

 

   

Probability-Weighted Expected Return Method (PWERM) . The PWERM is a scenario-based analysis that estimates the value per share based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to us, as well as the economic and control rights of each share class.

In conducting these valuations, our board of directors considered all objective and subjective factors that it believed to be relevant, including its and management’s best estimates of our business condition, prospects, and operating performance at each grant date. The valuations, assumptions, and methodologies included, among other things:

 

   

any recent contemporaneous third-party valuations prepared in accordance with the methodologies outlined in the Practice Aid;

 

   

the prices of our convertible preferred stock sold to investors in arm’s length transactions, and the rights, preferences and privileges of our convertible preferred stock as compared to our common stock, including the liquidation preferences of our convertible preferred stock;

 

   

progress of research and development activities, including our clinical trials;

 

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our operating and financial performance, including our available capital resources;

 

   

the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of comparable companies;

 

   

the lack of liquidity of our common stock as a private company;

 

   

equity market conditions affecting comparable public companies;

 

   

the achievement of development and other company milestones;

 

   

the likelihood of achieving a liquidity event for the shares of common stock, such as an initial public offering, or IPO, given prevailing market and biotechnology sector conditions; and

 

   

business risks.

The per share common stock value was estimated by allocating our enterprise value using the PWERM method in August 2011, August 2012, and September 2013. In determining the fair value of our common stock, our board of directors used a combination of the IPO approach and the market multiple approach to estimate the enterprise value of our company.

PWERM is a scenario-based analysis that estimates the value per share based on the probability-weighted present value of expected future investment returns. We considered each of four possible categories of scenarios—IPO, sale, private financing, and failure. The value per share under each scenario was then probability weighted and the resulting weighted values per share were summed to determine the estimated fair value per share of our common stock. In the failure, sale, and private financing scenarios, the value per share was allocated taking into account the liquidation preferences and participation rights of our convertible preferred stock in accordance with applicable elements of the Practice Aid. In the IPO scenarios, it was assumed that all outstanding shares of our convertible preferred stock and warrants would convert into common stock. Over time, as we achieved certain company-related milestones, the probability of each scenario was evaluated and adjusted accordingly.

In the IPO scenarios, we analyzed IPOs that had occurred since January 2010 and considered both an earlier- and a later-term IPO scenario. For the earlier IPO scenario, we relied on IPO peer group data and reviewed the pre-money IPO values of a group of companies that effectuated a recent IPO while in Phase 3 clinical development. For the later IPO scenario, we relied on valuations for companies that were in post-Phase 3 and/or had submitted their New Drug Application, or NDA, as of their IPO or that were publicly-traded and in post-Phase 3 and/or had submitted their NDA as of the date of valuation. For the various IPO scenarios, we estimated our IPO value based on the comparable company data and added our expected cash at the time of the expected IPOs.

For the sale scenarios, we analyzed merger and acquisition transactions involving certain targets that were in Phase 3 clinical development at the time of their acquisition. After deriving the present value of a future acquisition, we allocated the value per share by taking into account the liquidation preferences and participation rights of our convertible preferred stock .

For the failure scenarios, we analyzed the possibility that our Company would fail during the next few years. Failure can be caused by regulatory, clinical, or financial reasons. We examined statistics regarding the successful outcome of clinical trials in various disease areas, provided by a Federal Trade Commission working paper. We looked specifically at trials for product candidates by small pharmaceutical companies and at trials for product candidates derived from biologicals and concluded that 54% to 70% of Phase 3 trials succeed, implying that there is a 30% to 46% chance that a single Phase 3 trial will fail.

In determining the estimated fair value of our common stock, our board of directors also considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we applied

 

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discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity. The estimated fair value of our common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

We granted stock options during the period from January 1, 2011 through the date of this prospectus as summarized below:

 

Grant Date

   Shares Issued      Exercise Price
Per Share
     Estimated Fair Value of
Common Stock Per
Share Used to
Determine Stock-
Based Compensation
Expense
 

February 23, 2011

     296,800       $ 0.63       $ 0.63   

June 7, 2011

     2,334,000       $ 0.63       $ 0.63   

June 22, 2011

     255,000       $ 0.63       $ 0.63   

September 14, 2011

     1,258,000       $ 0.66       $ 0.66   

December 13, 2011

     75,000       $ 0.66       $ 0.66   

March 8, 2012

     5,020,000       $ 0.66       $ 0.66   

June 12, 2012

     210,000       $ 0.66       $ 0.66   

September 20, 2012

     1,380,000       $ 0.43       $ 0.43   

November 8, 2012

     530,600       $ 0.43       $ 0.43   

December 4, 2012

     1,549,000       $ 0.43       $ 0.43   

June 10, 2013

     1,275,900       $ 0.43       $ 0.60   

June 20, 2013

     33,000       $ 0.43       $ 0.60   

September 26, 2013

     541,800       $ 0.60       $ 0.60   

At each grant date the board of directors reviewed any recent events and their potential impact on the estimated fair value per share of the common stock. As is provided for in Internal Revenue Code Section 409A, we generally rely on our valuations for up to twelve months unless we have experienced a material event that would have affected the estimated fair value per common share.

For grants of stock awards made on dates for which there was no valuation performed by an independent valuation specialist, our board of directors determined the fair value of our common stock on the date of grant based upon the immediately preceding valuation and other pertinent information available to it at the time of grant.

August 1, 2011 Valuation. A contemporaneous valuation was performed by management and our board of directors with the assistance of an independent valuation specialist as of August 1, 2011 that determined the fair value of our common stock to be $0.66 per share. This valuation was performed in accordance with applicable elements of the Practice Aid. In accordance with the Practice Aid, we considered the various methods for allocating the enterprise value across our classes and series of capital stock to determine the fair value of our common stock at each valuation date. In this valuation we used the PWERM approach with estimates of the common stock value to our stockholders under each of seven possible future scenarios, including three IPO scenarios, three merger or strategic acquisition scenarios and one failure scenario, depending on the success of our product candidates in clinical trials during the ensuing three years. We applied a discount of 37% to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity.

Our board of directors determined there were no events or circumstances that warranted a change in fair value from the August 1, 2011 valuation at each of the grant dates of stock options that took place from August 1, 2011 through June 12, 2012.

August 31, 2012 Valuation. A contemporaneous valuation was performed by management and our board of directors with the assistance of an independent valuation specialist as of August 31, 2012 that determined the fair

 

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value of our common stock to be $0.43 per share, a decrease of $0.23 from the August 2011 valuation. The change in valuation reflected changes in the underlying assumptions regarding potential outcomes for an IPO or a merger or acquisition transaction for us. The August 31, 2012 valuation involved two IPO scenarios, one sale scenario, one Series D financing scenario and one failure scenario. We estimated the per share common stock fair value by allocating the enterprise value using the PWERM approach for the August 2012 valuation as described above. In the potential future private financing scenario, we used the OPM to estimate the common stock value using informed assumptions for an upcoming preferred stock round. In each scenario where present value calculations were required we used a risk-adjusted rate of return, as determined using the capital asset pricing model, of 21% to reflect risks associated with achievement of clinical goals and of being a clinical development company. We applied a discount of 37% to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity.

Our board of directors determined there were no events or circumstances that warranted a change in the fair value from the August 31, 2012 valuation and each of the grant dates of stock options that took place from August 31, 2012 through December 31, 2012.

September 24, 2013 Valuation. We estimated that our common stock had a value of $0.60 per share as of September 24, 2013, an increase of $0.17 from the prior August 31, 2012 valuation. In this contemporaneous valuation we used both the PWERM and OPM approach with estimates of the common stock value to our stockholders under each of seven possible future scenarios, including two IPO scenarios: 60% probability of an earlier IPO; 13% probability of a later IPO following a mezzanine financing round; 13% probability of the later IPO following a venture capital round of financing; and lower probabilities for a strategic acquisition in June 2015 following a mezzanine financing round, a strategic acquisition in June 2015 following a venture capital round of financing, a company failure following a mezzanine financing round, or company failure following a venture capital round. In establishing this exercise price, our board of directors considered input from management, including the valuation of our common stock as of the prior valuation date in August 2012, as well as the objective and subjective factors described above, including:

 

   

capital market conditions for biotechnology companies continued to improve as evidenced by a recent increase in the number of IPOs and their valuations, including increased valuations;

 

   

the NASDAQ Biotechnology (^NBI) index increased 17% from July 1, 2013 to September 30, 2013;

 

   

an increase in the likelihood of our board of directors pursuing an IPO as determined during board meetings conducted in September 2013; and

 

   

a decrease in the time to a prospective liquidity event.

We applied a discount of 17% to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity.

Retrospective Value Used for Financial Reporting Purposes

In September 2013, we decided to pursue an IPO. As a result, in connection with the preparation of our consolidated financial statements for the nine-month period ended September 30, 2013 included in this prospectus, and in preparing for our proposed IPO, we reexamined the estimated fair value of our common stock associated with our stock option grants during 2013 for financial reporting purposes as follows:

June 2013 Grants . Our board of directors granted options to purchase common stock on June 10, 2013 and June 20, 2013 to employees who were recently hired during the prior six months since we last issued option grants, with each option having an exercise price of $0.43 per share. In establishing this exercise price, our board of directors considered input from management, including the previously issued contemporaneous valuation of our common stock which was performed on August 31, 2012, as well as various objective and subjective factors including:

 

   

the continued lack of liquidity of our common stock as a private company;

 

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the capital raising transactions in May 2013 that were at the same valuations as prior rounds;

 

   

the rights, preferences and privileges of our preferred stock as compared to those of our common stock, including the liquidation preferences of our preferred stock;

 

   

the impact of significant ongoing expenses associated with research and development and ongoing clinical trials; and

 

   

the low likelihood of achieving a liquidity event for holders of our common stock, such as an IPO or sale of our company, given our early stage of development and prevailing market conditions.

At the time of the grants, our board of directors determined that, at the grant date, the collective effect of these events and circumstances did not indicate a significant change in the fair value of our common stock. Based on these factors, our board of directors determined that the fair value of our common stock on the grant dates listed above was $0.43 per share. In preparation for filing a registration statement with the Securities and Exchange Commission in connection with this offering, we evaluated whether or not in retrospect the value of the common stock on grant dates during 2013 was appropriate. We determine that in retrospect, the valuation of the common stock as determined by the valuation report issued on September 24, 2013 provided a closer approximation of the fair value of the common stock as it was closer to the grant date than the valuation report dated August 31, 2012. For the calculation of stock-based compensation expense for financial reporting purposes, we have used a market value of $0.60 per share for the June 2013 stock option awards.

Income Taxes

As of December 31, 2012, we had net operating loss carryforwards of approximately $102.6 million to offset future federal income taxes and approximately $102.5 million that may offset future state income taxes. The federal and state net operating loss carryforwards are available to reduce future taxable income, if any. If not utilized, the federal and state net operating loss carryforwards will begin to expire in various amounts beginning 2023 and 2013, respectively. Current federal and state tax laws include substantial restrictions on the utilization of net operating losses and tax credits in the event of certain ownership changes. Even if the carryforwards are available, they may be subject to annual limitations, lack of future taxable income, or future ownership changes that could result in the expiration of the carryforwards before they are utilized. At December 31, 2012, we recorded a 100% valuation allowance against our deferred tax assets of approximately $48.5 million, as at that time our management believed it was uncertain that they would be fully realized. If we determine in the future that we will be able to realize all or a portion of our net operating loss carryforwards, an adjustment to our net operating loss carryforwards would increase net income in the period in which we make such a determination.

Financial Overview and Results of Operations

General

We have not generated net income from operations and, at September 30, 2013, we had an accumulated deficit of $126.2 million, primarily as a result of research and development and general and administrative expenses. While we may in the future generate revenue from a variety of sources, including product sales, license fees, milestone payments and research and development payments in connection with strategic partnerships, our current revenue is generated solely from research and development funding pursuant to government contracts. Our product candidates are still in clinical development and may never be successfully developed or commercialized. Other than the government funding described below, we do not expect to derive any revenue from any product candidates that we develop until we obtain regulatory approval and commercialize such products, which we do not expect will occur before 2017, if at all, or until such time that we potentially enter into collaboration agreements with third parties for the development and commercialization of such product candidates. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.

 

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Contract Revenue

Our contract revenue represents services performed for the development of our product candidates under government contracts. For the years ended December 31, 2011, and 2012, and the nine months ended September 30, 2012 and 2013, contract revenue was $22.5 million, $17.9 million, $14.0 million, and $12.3 million, respectively. We have derived all of our revenue to date from funding provided under U.S. government contracts in connection with the development of our product candidates.

Biomedical Advanced Research and Development Authority (BARDA) . We have received funding for our lead product candidate, plazomicin, under a contract with the Biomedical Advanced Research and Development Authority, or BARDA, an agency of the U.S. Department of Health and Human Services for the development, manufacturing, nonclinical and clinical evaluation of, and regulatory filings for, plazomicin as a countermeasure for disease caused by antibiotic-resistant pathogens and biothreats. In August 2010, BARDA awarded us a contract, which we refer to as the BARDA Contract, that included committed funding of $27.6 million for the first two years of the contract and subsequent options exercisable by BARDA to provide additional funding. In September 2012, BARDA modified the contract to increase the total committed funding to $43.4 million through March 2014. In April 2013, we were awarded an additional $60.4 million under the contract to support our Phase 3 clinical trial of plazomicin, for total committed funding of $103.8 million. Our BARDA Contract provides for payments to us based on direct costs incurred and allowances for overhead, plus a fee, where applicable. In November 2013, we modified the most recent awarded option such that payments under this option would not exceed $60.4 million, even though the cost of the Phase 3 trial and related expenses are expected to exceed the amount available to us under the BARDA Contract for direct costs incurred. We currently anticipate that the estimated costs of the plazomicin development program, through the receipt of top-line data, that are not funded by the BARDA Contract will approximate the allocated portion of proceeds from this offering, as described in the “Use of Proceeds” section of this prospectus. We intend to utilize such allocated proceeds to fund the cost of the Phase 3 trial and related expenses that are in excess of the payments to us under the BARDA Contract for the direct costs of the trial.

For the years ended December 31, 2011 and 2012 and for the nine months ended September 30, 2012 and 2013, total revenue recognized under the BARDA Contract was $9.3 million, $11.6 million, $9.5 million and $11.9 million, respectively, of which $2.0 million, $1.8 million, and $4.3 million were included in contracts receivable at December 31, 2011 and 2012, and September 30, 2013, respectively. As of September 30, 2013, a total of $33.4 million under the BARDA Contract has been recorded as revenue, with $70.4 million remaining available under the contract.

National Institute of Allergy and Infectious Diseases (NIAID) . We received funding for a previous research and development program that we currently do not intend to advance, under a contract with the National Institute of Allergy and Infectious Diseases, or NIAID, a division of the National Institutes of Health, or NIH. In September 2008, NIAID awarded us a contract, which we refer to as the NIAID Contract, which as amended in September 2011 provided up to a total of $22.2 million in funding over five years through August 2013.

For the years ended December 31, 2011 and 2012 and for the nine months ended September 30, 2012 and 2013, we recognized revenue under the NIAID Contract of $6.2 million, $2.6 million, $2.3 million, and $0.2 million, respectively, of which $1.7 million, $0.2 million and $40,000 were included in contracts receivable at December 31, 2011 and 2012, and September 30, 2013, respectively.

Defense Threat Reduction Agency (DTRA) . We received funding from the Defense Threat Reduction Agency, or DTRA, a division of the Department of Defense, to develop novel antibacterials for the treatment of biodefense pathogens. In June 2007, DTRA awarded us a contract, which we refer to as the DTRA Contract, that provided up to a total of $18.8 million in funding over two years. The DTRA Contract was subsequently modified to extend through the end of November 2012 and to provide for a total of $35.4 million of funding for drawdown. In November 2012, DTRA terminated the contract for convenience. In connection with the termination, we are seeking payment from DTRA for additional expenses we have incurred. We have not

 

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recognized any revenue with respect to these additional amounts. The payments we have received under the DTRA Contract are subject to an ongoing audit by the Defense Contract Audit Agency, which may reduce the size of our requested payments or require us to refund some of the amounts previously paid to us.

For the years ended December 31, 2011 and 2012 and for the nine months ended September 30, 2012, we recognized revenue under the DTRA Contract of $6.8 million, $1.5 million and $0.7 million, respectively, of which $1.2 million and $0.8 million were included in contracts receivable at December 31, 2011 and 2012, respectively. No revenue was recognized in the nine months ended September 30, 2013.

U.S. Army Medical Research Acquisition Authority (USAMRAA) . In May 2012, we were awarded a one-year $2.5 million contract from the U.S. Army Medical Research Acquisition Authority to support our Phase 1 clinical trial of ACHN-975. Total revenue recognized was $2.2 million, $1.6 million, and $0.3 million, for the year ended December 31, 2012 and for the nine-month periods ended September 30, 2012 and 2013, respectively, of which $1.4 million and $0.1 million were included in contracts receivable at December 31, 2012 and September 30, 2013, respectively.

Research and Development Expenses

For the years ended December 31, 2011 and 2012 and the nine months ended September 30, 2012 and 2013, research and development expenses were $35.2 million, $26.6 million, $23.0 million, and $16.7 million, respectively. We expense both internal and external research and development costs as incurred. We currently track our external costs by project. Our external research and development expenses consist primarily of:

 

   

expenses incurred under agreements with contract research organizations, investigative sites, and consultants that conduct our clinical trials and a substantial portion of our preclinical activities;

 

   

the cost of acquiring and manufacturing clinical trial and other materials; and

 

   

other costs associated with development activities, including additional studies.

Internal research and development costs consist primarily of salaries and related fringe benefit costs for our employees (such as workers compensation and health insurance premiums), stock-based compensation charges, travel costs, lab supplies, and overhead expenses. Internal costs, except direct labor, generally benefit multiple projects and are not separately tracked by project.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue the development of our product candidates. In particular, we expect our research and development costs associated with our plazomicin program to increase significantly as we initiate our pivotal Phase 3 superiority trial. As product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, we expect that our research and development expenses will increase in the future.

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, audit and tax services, rent and other general operating expenses not otherwise included in research and development. For the years ended December 31, 2011 and 2012 and the nine months ended September 30, 2012 and 2013, general and administrative expenses were $8.0 million, $7.3 million, $5.7 million, and $5.4 million, respectively. We anticipate general and administrative expenses will increase in future periods, reflecting an expanding infrastructure and increased professional fees in preparation for becoming and operating as a public company.

 

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Comparison of Nine Months Ended September 30, 2012 and 2013

 

     Nine Months Ended
September 30,
    Increase
(Decrease)
 
     2012     2013    
     (in thousands)  

Contract revenue

   $ 13,971      $ 12,320      $ (1,651

Operating expenses:

      

Research and development

     23,036        16,685        (6,351

General and administrative

     5,668        5,418        (250
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (14,733     (9,783     4,950   

Interest income and other, net

     47        261        214   

Interest expense and other, net

     (1,799     (1,104     695   
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (16,485   $ (10,626   $ 5,859   
  

 

 

   

 

 

   

 

 

 

Contract Revenue

Contract revenue in each period related solely to funding pursuant to our government contracts. Contract revenue decreased $1.7 million, from $14.0 million for the nine months ended September 30, 2012 to $12.3 million for the nine months ended September 30, 2013. This decrease was mainly attributable to a reduction in research and development services performed under our DTRA and NIAID Contracts as we wound down activities under those contracts, offset in part by increased funding under our BARDA Contract.

Research and Development Expenses

Research and development expenses decreased $6.4 million, from $23.0 million for the nine months ended September 30, 2012 to $16.7 million for the nine months ended September 30, 2013. This was primarily due to a $2.4 million decrease in nonclinical research and development costs, a $1.9 million decrease in clinical trial costs as a result of the completion of our Phase 2 clinical trial of plazomicin in the second quarter of 2012, and a $1.5 million decrease in personnel-related costs as a result of a headcount reduction of 26 employees in our research and development organization in the second half of 2012.

External research and development expenses for plazomicin decreased $2.0 million from $9.6 million for the nine months ended September 30, 2012 to $7.6 million for the nine months ended September 30, 2013. This decrease was primarily due to a $3.1 million decrease in clinical trial costs associated with Phase 1 and Phase 2 trials, offset by a $1.6 million increase in the Phase 3 trial design and start-up activities. After completing our Phase 2 clinical trial of plazomicin in the second quarter of 2012, we incurred $1.4 million and $7.5 million in plazomicin-related expenses during the nine month periods ended September 30, 2012 and 2013, respectively, for nonclinical studies on biothreat pathogens, manufacturing process development work, and the design and start-up activities for the Phase 3 CRE clinical trial.

 

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The following table illustrates the components of our research and development expenses during the periods indicated:

 

     Nine Months Ended
September 30,
     Increase
(Decrease)
 
     2012      2013     
     (in thousands)  

External research and development expenses by program:

        

Plazomicin

   $ 9,595       $ 7,642       $ (1,953

Other research programs

     4,689         2,851         (1,838
  

 

 

    

 

 

    

 

 

 

Subtotal external program costs

     14,284         10,493         (3,791
  

 

 

    

 

 

    

 

 

 

Internal costs:

        

Research and development personnel costs

     5,704         3,776         (1,928

Indirect research and development expenses

     3,048         2,416         (632
  

 

 

    

 

 

    

 

 

 

Subtotal internal costs

     8,752         6,192         (2,560
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 23,036       $ 16,685       $ (6,351
  

 

 

    

 

 

    

 

 

 

General and Administrative Expenses

General and administrative expenses decreased $0.3 million, from $5.7 million for the nine months ended September 30, 2012 to $5.4 million for the nine months ended September 30, 2013. The decrease in general and administrative expenses was primarily due to a decrease of $0.9 million in personnel-related costs from a headcount reduction of nine employees in our general and administrative organization in the second half of 2012.

Interest Income and Other, Net

Interest income and other, net increased from $47,000 for the nine months ended September 30, 2012 to $261,000 for the nine months ended September 30, 2013. The increase in interest income and other, net was due to a payment received from a potential sublessee for improvements made to our leased facilities in connection with negotiations for a sublease arrangement.

Interest Expense and Other, Net

Interest expense and other, net decreased $0.7 million from $1.8 million to $1.1 million for the nine-month periods ended September 30, 2012 and 2013, respectively. The decrease was primarily a result of the full amortization of the beneficial conversion features of our convertible loans with The Wellcome Trust Limited in March 2013, concurrent with the conversion of those loans into 6.4 million shares of our Series D convertible preferred stock.

 

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Comparison of Years Ended December 31, 2011 and 2012

 

     Year Ended
December 31,
    Increase
(Decrease)
 
     2011     2012    
     (in thousands)  

Contract revenue

   $ 22,474      $ 17,941      $ (4,533

Operating expenses:

      

Research and development

     35,210        26,581        (8,629

General and administrative

     7,979        7,349        (630
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (20,715     (15,989     4,726   

Interest income and other, net

     15        51        36   

Interest expense and other, net

     (166     (2,427     (2,261
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (20,866   $ (18,365   $ 2,501   
  

 

 

   

 

 

   

 

 

 

Contract Revenue

Contract revenue in each period related solely to funding pursuant to our government contracts. Contract revenue decreased $4.5 million from the year ended December 31, 2011 to the year ended December 31, 2012. This decrease was primarily attributable to reduced research and development services performed under our government contracts with DTRA and NIAID as we wound down those contracts.

Research and Development Expenses

Research and development expenses decreased $8.6 million from $35.2 million for the year ended December 31, 2011 to $26.6 million for the year ended December 31, 2012. After completing our Phase 2 clinical trial of plazomicin in the second quarter of 2012, we incurred $2.4 million in plazomicin-related expenses during the year ended December 31, 2012, for nonclinical studies for biothreat pathogens, manufacturing process development work, and the design and start-up activities for the Phase 3 CRE clinical trial. The decrease in plazomicin external expenses was primarily due to a decrease of $1.9 million in clinical trial costs as a result of the completion of our Phase 2 clinical trial and a decrease of $1.5 million in manufacturing and nonclinical costs. The decreased external expenses in other research programs were attributable to a decrease of $4.0 million in the manufacturing costs of clinical and preclinical materials, and a decrease in nonclinical costs of $2.2 million as we wound down the activities under our contracts with DTRA and NIAID, offset by increased clinical costs of $1.4 million. The decrease in personnel-related expenses was primarily attributed to a reduction of 26 employees in our research and development organization in the second half of 2012.

 

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The following table illustrates the components of our research and development expenses during the periods indicated:

 

     Year Ended
December 31,
     Increase
(Decrease)
 
     2011      2012     
     (in thousands)  

External research and development expenses by program:

        

Plazomicin

   $ 13,807       $ 10,606       $ (3,201

Other research programs

     9,879         5,217         (4,662
  

 

 

    

 

 

    

 

 

 

Subtotal external program costs

     23,686         15,823         (7,863
  

 

 

    

 

 

    

 

 

 

Internal costs:

        

Research and development personnel costs

     7,704         6,813         (891

Indirect research and development expenses

     3,820         3,945         125   
  

 

 

    

 

 

    

 

 

 

Subtotal internal costs

     11,524         10,758         (766
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 35,210       $ 26,581       $ (8,629
  

 

 

    

 

 

    

 

 

 

General and Administrative Expenses

General and administrative expenses decreased $0.6 million from the year ended December 31, 2011 to the year ended December 31, 2012. This decrease is primarily attributable to a decrease in consulting and personnel related expenses of $1.0 million resulting from headcount reduction of 9 employees in our general and administrative organization in the second half of 2012, offset in part by increased expenses from plazomicin-related market research activities.

Interest Expense and Other, Net

Interest expense and other, net increased approximately $2.3 million from $0.2 million to $2.4 million for the years ended December 31, 2011 and 2012, respectively. The increase is primarily the result of $1.1 million of interest expense associated with amortization of the beneficial conversion features of our convertible loans with The Wellcome Trust and $1.2 million of interest expense associated with a loan and security agreement with Oxford Finance LLC and Silicon Valley Bank.

Liquidity and Capital Resources

Since our inception and through September 30, 2013, we have financed our operations primarily through private placements of our equity securities, funding under our contracts with government agencies, and certain debt related financing arrangements. Between March and May 2013, we issued 13,844,040 shares of Series D convertible preferred stock at $1.09 per share, resulting in net proceeds of $12.2 million. In November 2013, under the terms of the March 2013 stock purchase agreement, we issued an additional 9,174,314 shares of Series D convertible preferred stock, with gross proceeds to us of $10.0 million.

At September 30, 2013, we had working capital of $2.1 million and cash and cash equivalents of $8.2 million. In addition to our existing cash and cash equivalents, we have historically received funding provided under U.S. government contracts in connection with the development of our product candidates. In particular, we have received funding for our lead product candidate, plazomicin, under a contract with BARDA for the development, manufacturing, nonclinical and clinical evaluation of, and regulatory filings for, plazomicin as a countermeasure for disease caused by antibiotic-resistant pathogens and biothreats. In April 2013, we were awarded an additional $60.4 million under the contract to support our pivotal Phase 3 trial of plazomicin, for total committed funding of $103.8 million.

 

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Plan of Operations and Future Funding Requirements

We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates. Specifically, we have incurred and we expect to continue to incur substantial expenses in connection with our pivotal Phase 3 trial of plazomicin. We believe our existing cash and cash equivalents, together with the proceeds from this offering, combined with the funds from the BARDA Contract, will allow us to fund our operating plan through at least the next 12 months. Assuming we receive the full amount of funding under the BARDA Contract, including under the unexercised option, we expect such funds, together with the proceeds from this offering, will be sufficient to fund our development of plazomicin through receipt of top-line data from our Phase 3 trial. Upon dosing our first patient in the trial, we will be obligated to make a $4.0 million payment to Isis Pharmaceuticals, Inc., or Isis, under our license agreement. See “—Contractual Obligations and Commitments— Other Commitments ” below. However, our operating plan may change as a result of factors currently unknown to us, and we may need to seek additional funds sooner than planned. We anticipate that we will need to raise substantial additional financing in the future to fund our operations, including for obtaining marketing approval for plazomicin.

We will be required to obtain additional financing in the future, which we may obtain through public or private equity offerings, debt financings, a credit facility, government contracts and/or strategic collaborations. Adequate additional funding may not be available to us on acceptable terms or at all. In addition, although we anticipate being able to obtain additional financing through non-dilutive means, we may be unable to do so. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. Our future financing requirements will depend on many factors, some of which are beyond our control, including:

 

   

continued funding under our contract with BARDA;

 

   

the size and type of the nonclinical and clinical trials that we decide to pursue in the development of our product candidates, including plazomicin;

 

   

the type, number, costs and results of the product candidate development programs which we are pursuing or may choose to pursue in the future;

 

   

the rate of progress and cost of our clinical trials, preclinical studies and other discovery and research and development activities;

 

   

the timing of, and costs involved in, seeking and obtaining FDA and other regulatory approvals;

 

   

our ability to enter into additional collaboration, licensing or other arrangements and the terms and timing of such arrangements;

 

   

the costs of preparing, filing, prosecuting, maintaining and enforcing any patent claims and other intellectual property rights, including litigation costs and the results of such litigation;

 

   

the emergence of competing technologies and other adverse market developments;

 

   

the resources we devote to marketing, and, if approved, commercializing our product candidates;

 

   

the scope, progress, expansion, and costs of manufacturing our product candidates;

 

   

our ability to enter into additional government contracts, or other collaborative agreements, to support the development of our product candidates and development efforts;

 

   

the amount of funds we receive in this offering; and

 

   

the costs associated with being a public company.

If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves.

 

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Cash Flows

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

 

     Year Ended
December 31,
    Nine Months Ended
September 30,
 
     2011     2012     2012     2013  
     (In thousands)  

Net cash (used in) provided by:

        

Operating activities

   $ (17,117   $ (16,762   $ (13,905   $ (7,573

Investing activities

     (1,237     (533     (249     (120

Financing activities

     3,979        11,840        10,156        8,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ (14,375   $ (5,455   $ (3,998   $ 1,139   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Net cash used in operating activities was $17.1 million and $16.8 million for the years ended December 31, 2011 and 2012, respectively. The primary use of cash in each of these periods was to fund our operations related to the development of our product candidates. The decrease in 2012 was primarily due to changes in operating assets and liabilities.

Net cash used in operating activities was $13.9 million and $7.6 million for the nine months ended September 30, 2012 and 2013, respectively. The primary use of cash in each of these periods was to fund our operations related to the development of our product candidates. Cash used for the nine months ended September 30, 2013 decreased compared to the same period in 2012, primarily due to lower net loss from operations.

Investing Activities

Cash used in investing activities was $1.2 million and $0.5 million for the years ended December 31, 2011 and 2012, respectively, consisting primarily of purchases of property and equipment. The decrease in purchases of property and equipment was related to a reduction of capital expenditures as part of the corporate restructuring plan in 2012.

Cash used in investing activities was $0.2 million and $0.1 million for the nine months ended September 30, 2012 and 2013, consisting primarily of purchases of property and equipment.

Financing Activities

Cash provided by financing activities amounted to $4.0 million and $11.8 million for the years ended December 31, 2011 and 2012, respectively. The net cash provided by financing activities in 2011 consisted of $4.0 million in notes payable issued in December 2011 to Oxford Finance LLC and Silicon Valley Bank under a loan and security agreement, or the Loan Agreement. The net cash provided by financing activities in 2012 consisted primarily of the net proceeds from the issuance of $2.7 million of convertible notes issued to a group of existing investors in November 2012 as part of a bridge financing, $8.0 million in notes payable issued in April 2012 to Oxford Finance LLC and Silicon Valley Bank under the Loan Agreement, and $2.4 million received from our funding agreement with The Wellcome Trust, offset by $1.5 million for the repayment of notes payable to Oxford Finance LLC and Silicon Valley Bank.

Cash provided by financing activities amounted to $10.2 million and $8.8 million for the nine months ended September 30, 2012 and 2013, respectively. The net cash provided by financing activities for the nine months ended September 30, 2012 of $10.2 million consisted primarily of the net proceeds from the issuance of

 

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$8.0 million in notes payable to Oxford Finance LLC and Silicon Valley Bank under the Loan Agreement and $2.4 million from our funding agreement with The Wellcome Trust. The net cash provided by financing activities for the nine months ended September 30, 2013 of $8.8 million consisted primarily of the $12.2 million net proceeds from the issuance of convertible preferred stock in the first tranche of our Series D convertible preferred stock financing in March and May 2013, offset by $3.4 million for the repayment of notes payable to Oxford Finance LLC and Silicon Valley Bank.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2012:

 

     Payments due by period  
     Total      Less than
1 year
     1 to 3
years
     4 to 5
years
     After 5
years
 
     (in thousands)  

Lease obligations

   $ 1,508       $ 1,200       $ 308       $ —         $ —     

Notes payable principal and interest

     12,528         5,325         7,203         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,036       $ 6,525       $ 7,511       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table summarizes our contractual obligations as of September 30, 2013:

 

     Payments due by period  
     Total      Less than
1 year
     1 to 3
years
     4 to 5
years
     After 5
years
 
     (in thousands)  

Lease obligations

   $ 2,099       $ 616       $ 1,155       $ 328       $ —     

Notes payable principal and interest

     8,534         5,325         3,209         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,633       $ 5,941       $ 4,364       $ 328       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Lease Obligations

We lease our operating facility in South San Francisco, California under an operating lease agreement that commenced in December 2010, which covers approximately 35,000 square feet. We also sublease approximately 19,000 square feet of our leased space to a third party. In June 2013, we amended the lease to extend the term to April 2017. The lease extension does not include the space currently being subleased.

Notes Payable

In November 2011, we entered into the Loan Agreement with Oxford Finance LLC and with Silicon Valley Bank, collectively the Lenders, under which we could borrow up to $12.0 million through June 30, 2012, with $8.0 million being drawable at our option, and the remaining $4.0 million being drawable upon the occurrence of an IND event, as defined in the Loan Agreement. We borrowed $4.0 million in November 2011, and the remaining $8.0 million in April 2012. The interest rate, which was fixed at the closing of each tranche, equals the three-month LIBOR plus 7.75%. The interest rates for the loans under the Loan Agreement are 8.18% and 8.22% per annum. Payments are monthly in arrears and interest only until September 1, 2012, followed by 30 equal monthly payments of principal and interest through the scheduled maturity date of February 1, 2015. In addition, a final payment equal to 8.25% of the aggregate amount drawn will be due on February 1, 2015, or when the Loan Agreement terminates, which is being accreted as interest expense over the term of the loan using the effective-interest method. The Loan Agreement contains various covenants. As of December 31, 2012 and September 30, 2013, we were in compliance with all required covenants.

In accordance with the terms of the Loan Agreement, we agreed to issue to the Lenders upon each drawdown warrants to purchase preferred stock equal to 3% of the advanced amount using a share strike price equal to the lower of the price per share of our Series C convertible preferred stock or the price per share in our

 

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next round of convertible preferred stock financing. During 2011 and 2012, we issued warrants to purchase 110,092 and 220,183 shares, respectively, of our Series C convertible preferred stock at an exercise price of $1.09 per share. The fair value of these warrants at the dates of issuance was approximately $86,000 and $163,000, was recorded as a debt discount within notes payable and is being amortized as interest expense over the term of the loan using the effective-interest method.

Other Commitments

We have obligations to make future payments to third parties under license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of certain development, regulatory and commercialization milestones. However, because the achievement of these milestones is not fixed and determinable, such commitments have not been included on our balance sheet or in the Contractual Obligations and Commitments table above. In the near term, upon dosing our first patient in our Phase 3 trial for plazomicin, we will be obligated to make a milestone payment of $4.0 million to Isis pursuant to our license agreement, which we anticipate paying from our existing cash resources. For additional information regarding future payments to third parties, including milestone and royalty payments to Isis, please see “Business—Commercial Agreements.”

Indemnification

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

In accordance with our amended and restated certificate of incorporation and our amended and restated bylaws, we have indemnification obligations to our officers and directors for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. We have also entered into indemnification agreements with our directors and executive officers. There have been no claims to date, and we have director and officer insurance that may enable us to recover a portion of any amounts paid for future potential claims.

Off-Balance Sheet Arrangements

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

JOBS Act Accounting Election

The Jumpstart our Business Startups Act of 2012, or 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.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to limited market risk related to fluctuations in interest rates and market prices. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit

 

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quality. As of September 30, 2013, we had cash and cash equivalents of $8.2 million consisting of cash and money market funds deposited in highly rated financial institutions in the United States. A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.

We contract for the conduct of certain clinical development and manufacturing activities with vendors outside the United States. We are subject to exposure due to fluctuations in foreign exchange rates in connection with these agreements. For the nine months ended September 30, 2013, the effect of the exposure to these fluctuations in foreign exchange rates was not material.

We do not believe that inflation or fluctuations in foreign exchange rates had a significant impact on our results of operations for any periods presented in our financial statements.

 

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BUSINESS

Overview

We are a clinical-stage biopharmaceutical company passionately committed to the discovery, development, and commercialization of novel antibacterials to treat multi-drug resistant, or MDR, gram-negative infections. We are developing plazomicin, our lead product candidate, for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including carbapenem-resistant Enterobacteriaceae, or CRE. In 2013, the Centers for Disease Control and Prevention identified CRE as a “nightmare bacteria” and an immediate public health threat that requires “urgent and aggressive action.” We expect to initiate a Phase 3 superiority trial of plazomicin in the first quarter of 2014. Through the Special Protocol Assessment procedure, the U.S. Food and Drug Administration, or FDA, has agreed that the design and planned analyses of our single pivotal Phase 3 trial adequately address objectives in support of a New Drug Application. We have also received FDA fast track designation for the development and regulatory review of plazomicin to treat serious and life-threatening CRE infections. Our plazomicin program is funded in part with a contract from the Biomedical Advanced Research and Development Authority for up to $103.8 million. We have global commercialization rights to plazomicin, which has patent protection in the United States extending through 2031.

According to government agencies and physician groups, including the Centers for Disease Control and Prevention, or CDC, and the Infectious Disease Society of America, one of the greatest needs for new antibiotics is to treat CRE and other drug-resistant gram-negative pathogens. CRE are strains of Enterobacteriaceae that are resistant to many types of antibiotics, including carbapenems, one of the last lines of defense against gram-negative bacteria, leading to mortality rates of up to 50% in patients with bloodstream infections. We estimate that there were approximately 110,000 cases of CRE infections in the United States and five major markets in the European Union in 2013, with approximately one-fourth of these being bloodstream infections or pneumonia. Based on the significant increase in resistance rates in recent years, we anticipate CRE will continue to be a major health problem. For example, CDC surveillance data indicates that the rate of carbapenem resistance in Klebsiella species, a type of Enterobacteriaceae, increased from 1.6% to 10.4% in the hospital setting in the United States between 2001 and 2011. In Italy, K. pneumoniae carbapenem resistance rates almost doubled from 16% in 2010 to 31% in 2012. Governments, in collaboration with the private sector, have begun to respond by progressing regulatory reform and economic incentives to spur development of new antibiotics.

Plazomicin is a novel intravenous, semi-synthetic aminoglycoside antibiotic. Aminoglycosides have been used successfully for the treatment of serious infections for more than 50 years. However, the widespread clinical resistance to currently marketed aminoglycosides has increasingly limited their utility. We developed plazomicin by chemically modifying sisomicin, a naturally occurring aminoglycoside, in order to overcome common aminoglycoside resistance mechanisms. In MDR Enterobacteriaceae, including CRE, plazomicin remains active where most other antibiotics, including the commercially available aminoglycosides, have limited potency due to resistance.

We consider the following to be key attributes that support the clinical utility and commercial value of plazomicin:

 

   

Potent in vitro activity and in vivo efficacy in nonclinical studies against MDR Enterobacteriaceae, including CRE.

 

   

Demonstration of comparable efficacy to levofloxacin and acceptable safety in a Phase 2 clinical trial in patients with complicated urinary tract infections caused primarily by non-MDR Enterobacteriaceae.

 

   

Improved dosing strategy as compared to existing aminoglycosides, and individualized patient dosing using an in vitro assay.

 

   

Potential to demonstrate a mortality benefit over currently available therapy in the treatment of life-threatening CRE infections.

 

   

Potential to reduce the healthcare costs associated with the treatment of such infections.

 

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Our pivotal Phase 3 trial is a pathogen-specific trial that will enroll patients with a high risk of mortality and, if successful, provide clinical evidence of the superiority of plazomicin versus the best currently available therapy for life-threatening bloodstream infections and pneumonia due to CRE. We expect to report top-line data from our Phase 3 trial in the first half of 2017, with interim analyses projected to occur in 2015 and 2016. We believe that positive efficacy data from this trial will provide the basis for FDA approval and position plazomicin as the standard of care for the treatment of serious CRE infections.

CRE are one of many types of MDR gram-negative pathogens threatening patients. Bacteria such as Pseudomonas aeruginosa , Acinetobacter baumannii , and extended-spectrum beta-lactamase producing Enterobacteriaceae , which are organisms with resistance to all beta-lactam antibiotics except for carbapenems, each pose “serious” resistance threats, according to the CDC, and also drive a great need for new, safe, and effective antibiotics. We have assembled the chemistry and microbiology expertise and capabilities required to develop new agents for the treatment of gram-negative infections. Plazomicin was the first clinical candidate from our gram-negative antibiotic discovery engine. In addition, our research and development pipeline includes two antipseudomonal programs, which are programs that specifically target P. aeruginosa infections: a program to discover and develop small molecule inhibitors of LpxC, which is an enzyme essential for the synthesis of the outer membrane of gram-negative bacteria, and a therapeutic antibody program. We are also pursuing small molecule research programs targeting other essential gram-negative enzymes.

We have built an exceptional research and development team of approximately 30 individuals, who collectively have deep expertise in the discovery and development of new drugs from research through commercialization. Our executive team has over 60 years of combined industry experience, and a proven track record of leadership, global registration, and lifecycle management for over 20 products. Our Chief Executive Officer and Chief Medical Officer, Dr. Kenneth Hillan, held research and product development leadership roles during his career at Genentech for multiple products, including Rituxan ® , Xolair ® , Lucentis ® , and Pulmozyme ® . Becki Filice, who leads our development operations, was previously Genentech’s project team leader for both Avastin ® and Nutropin AQ ® . Christine Murray leads our regulatory affairs and quality activities and has held key roles during the development and global registration of Viread ® , Emtriva ® , Truvada ® , Atripla ® , and Hepsera ® while with Gilead Sciences.

Strategy

Our strategy is to discover, develop, and commercialize new antibacterials for the treatment of gram-negative bacterial infections. Key elements of our strategy are as follows:

 

   

Complete our pivotal Phase 3 superiority trial of plazomicin in the treatment of CRE infections and obtain regulatory approval in both the United States and the European Union. We expect to report top-line data from our Phase 3 trial and to have gathered required safety data in the first half of 2017 to support an NDA. If the trial is successful, we expect to submit a New Drug Application, or NDA, to the FDA and a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, concurrently in the second half of 2017. Through the Special Protocol Assessment, or SPA, procedure, the FDA has agreed that the design and planned analyses of our pivotal Phase 3 trial adequately address objectives in support of an NDA. We have also received FDA fast track designation for the development and regulatory review of plazomicin to treat serious and life-threatening CRE infections.

 

   

Demonstrate improved clinical benefit and pharmacoeconomic advantages of our product candidates over existing therapies. By selecting product candidates with potency against MDR pathogens, we have the opportunity to demonstrate superior clinical outcomes against the current standard of care. This is in contrast to most other antibiotics currently marketed or under clinical development, which were tested, or are being tested, in non-inferiority trial designs. We also plan to demonstrate the economic benefits of our product candidates based on pharmacoeconomic outcomes such as fewer days on mechanical ventilation, less time in the ICU, or shorter total hospital stay. For example, our Phase 3 trial of plazomicin is designed to demonstrate improved mortality outcomes of plazomicin over comparator therapy and will allow us to assess improved pharmacoeconomic outcomes from plazomicin treatment.

 

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Commercialize our products directly, either alone or with support from a commercialization partner, in the United States and through commercialization partners elsewhere. We have global commercialization rights to all of our drug candidates. We intend to commercialize plazomicin directly, either alone or with support from a commercialization partner, using a targeted hospital-based sales force in the United States, where CRE infections are concentrated in resistance hotspots, including New York City, Chicago, and other major population centers. Outside the United States, we intend to license full product rights to global and regional commercialization partners who can help us develop and market our products. By collaborating with companies that have an existing commercial presence and experience in targeted geographic markets, we believe we can efficiently maximize the commercial potential of our products.

 

   

Establish and leverage collaborations with non-commercial organizations for scientific expertise and funding support. We collaborate with government agencies and non-profit foundations to support our discovery efforts and advance the product candidates in our pipeline. We are currently receiving funding support for up to $103.8 million from a contract with the Biomedical Advanced Research and Development Authority, or BARDA, for the development of plazomicin as a countermeasure for diseases caused by antibiotic-resistant pathogens and biothreats, such as pneumonic plague and tularemia. We have also received funding support from government agencies such as the U.S. Department of Defense, or DOD, the U.S. National Institutes of Health, or NIH, and The Wellcome Trust, a global charitable foundation. We also partner with leading academics, scientists, and clinicians to enhance our internal discovery and development expertise, and to jointly sponsor funding proposals.

 

   

Build a portfolio of differentiated products for the treatment of MDR gram-negative infections. Since we commenced operations in 2004, we have focused on the discovery and development of antibiotics to treat gram-negative infections and have developed proprietary know-how about the relationship between compound structure and potency against gram-negative bacteria through our work on multiple antibiotic classes. We are using this expertise to build a portfolio of product candidates for the treatment of infections due to MDR pathogens. Patients with these infections often have limited or inadequate therapeutic options leading to high rates of mortality. We believe the greatest unmet medical needs lie among infections due to MDR gram-negative bacteria, where there is a significant and growing problem and the industry pipeline of drug candidates is sparse.

Antibacterials Background

Antibacterials, which we refer to interchangeably as antibiotics, are drugs used to treat infections that are caused by bacteria. The introduction of antibiotics is recognized as one of the most transformative events in medicine. Prior to the introduction of the first antibiotics in the 1930s and 1940s, bacterial infections were often fatal, and invasive surgery was accompanied by a high risk of infectious complications. Today, antibacterials are used routinely to treat and prevent infection. According to IMS Health, antibiotics accounted for $38.8 billion in sales globally in 2012, with healthcare providers prescribing 268 million courses of antibacterials in the United States alone.

There are two main varieties of bacteria, designated based on how they behave in a common laboratory staining test known as the “Gram stain.” Gram-positive bacteria are surrounded by a single lipid membrane and a thick cell wall. Common gram-positive pathogens include Staphylococcus aureus (including methicillin-resistant strains, or MRSA), Streptococcus species, and Clostridium difficile . In contrast, gram-negative bacteria are encircled by two lipid membranes, an inner membrane and an outer membrane, with a thinner cell wall in between. Gram-negative bacteria include P. aeruginosa , A. baumannii , and the Enterobacteriaceae, a family of related organisms that includes E. coli , K. pneumoniae , Enterobacter, Salmonella, and Shigella species. Drugs that act in the cytoplasm of gram-negative bacteria must cross both the inner and outer membranes, as distinct from drugs that just act on gram-positive bacteria, which only have to cross one membrane. Each membrane in gram-negative bacteria excludes different types of chemical entities, requiring gram-negative active antibiotics to be specifically designed to permeate both membranes. A 2007 study found that in hospital intensive care units

 

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worldwide, approximately 54% of bacterial infections were caused by gram-negative organisms and 41% by gram-positive organisms, with the remainder caused by other types of bacteria.

Antibiotics are evaluated according to several criteria:

 

   

Spectrum. Antibiotics that are effective against a wide variety of bacteria, including both gram-negative and gram-positive organisms, are considered to be broad-spectrum, while those that act upon only a limited number of species are considered to be narrow-spectrum. Narrow-spectrum antibiotics are most often selected if a specific pathogen is suspected or confirmed.

 

   

Cidality. Antibiotic action generally falls into two categories: bacteriostatic and bactericidal. Bacteriostatic antibiotics halt the growth of bacteria, allowing the human immune system to clear the infection. Bactericidal antibiotics kill the bacterial pathogen directly.

 

   

Microbiological activity. Also referred to as potency, this is the ability of the antibiotic to kill or inhibit growth of bacteria in vitro . In vitro experiments and assays are performed outside of a complex organism such as an animal or human, and include bacterial growth inhibition assays conducted in the laboratory. Potency is commonly expressed as the minimum inhibitory concentration, or MIC, in µg/mL, which is the lowest concentration at which the drug inhibits growth of the bacteria. Antibiotics with lower MICs are considered more potent.

 

   

Susceptibility/non-susceptibility. The relationship between microbiological activity and the clinical utility of an antibiotic in the hospital setting can be described in terms of susceptibility or non-susceptibility. A susceptible MIC value means an antibiotic can be used to treat a particular infection. A non-susceptible MIC value from in vitro testing means the antibiotic should not be used to treat the infection because the antibiotic is unlikely to be effective against the causative pathogen. These values are established by medical standards organizations including the Clinical Laboratory and Standards Institute, or CLSI, and the European Committee on Antimicrobial Susceptibility Testing, or EUCAST.

 

   

Resistance. Resistance refers to the inability of an antibiotic to effectively control bacterial growth. Some bacteria are naturally resistant to certain types of antibiotics. Resistance can also occur due to genetic mutations or changes in gene expression. Mechanisms responsible for resistance are often found together and can be transferred between different bacteria, leading to multi-drug resistance.

New Antibiotics Are Needed for Resistant Gram-negative Infections

According to the CDC, at least two million people each year in the United States acquire serious infections with bacteria that are resistant to one or more of the antibiotics designed to treat those infections, and each year, over 20,000 patients in the United States die from these infections. In the European Union, the annual burden posed by resistant healthcare associated bacterial infections is approximately 2.5 million hospital days and 25,000 deaths. Similar problems exist throughout the world, and the World Health Organization has declared antibiotic resistance a threat to global health security. The development and spread of resistance is driven by the use of antibiotics. Once they arise, resistant bacteria can be transferred between patients and antibiotic resistance mechanisms can be transferred between bacterial species, thus increasing the problem.

Antibiotic-resistant infections not only cause significant morbidity and mortality, but also place a substantial cost burden on the healthcare system. In most cases, antibiotic-resistant infections require prolonged and/or costlier treatments, extend hospital stays, and necessitate additional doctor visits and healthcare expenditures compared with infections that are easily treatable with antibiotics. The CDC estimates that the excess annual cost resulting from these infections in the United States is as high as $20 billion. According to an estimate from a 2012 study of over 5,500 U.S. patients, the average incremental per-patient hospital cost for antibiotic-resistant healthcare-associated infections, as compared to antibiotic-susceptible infections, was over $15,000.

According to government agencies and physician groups such as the CDC and the Infectious Disease Society of America, one of the greatest needs is for new antibiotics to treat infections caused by drug-resistant

 

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gram-negative pathogens, including CRE, P. aeruginosa , and A. baumannii . These pathogens are associated with significant mortality, as growing antibiotic resistance has left limited effective treatment options. There have been few approvals for new gram-negative antibiotics in recent decades, and there are to our knowledge only three other antibiotics currently in Phase 3 development for infections due to gram-negative pathogens.

Governments, in collaboration with the private sector, have begun to respond to this significant and growing unmet medical need by progressing regulatory reform and offering economic incentives. With the passage of the Generating Antibiotic Incentives Now Act, or the GAIN Act, in July 2012, qualifying antibiotics in the United States are eligible for priority review and the potential for a five-year extension of any existing non-patent market exclusivity that has been awarded. Additionally, the FDA has issued a new draft guidance document with proposed approaches to streamline development of new antibiotics addressing serious diseases with limited treatment options. Similar developments are occurring in parallel in other regulatory bodies, most notably in Europe. Government agencies such as BARDA, the DOD’s Defense Threat Reduction Agency, or DTRA, and the NIH are also providing significant funding to support the discovery and development of new antibiotics.

Our Antibiotic Discovery and Development Engine

The challenge of discovering and developing a new antibacterial for the treatment of gram-negative infections is that such treatments need to overcome resistance mechanisms to existing antibiotics and to permeate the inner and outer membranes of the bacteria. Since we began operations in 2004, we have focused on the discovery and development of antibiotics to treat gram-negative infections and have developed proprietary know-how about the relationship between chemical structure and gram-negative potency through our work on multiple antibiotic classes.

Our progress in discovering and developing gram-negative product candidates has been achieved through:

 

   

Knowledge of gram-negative antibiotic chemistry . We are able to modify the chemical structure of molecules from existing classes, such as the aminoglycosides, to avoid resistance mechanisms that inactivate other members of these classes. Further, by studying the properties of existing antibiotics that are effective against gram-negative bacteria, we believe we elucidated the first set of “rules” for modifying the chemical structure of compounds to increase penetration across both membranes. We are applying these rules in our discovery efforts to engineer molecules to be active against gram-negative bacteria.

 

   

Specialized compound libraries . Our chemistry libraries are designed to contain compounds that have the necessary properties for penetration of gram-negative bacteria and are used in screening campaigns against clinical isolates of MDR gram-negative pathogens.

 

   

Microbiology capabilities in clinically important pathogens . Our current focus is on today’s major unmet needs such as CRE and P. aeruginosa. We have compiled an extensive collection of bacterial isolates, including both clinical and engineered strains, and use them to direct our modifications of compounds. Our molecular genetic expertise with these pathogens allows us to rapidly validate new antibacterial targets and determine the mode of action of our new agents across multiple pathogens.

 

   

Use of nonclinical data to predict clinical outcomes . We leverage in vivo animal data and computational modeling techniques to project the clinical efficacy of our early developmental candidates. In vivo refers to experiments and assays involving complex organisms, such as animals. As compared to other therapeutic areas, animal models of infection treatment are highly predictive of clinical efficacy. Utilizing these results, and pharmacokinetics, or PK, and safety established in initial clinical trials, we use pharmacometric modeling approaches to estimate clinical efficacy and predict our clinical dosing regimens.

 

   

Collaborations with industry-leading advisors and scientific experts. Our advisors include experts in antibacterial drug development such as Lynn Silver, Ph.D. (former Senior Investigator at Merck Research Laboratories), George H. Talbot, M.D. (Chief Medical Officer, Cerexa, acquired by Forest Laboratories), and Paul Reider, Ph.D. (Former Vice President, Process Chemistry at Merck and Amgen and current faculty member in the Department of Chemistry at Princeton University). We have also established

 

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collaborations with academic researchers in the field of antibiotic pharmacology, such as George Drusano, M.D., Henry Heine, Ph.D., and Arnold Louie, M.D., all with the Institute for Therapeutic Innovation, University of Florida. We maintain external collaborations with specialized scientific resources for the conduct of studies with dangerous biodefense pathogens, such as the U.S. Army Medical Research Institute for Infectious Diseases. We leverage these relationships and our own in-house expertise in biodefense countermeasure development to secure funding that supports our antibacterial programs targeting both antibiotic-resistant pathogens and biothreats.

Research and Development Pipeline

The following table summarizes the status of plazomicin and our other research programs:

 

LOGO

Plazomicin

Overview

Our most advanced product candidate is plazomicin, a novel semi-synthetic aminoglycoside designed by our scientists to overcome clinically relevant aminoglycoside resistance mechanisms. Aminoglycosides have been used successfully for the treatment of serious bacterial infections for more than 50 years. As a class, aminoglycosides have several important characteristics including rapid bactericidal activity, well-described PK, a lack of metabolism in humans, and excellent solubility and stability. However, the spread of resistance to currently marketed aminoglycosides has decreased their clinical utility. We developed plazomicin by chemically modifying an existing aminoglycoside, sisomicin, a natural product isolated from bacteria, to shield the regions of the molecule that are targeted by the enzymes responsible for aminoglycoside resistance. As a result of these modifications, plazomicin remains active against multi-drug resistant organisms where most other major drug classes, including commercially available aminoglycosides such as gentamicin and amikacin, have limited activity. Based on this profile, we are developing plazomicin as an intravenous, or IV, therapy for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including CRE, which the CDC considers to be one of the top three urgent resistance threats to public health.

 

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We consider the following to be key attributes that support the clinical utility and commercial value of plazomicin:

 

   

Potent in vitro activity and in vivo efficacy in nonclinical studies against MDR Enterobacteriaceae, including CRE. Plazomicin retains activity in nonclinical studies against clinical Enterobacteriaceae isolates possessing most varieties of carbapenem resistance mechanisms, as well as most types of resistance to other key antibiotics, including commercially available aminoglycosides, colistin, and tigecycline.

 

   

Demonstration of comparable efficacy to levofloxacin and acceptable safety in a Phase 2 clinical trial in patients with complicated urinary tract infections caused primarily by non-MDR Enterobacteriaceae . We have completed a successful Phase 2 clinical trial of plazomicin in patients with complicated urinary tract infections, or cUTI, as well as required Phase 1 PK and safety clinical trials. In patients with cUTI, plazomicin demonstrated efficacy that was similar to levofloxacin in microbiological eradication of the causative pathogen of the infection, which were primarily non-MDR Enterobacteriaceae, and in clinical outcome, specifically, resolution of baseline signs and symptoms.

 

   

Improved dosing strategy compared to existing aminoglycosides, and individualized patient dosing using an in vitro assay. We have used recent innovations in PK and pharmacodynamic, or PD, modeling to create dosing regimens designed to achieve the drug exposures in the body we project to be efficacious in treating serious CRE infections. As a consequence, plazomicin is dosed in higher amounts relative to MIC than other commercially available aminoglycosides. Patient dosing in the Phase 3 trial population will also be individualized by using a proprietary in vitro assay to measure levels of plazomicin in the bloodstream and adjusting the dose to achieve the targeted drug exposure.

 

   

Potential to demonstrate a mortality benefit over currently available therapy in the treatment of life-threatening CRE infections . We have designed our pivotal Phase 3 trial for plazomicin as a superiority trial with a primary efficacy endpoint of all-cause mortality at 28 days. The trial will compare a plazomicin-based regimen versus a colistin-based regimen for the treatment of CRE bloodstream infections and pneumonia. Through the SPA procedure, the FDA has agreed that the design and planned analyses of the trial adequately address objectives in support of an NDA. Most antibiotics are approved based on demonstrating non-inferiority to the current standard of care in the treatment of a specific type of infection (such as cUTI, intra-abdominal infection, and pneumonia) caused by a range of pathogens against which both the treatment and comparator are active. By focusing the Phase 3 plazomicin trial on patients with a high unmet medical need where the efficacy of the current standard of care is poor, and enrolling based on infections caused by the target pathogen (CRE), we have the opportunity to demonstrate differentiated efficacy of plazomicin in the clinical setting.

 

   

Potential to reduce the healthcare costs associated with the treatment of serious infections . Treatment of antibiotic-susceptible infections is associated with lower overall costs as compared to the treatment of antibiotic-resistant infections. Our Phase 3 trial of plazomicin will permit us to document improved pharmacoeconomic outcomes from plazomicin treatment of MDR Enterobacteriaceae, which may include fewer days on mechanical ventilation, less time in the ICU, and shorter total hospital stay.

Based on these attributes, we believe that plazomicin has the potential to become the new standard of care for the treatment of CRE.

Carbapenem-Resistant Enterobacteriaceae Pose an Urgent Threat to Patients

The need for new antibiotics to treat CRE is particularly acute, as CRE are one of the top global threats in infectious disease. In 2013, the CDC labeled CRE as “nightmare bacteria” and indicated that CRE pose a public health threat requiring “urgent and aggressive action.” These bacteria are commonly MDR, exhibiting resistance to not only carbapenems, but also to nearly all antibiotics commonly used to treat gram-negative infections, including cephalosporins, beta-lactam/beta-lactamase inhibitor combinations, fluoroquinolones, and currently-marketed aminoglycosides. Resistance to carbapenems, which we define as non-susceptibility to a carbapenem

 

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antibiotic, has been highlighted because these drugs are one of the last lines of defense against resistant gram-negative infections. Most CRE express enzymes called carbapenemases which break down the carbapenem antibiotic molecule before it can kill the bacteria. Due to the lack of effective therapies, CRE infections are associated with significant mortality, with up to 50% mortality observed in patients with bloodstream infections.

With limited treatment options available for CRE infections, physicians have resorted to older drugs such as colistin or more recently approved drugs such as tigecycline. However, there is evidence that these antibiotics are failing patients. For example, in bloodstream infections due to carbapenemase-producing K. pneumoniae , all-cause mortality for treatment with colistin, tigecycline, or combinations of antibiotics that do not include a carbapenem active in vitro against the infecting isolate were reported to be 46%, 47%, and 37%, respectively. Recently, resistance to even these last-resort treatments has begun to be reported, further increasing the urgency for new therapeutic options.

The CRE problem is global and the incidence has increased significantly over the last decade. For example, CDC surveillance data indicates that the rate of carbapenem resistance among Klebsiella species increased from 1.6% to 10.4% in the United States between 2001 and 2011. In Italy, 31% of K. pneumoniae strains were carbapenem-resistant in 2012, a sharp increase from 2010 when the rate was 16%. The problem is even more pronounced in Greece, with more than 60% of K. pneumoniae strains exhibiting resistance in 2012. In Latin America, 11% of Klebsiella species were resistant to carbapenems in Brazil, 8% in Argentina, and 5% in Chile, according to surveillance data gathered from 2008 to 2010.

We estimate that there were approximately 110,000 cases of CRE infections in the United States and five major markets in the European Union in 2013, with approximately one-fourth of these being bloodstream infections or pneumonia. We believe that CRE incidence will continue to increase in the future. A key driver of resistance growth, the use of carbapenems, is increasing. Once restricted in use to limit the emergence of resistance, hospitals are changing their policies due to the pressing need for carbapenems to treat the growing number of MDR infections. In a recent survey, two-thirds of U.S. hospital pharmacy directors reported that carbapenems are now unrestricted on their hospital formularies, likely a reflection of the increasing incidence of difficult-to-treat gram-negative infections. Additionally, the spread of CRE among patients, between healthcare facilities, and across geographic regions is exacerbated by the ability of CRE to readily transfer their resistance genes to other bacteria. Spread is especially dangerous when encountered in the outpatient setting, as it could lead to an epidemic of community-based CRE infections. Among outpatients in the United States, almost 2% of K. pneumoniae isolates were resistant to carbapenems in 2010, up from nearly 0% in 2005. Finally, CRE are very difficult to eradicate once they establish a foothold in the healthcare setting.

Commercial Strategy for Plazomicin in CRE

Our overall goal is to establish plazomicin as the standard of care for the treatment of serious CRE infections. Through our clinical development approach to demonstrate plazomicin’s superiority to the current standard of care, and our regulatory filing strategy under an SPA, we plan to establish the utility of plazomicin in treating bloodstream infections and pneumonia caused by gram-negative bacteria. This strategy is intended to support plazomicin’s differentiated profile from both approved and development-stage antibacterials.

We believe that the commercial opportunity for plazomicin will be significant if our pivotal Phase 3 superiority trial demonstrates a mortality benefit against currently available antibacterial treatment. To our knowledge, plazomicin would be the first antibiotic to be approved on the basis of such a design. We anticipate that the expected mortality benefit of plazomicin will create significant physician demand for plazomicin in treating presumed and documented CRE infections based on our primary market research. A demonstrated mortality benefit in a patient population with a high risk of death, and a potential to circumvent spread of CRE in the hospital setting, will be key product differentiators that drive adoption. We intend to achieve our pricing and reimbursement objectives through demonstration of a mortality benefit in CRE patients as well as pharmacoeconomic analyses that demonstrate significant cost savings to the healthcare system with the use of plazomicin. At a 2013 forum sponsored by The Pew Charitable Trusts, a nonprofit organization, which brought

 

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together payors, the FDA, and industry, panelists supported an approximate price points of $15,000 per treatment course for new antibacterial agents for resistant infections as long as clinical and economic benefits were clearly demonstrated. We will collect data in our Phase 3 trial that is designed to enable us to compare medical resource utilization between patients treated with plazomicin and those treated with comparator therapy. For example, we will determine whether plazomicin-based therapy results in fewer days on mechanical ventilation, less time in the ICU, and shorter total hospital stays. As a reference for the potential cost-savings that could accumulate, a study using 2002 cost data estimated that the total cost of a single day in the ICU without mechanical ventilation was over $3,000, and that the incremental cost of a day of mechanical ventilation in the ICU was over $1,500. Accordingly, we believe an effective treatment for CRE infections has the potential to yield substantial cost-savings relative to existing therapy based on these key cost drivers.

We intend to focus our initial commercial efforts on the U.S. market, which we believe represents the largest single market opportunity for plazomicin. We plan to employ a targeted U.S. sales force to promote plazomicin to hospital-based healthcare professionals in resistance hotspots. In key markets outside of the United States, including Europe, Asia, and Latin America, we believe we can maximize the value of plazomicin through licensing full product rights to one or more commercialization partners who have local market expertise.

Plazomicin Development Program

We are developing plazomicin, our lead product candidate, for the treatment of serious bacterial infections due to MDR Enterobacteriaceae, including CRE. We have not conducted a clinical trial of plazomicin in patients with CRE infections, and we have no direct clinical evidence that plazomicin is effective in treating CRE infections in humans. However, based on the strength of our nonclinical data against CRE, and supported by the clinical pharmacokinetic, efficacy and safety data generated by our completed clinical trials, including our successful Phase 2 trial evaluating the efficacy of plazomicin compared with levofloxacin in patients with cUTI, the FDA agreed through the SPA procedure and other communications that our single pivotal Phase 3 trial, a total safety database of approximately 300 patients, and additional nonclinical studies would be acceptable to support an NDA for plazomicin. While we were originally developing plazomicin for a broad range of gram-negative infections, including cUTI, we recognized it had exciting potential to address the urgent public health threat of CRE that has emerged in recent years. We also received FDA fast track designation for plazomicin for the treatment of serious and life-threatening CRE infections. We believe our planned development program, if successful, will also be acceptable to support a marketing application for plazomicin in the EU, based on feedback obtained through the EMA scientific advice procedure.

Key elements of our program to develop plazomicin for the treatment of CRE infections are outlined in the table below:

 

CRE Clinical Program

 

Phase

  

Objectives

   Planned
Enrollment
(approximate)
     Initiation— Receipt
of Top-Line Data
 

3

  

Primary : Demonstrate superiority of plazomicin as compared to colistin with respect to all-cause mortality at 28 days in patients with serious CRE infections

Secondary : Safety, PK of plazomicin

     360         Q1 2014 – 1H 2017   

Safety Trial

   Demonstrate safety of plazomicin in patients with serious CRE infections      120         2H 2015 – 1H 2017   

 

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Nonclinical Studies Supporting Success of CRE Program

Study

  

Methods

  

Key Result

In vitro  activity

against CRE

   Standard microbiology assays    Plazomicin demonstrated strong potency against CRE isolates resistant to other antibiotics.

In vivo efficacy

against CRE

   Mouse models of lung and thigh muscle infection    Plazomicin demonstrated strong efficacy against CRE, including as compared to colistin or tigecycline.

In vivo efficacy

against plague and

tularemia

   Non-human primate models of pneumonic plague and tularemia    Animals receiving plazomicin demonstrated survival at doses below the level equivalent to our Phase 3 clinical dose.

In vivo  and  in   vitro

toxicology studies

   In vitro and animal model studies of toxicities and potential side effects    Plazomicin demonstrated impacts on kidney function similar to other aminoglycosides. No other significant effects were observed.

 

Completed Phase 1 and Phase 2 Clinical Studies
Study
No.
 

Objectives

   Number
Enrolled
  

Key Result

001   Phase 1 trial of safety and PK after single and multiple doses in healthy subjects    39    Plazomicin was well tolerated at doses of up to 15 mg/kg for 3 days.
003   Phase 1 trial of safety, plasma PK and lung penetration in healthy subjects    40    Plazomicin was well tolerated at doses of up to 15 mg/kg for 5 days. Plazomicin penetrated into the lung.
004   Phase 1 trial of safety and PK in healthy and impaired kidney function subjects    24    As with other aminoglycosides, plazomicin’s dose needs to be adjusted in patients with moderately or severely impaired kidney function.
006   Phase 1 thorough QT/QTc trial in healthy subjects 1    64    Plazomicin showed no clinically relevant potential to increase risk for cardiac arrhythmias at single doses of up to 20 mg/kg.
002   Phase 2 safety, efficacy, and PK in patients with cUTI    145    Plazomicin displayed efficacy similar to the comparator antibiotic treatment (levofloxacin). Plazomicin was generally well tolerated at doses of up to 15 mg/kg for 5 days.
1  

The “thorough QT/QTc study” is used to determine whether or not the effect of a drug on the QT/QTc interval in target patient populations should be studied intensively during later stages of drug development. The QT/QTc interval is a measure of the time between the start of the Q wave and the end of the T wave in the heart’s electrical cycle .

As part of our drug development strategy, we monitor changes in the competitive landscape and new opportunities that may result from regulatory reform regarding approval pathways for new antibiotics. As appropriate, we may consider performing additional clinical trials if we believe such trials might result in more rapid regulatory approval of plazomicin or our other product candidates.

Pivotal Phase 3 Superiority Trial of Plazomicin for the Treatment of CRE

Given the critical need for new drugs to treat infections caused by CRE and given plazomicin’s differentiated in vitro activity and in vivo efficacy against this pathogen, we have designed our pivotal Phase 3 trial to position plazomicin as a superior drug for the treatment of CRE. By focusing on the pathogen against

 

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which plazomicin has superior nonclinical activity, instead of a broader population of pathogens, we believe we have a greater probability of demonstrating the clinical differentiation of plazomicin. In addition, unlike most antibiotic trials that are designed to show non-inferiority to the current standard of care, this trial is a superiority study with a primary efficacy endpoint of all-cause mortality at 28 days. This superiority approach is consistent with recent FDA draft guidance regarding the development of antibacterial therapies to treat patients with unmet medical need. We have reached agreement with the FDA through the SPA procedure on the design and planned analyses of this pivotal Phase 3 trial.

We expect to initiate our global Phase 3 trial for the treatment of serious CRE infections in the first quarter of 2014. We expect to have top-line data from this pivotal Phase 3 trial and to have gathered requisite safety data by the first half of 2017. If the trial is successful, we expect to submit an NDA to the FDA and an MAA to the EMA in the second half of 2017, and subsequently submit marketing applications in other global regions. Our Phase 3 trial for plazomicin will be funded in part by BARDA, which has awarded us an option for $60.4 million in funding for the trial, as part of our $103.8 million contract.

Trial Design

Our pivotal Phase 3 trial is a randomized, open-label superiority trial of the efficacy and safety of plazomicin as compared to colistin when each is combined with a second antibiotic in the treatment of patients with bloodstream infections or hospital-acquired pneumonia due to CRE. The trial will enroll patients whose causative pathogen is either presumed or documented to have an MIC ³ 4 µg/mL for the broadest spectrum carbapenems, which are referred to as type 2 carbapenems. These patients are reported to have high mortality rates when treated with currently available therapeutic options, providing us with the opportunity to demonstrate a statistically significant improvement in mortality with plazomicin.

The following figure provides an overview of our pivotal Phase 3 superiority trial:

 

LOGO

Patients with presumed or confirmed infection with CRE based on local laboratory testing will be enrolled and randomized 1:1 to a plazomicin- or colistin-based regimen. Presumed CRE infections are those with a high probability of being CRE based on diagnostic testing (for example, mass spectrometry or molecular testing), while confirmed CRE infections for purposes of our Phase 3 trial are those with isolates confirmed to have an MIC ³ 4 µg/mL to a type 2 carbapenem. At the time of randomization, one adjunctive antibiotic, either

 

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tigecycline or meropenem, will be selected by the investigator to be added to plazomicin or colistin. Prior to randomization, patients may receive treatment with empirical therapy according to the local standards of care. However, patients who have received more than 72 hours of empirical therapy for presumed CRE infection will not be eligible for the trial.

Patients randomized to plazomicin will receive an initial dose up to 15 mg/kg as a 30-minute IV infusion. The initial dose and dosing interval will be determined by baseline renal function. Subsequent plazomicin doses will be individualized based on changes in renal function and by therapeutic drug management, or TDM, using our in vitro assay.

Colistin will be administered in the form of its IV prodrug as a 5 mg/kg IV loading dose followed by maintenance dosing of 5 mg/kg divided every eight or every 12 hours for up to 14 days. Colistin dosing will be adjusted according to renal function.

The trial comprises a screening period of up to 72 hours, an active-treatment period of 7 to 14 days, and a post-treatment period through the end of study on Day 28. Efficacy will be determined by assessments of survival, clinical response, and microbiological response. The primary efficacy endpoint is all-cause mortality at 28 days. Secondary efficacy parameters include time to death through Day 28, all-cause mortality at 14 days after randomization and assessment of clinical response at end of treatment, test of cure, and end of study. Additional efficacy endpoints include early assessment of the resolution of fever, improvement of oxygenation in pneumonia patients, and clearance of bacteremia in patients with bloodstream infections. Microbiological assessments include the evaluation of microbiological response and the incidence of development of decreased susceptibility to plazomicin or colistin.

Prior to the completion of enrollment, an independent data monitoring committee will conduct and review two unblinded interim analyses of efficacy and futility. The interim analyses will occur when 33% and 67% of the required patients in the primary analysis population have reached the end of study on Day 28, which we anticipate to occur in 2015 and 2016, respectively. The interim analyses will determine whether the trial should be stopped early based on either efficacy or futility criteria.

Dosing Strategy for Phase 3 Using Pharmacometric Modeling

We used recent innovations in PK/PD modeling to predict that the plazomicin dosing regimen in the Phase 3 trial will be adequate for efficacious treatment of CRE infections. This approach integrates information on the distribution of MICs for the target pathogen based on recent microbiology surveillance data, the results of exposure-response assessments in animal models, and PK data from our Phase 1 and 2 trials to define the appropriate dosing regimen for efficacy. Based on this analysis, we predict that with our Phase 3 dosing regimen 92% of patients will achieve the levels of plazomicin in their blood or lung tissue associated with successful treatment of CRE infection in vivo . Compared to exposures achieved with current dosing of other aminoglycosides, the targeted plazomicin exposure is typically two to three times higher relative to the MIC of the infecting pathogen.

In addition, dosing of plazomicin in our Phase 3 trial will be individualized for each patient based on changes in renal function and by TDM. The use of TDM for currently marketed aminoglycosides, combined with real-time PK assessments, has been shown to help achieve target drug exposures, leading to improved patient outcomes and reduced length of hospital stays. Plazomicin concentration in plasma will be determined using an investigational in vitro assay. In November 2013, we received an Investigational Device Exemption, or IDE, approval from the FDA for use of the assay in the trial.

Projected Mortality Benefit of Plazomicin

To estimate the potential size of the treatment effect for plazomicin over colistin in our pivotal Phase 3 superiority trial, we performed a meta-analysis of data from three observational studies describing the clinical

 

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outcome of 309 patients with bloodstream infections due to carbapenemase-producing Enterobacteriaceae. We segregated patients into two groups:

 

   

High MIC ”: Patients whose infections were caused by an isolate with a carbapenem MIC  ³  4 µg/ml, our target MIC for inclusion in our Phase 3 trial, and who received combination antibiotic therapy.

 

   

“Low MIC” : Patients whose infections were caused by an isolate with a carbapenem MIC < 4 µg/ml, and who received combination antibiotic therapy containing a carbapenem.

We observed a 35% mortality rate in the High MIC group and a lower 14% mortality rate in the Low MIC group. We interpret the absolute mortality difference of 21% (95% confidence interval: 11%-30%) between the two groups to be an indication of the potential magnitude of the treatment effect that might be observed when an effective antibiotic therapy is used to treat patients whose isolates have a carbapenem MIC  ³  4 µg/ml.

Our trial design assumes a more conservative treatment effect size than suggested by this meta-analysis. Specifically, we assumed that a plazomicin-based regimen would result in a 12% absolute reduction in mortality from a baseline mortality rate of 35% in the colistin comparator group. Based on this projection, as well as additional statistical considerations, we estimate that the trial will need to enroll 286 treated patients with laboratory confirmed CRE infections to complete the primary analysis population. We estimate that it will require approximately 360 randomized patients over a 36-month period to reach this enrollment target.

Open Label Safety Trial

We intend to conduct an additional safety trial to supplement the Phase 3 trial in order to complete the safety database of 300 patients treated with plazomicin as agreed with the FDA to support the NDA. The study will be a single-treatment arm safety trial. We expect to initiate this safety trial following our first interim analysis of the Phase 3 trial in 2015. Our BARDA contract includes an unexercised option for additional funding to support this safety trial, among other things. The dollar value of this unexercised option has not yet been determined.

Nonclinical Data Support the Use of Plazomicin for the Treatment of CRE Infections

Plazomicin has been tested extensively in vitro , in animal efficacy models, and in safety pharmacology and toxicology studies. As noted above, nonclinical assays are generally predictive of clinical efficacy for antibacterials, particularly in the case of a well understood class such as aminoglycosides.

In vitro Activity Against MDR Enterobacteriaceae, Including CRE

Results from multiple susceptibility testing studies against MDR Enterobacteriaceae demonstrate that plazomicin remains potent against strains resistant to several other classes of antibiotics, including carbapenems and other aminoglycosides. We can determine the likely activity of plazomicin against MDR Enterobacteriaceae, including CRE, encountered in the hospital setting globally by testing a large number of clinical isolates collected from unique patients with different types of infections from hospitals around the world.

 

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In these studies, we measured the potency of each drug by determining the concentration of drug required to inhibit the growth of 50% and 90% of the isolate set. We refer to these measurements as the MIC 50 and MIC 90 , respectively. The table below summarizes the in vitro activity of plazomicin and several other commercially-available antibiotics from various different drug classes commonly used to treat Enterobacteriaceae infections against a large number of clinical CRE isolates.

 

Compound

  

Class

           N              

MIC 50

(µg/mL)

  MIC 90
(µg/mL)

Plazomicin

  

Aminoglycoside

   807    

0.5

  2

Gentamicin

  

Aminoglycoside

   807    

4

  128

Amikacin

  

Aminoglycoside

   806    

32

  64

Ciprofloxacin

  

Fluoroquinolone

   767    

8

  8

Ceftazidime

  

Cephalosporin

   510    

64

  >128

Piperacillin/tazobactam

  

Beta-lactam/Beta-lactamase  inhibitor

   731    

>128

  >128

Tigecycline

  

Glycycline

   723    

1

  2

Colistin/polymyxin B

  

Polymyxin

   692    

1

  4

 

Key:

 

Susceptible    Non-susceptible

 

     N=number of strains within the overall set of 807 strains tested vs. the given antibiotic.
     Notes: CLSI 2012 susceptibility criteria were used except for tigecycline and colistin, for which EUCAST 2013 criteria were used because CLSI criteria were not available. Isolates selected had an MIC  ³  2 µg/mL for any type 2 carbapenem, a value defined as non-susceptible for this class according to CLSI 2012 susceptibility criteria. Plazomicin has not yet been assigned susceptibility criteria by these organizations.

As shown in this table, at least 50% of the tested isolates were non-susceptible to all of the marketed drugs except for gentamicin, tigecycline, and colistin, while plazomicin remained potent (MIC of 0.5 µg/mL or less). This shows the high degree of multi-drug resistance in CRE and the reason tigecycline and colsitin are considered among the only options for treatment of infections caused by CRE. All of the MIC 90 values of the marketed drugs were non-susceptible, meaning that a significant percentage of infections caused by these isolates would be untreatable with available antibiotics. Plazomicin maintained an MIC 90 of 2, meaning that at least 90% of these isolates were inhibited by a concentration of 2 µg/mL or less. Overall, 96% of these isolates had a plazomicin MIC of 2 µg/mL or less.

 

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The graphs below display the activity of each of plazomicin and two commercially available aminoglycosides, amikacin and gentamicin, against clinical isolates of Enterobacteriaceae that are resistant to carbapenems due to the expression of two of the three main types of carbapenemases, serine carbapenemase and oxacillinase. The MIC of each of the tested drugs is expressed along the horizontal axis of the graph and the percent of the strains inhibited by the tested drug at a given MIC is expressed along the vertical axis. The number specified in the title indicates the number of strains that were included in each study.

 

LOGO

As exemplified in the above graphs, plazomicin retained activity against 90% or more of the tested isolates at an MIC of less than or equal to 1 µg/mL. Amikacin and gentamicin display poor activity overall because the tested strains also expressed aminoglycoside resistance mechanisms.

The following set of graphs displays the activity of each of plazomicin, amikacin, and gentamicin against clinical isolates of Enterobacteriaceae that are resistant to carbapenems due to the expression of the third main type of carbapenemase, metallo-beta-lactamase, or MBL. Activity against isolates with NDM-1, which is a particular type of MBL, is shown separately from isolates with other MBLs.

 

LOGO

Plazomicin retained activity with an MIC of less than or equal to 1 µg/mL against 90% or more of the tested isolates with an MBL, except for those with NDM-1, where plazomicin was only active against one of the 17 isolates tested. Plazomicin, amikacin, and gentamicin each display very poor activity against the NDM-1 isolates because this resistance mechanism and a particular aminoglycoside resistance mechanism, ribosomal methyltransferase, commonly occur together in the same isolate. Ribosomal methyltransferase, which renders plazomicin and most commercially available aminoglycosides inactive, and NDM-1 are generally limited to some countries in Asia, including India, although there have been isolated cases of infections by bacteria carrying such resistance mechanisms elsewhere, including the United States.

We also studied the activity of plazomicin in vitro against eight clinical CRE isolates in combination with meropenem and tigecycline, as we are planning to use plazomicin in combination with these two antibiotics during our Phase 3 trial. In our studies, we did not observe any reduced activity of plazomicin in combination with either of these antibiotics.

 

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In vivo Efficacy Against CRE

Plazomicin has demonstrated efficacy against CRE in multiple efficacy studies in animal models, and was consistently more potent than either tigecycline or colistin at doses equivalent to the clinical dose for each drug. In these studies, the PK of plazomicin was measured so the effect of its concentration in blood or lung tissue could be evaluated. Because animals and humans metabolize and excrete drugs at different rates, the dose of plazomicin was “humanized” so the concentration of plazomicin over time in the animal closely matched the human concentration over time measured from our clinical studies. We used two different mouse models of bacterial infection in which a measured amount, or inoculum, of a CRE strain was introduced into either the thigh muscle or lung of the animal, allowed to grow for two hours, and then treated with an antibiotic for one day. We determined efficacy in the animal model by measuring the amount of bacteria, expressed as colony-forming units per gram (CFU/g), in treated as compared to untreated tissues, and then comparing either the increase or decrease in the amount of bacteria versus the original inoculum, or stasis.

The graph below shows the results of plazomicin, colistin administered as its prodrug used in the treatment of patients, and tigecycline against eight CRE strains in a mouse thigh infection model.

 

LOGO

For these thigh infection studies, we selected CRE isolates from hospitalized patients that were primarily susceptible (MIC £ 1 µg/mL) to colistin and tigecycline by EUCAST criteria. The MICs of the antibiotics against the eight tested CRE isolates are shown in the table below.

 

     Number of Strains with the Given MIC  
     £ 1 µg/mL      ³ 2 µg/mL  

Plazomicin

     8         0   

Colistin

     6         2   

Tigecycline

     7         1   

Plazomicin demonstrated efficacy by reducing the amount of bacteria by up to 100 times compared to the original inoculum at doses lower than the equivalent clinical dose. In contrast, colistin and tigecycline displayed poor efficacy, despite having MICs against most of the isolates at or below the value considered to be susceptible. This result is consistent with the high mortality rates observed when colistin and tigecycline are used to treat serious CRE infections.

 

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Efficacy Against Rapidly Lethal Plague and Tularemia Pneumonia in Non-Human Primate Models

Plazomicin has demonstrated efficacy in non-human primate models against infections caused by the biothreat pathogens Yersinia pestis and Francisella tularensis . These two bacteria species are considered potential bioweapons and are the causative agents for plague and tularemia, respectively. The primary site of infection in these models is the lung, and the pathogens cause a rapidly lethal pneumonia that spreads to other organs in the absence of effective therapy. In these models, animals were exposed to an aerosol spray of the pathogen and monitored for signs of fever indicating an active infection. PK was also measured. Once fever was detected, treatment was started with either a fixed dose of plazomicin (six animals for each treatment group) or a placebo and continued for 10 days. In one arm of the tularemia study, treatment was withheld until 24 hours after fever was observed allowing additional time for the infection to establish and worsen. Across these studies, almost all plazomicin-treated animals were cleared of their bloodstream and lung infections even when dosed below levels equivalent to our Phase 3 clinical dose. However, in the plague studies some plazomicin-treated animals died due to infections that spread to the central nervous system, or CNS, where we believe plazomicin does not penetrate. Like other aminoglycosides, intravenous plazomicin would not be suitable for the treatment of CNS infections. In contrast, none of the placebo control-treated animals in these studies survived. The strong efficacy of plazomicin against these diseases in a primate model suggests that it would likely be effective in similar serious infections in humans. Our BARDA contract includes an unexercised option for funding, among other things, additional non-human primate studies of plazomicin’s efficacy against Yersinia pestis and Francisella tularensis . The dollar value of this unexercised option has not yet been determined.

Nonclinical Safety Studies

We have studied plazomicin in industry-standard in vitro and in vivo toxicology models designed to characterize the potential side effects and safety parameters of drugs. These studies are typically required by regulatory agencies such as the FDA prior to use of the drug in humans. In our studies, plazomicin’s primary toxicological effect was on the kidney. In animals, damage to the kidney increased and organ function deteriorated in proportion to plazomicin dose. This effect was observed to be reversible. After plazomicin dosing ceased, kidney function returned to normal or near normal, and the kidney damage was repaired. These results are consistent with the nonclinical toxicity and clinical safety of other aminoglycosides. Reversible kidney toxicity is a known side effect of these drugs. In head to head studies in animals, we observed the relationship between plazomicin dose and effect on the kidney and its function to be similar to that of gentamicin.

Aminoglycosides are also associated with hearing loss and impaired balance. Both of these functions are controlled by organs in the inner ear. To evaluate the potential for hearing loss with plazomicin treatment, we studied plazomicin in an animal model designed to detect hearing loss associated with drug treatment. In this study, plazomicin did not impact hearing function or cause detectable damage to the inner ear. The ability of this model or other available nonclinical models to predict drug-related hearing loss has not been firmly established. Therefore, we carefully monitored hearing and balance in our completed clinical trials of plazomicin.

Additional Nonclinical Studies to Support an NDA

We intend to conduct additional nonclinical studies to support an NDA for plazomicin. We plan to perform further microbiological studies of plazomicin in order to assess its activity against contemporary clinical isolates of Enterobacteriaceae and other bacterial species from the United States and other countries. We plan to conduct these studies no earlier than three years prior to the NDA filing. Our BARDA contract includes an unexercised option for additional funding to support these studies. The FDA has agreed that these additional nonclinical studies, when combined with our single pivotal Phase 3 trial and a total safety database of approximately 300 patients, would be acceptable to support an NDA for plazomicin. Other studies we plan to conduct include industry-standard experiments to characterize the distribution and excretion of plazomicin in vivo , as well as in vitro studies of the potential for plazomicin to interact with enzymes associated with drug distribution and metabolism.

 

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Plazomicin Clinical Data Are Supportive of Further Trials of Plazomicin in Patients with CRE

Our clinical trial data to date for plazomicin indicate an acceptable safety profile, predictable PK, and lung penetration that is similar to other aminoglycosides. In addition, our Phase 2 trial demonstrates that plazomicin has microbiological and clinical efficacy in treating cUTI that is similar to levofloxacin, an approved antibiotic in the fluoroquinolone class commonly used in hospitals for the treatment of this infection.

Plazomicin has been studied in four Phase 1 clinical trials and one Phase 2 clinical trial. To date, a total of 239 healthy subjects and patients have received plazomicin at doses ranging between 1 and 20 mg/kg administered as an IV infusion. In the Phase 1 trials, 82 subjects received 15 mg/kg administered either as a single dose or once daily for up to five days. In the Phase 2 trial, 74 patients with cUTI received 15 mg/kg of plazomicin administered once daily for up to five days.

Phase 1 Clinical Trials

In our Phase 1 trials we demonstrated that plazomicin displays good tolerability and safety in single doses up to 20 mg/kg and multiple doses of up to 15 mg/kg of plazomicin administered once daily for five days. Common adverse events in the Phase 1 studies (occurring at a frequency greater than 5% in all subjects) were headache, numbness or tingling, dizziness, nausea, and drowsiness. All adverse events were mild or moderate in severity, and the overall frequency of events was similar between the plazomicin and placebo groups. In a substudy of our second Phase 1 trial (003) that investigated lung penetration of plazomicin, five subjects experienced mild to moderate transient hypotension at the end or soon after a single dose, consisting of a 10-minute infusion of 15 mg/kg of plazomicin. Following this trial, the infusion period was increased to 30 minutes for all subsequent trials. In a focused cardiovascular trial, plazomicin showed no clinically significant potential to cause arrhythmias, and all adverse events were mild or moderate in severity.

Pharmacokinetic data collected in these trials showed dose proportionality and linearity in plasma within the tested plazomicin dose range. Lung penetration of plazomicin based on epithelial lining fluid, or ELF, levels was similar to the range of values reported for amikacin, another aminoglycoside agent, in bronchial secretions of normal and infected subjects. Phase 1 trials also showed that, as with other aminoglycosides, plazomicin is mainly cleared through the kidneys. A trial in subjects with moderate or severe kidney function impairment confirmed that plazomicin PK is significantly altered in these subjects relative to subjects with mild or normal kidney function. This trial demonstrated that, as with other aminoglycosides, dose adjustment will be necessary in patients with moderate or severe impairment.

Phase 2 Clinical Trial

Our Phase 2 multicenter, double-blind, randomized, active comparator-controlled trial, evaluated the efficacy of plazomicin compared with levofloxacin in 145 patients with cUTI including acute pyelonephritis. We selected cUTI as the target infection for our Phase 2 trial because cUTIs are one of the most common hospital-acquired infections, and the majority of cUTIs across all geographic regions are caused by Enterobacteriaceae, most commonly E. coli . We selected levofloxacin as the comparator drug for this trial since it is considered an empiric standard of care for cUTI and it shares many similar properties to plazomicin, such as concentration-dependent killing of bacteria, once-daily dosing, and achievement of high urinary concentrations.

During the first phase of the trial, patients were randomized 1:1:1 to 10 mg/kg plazomicin, 15 mg/kg plazomicin, or 750 mg levofloxacin, each treatment being administered once daily for five consecutive days. During the second phase of the trial, the 10 mg/kg treatment arm was eliminated and patients were randomized 2:1 to 15 mg/kg plazomicin or levofloxacin 750 mg.

Efficacy was assessed through microbiological and clinical outcomes at end of treatment, at test of cure, and at a long-term follow-up visit. The primary efficacy endpoint was the proportion of patients who attained microbiological eradication at the test of cure visit. This endpoint was determined for two analysis populations: a

 

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modified intent-to-treat, or MITT, population which included all randomized patients with at least one causative pathogen isolated from an acceptable urine specimen before treatment; and a microbiologically evaluable, or ME, population which was a smaller subset of the MITT population and included patients who met key study inclusion criteria, received study treatment for a pre-specified duration and had an acceptable urine specimen at test of cure.

As shown in the table below, the proportion of patients who achieved microbiological eradication was similar for each of the plazomicin (10 mg/kg and 15 mg/kg) and levofloxacin treatment groups in both analysis populations. Microbiological eradication rates for the MITT population in our Phase 2 trial were lower than the ME population. This is in part due to the fact that the MITT population, but not the ME population, had a proportion of patients with an unknown/indeterminate microbiologic outcome primarily because samples at the test of cure visit were not obtained.

 

By-Patient
Microbiological Response 1

   Plazomicin
10 mg/kg
   Plazomicin
15 mg/kg
   Levofloxacin
750 mg

Microbiologically Evaluable (ME)

N

   7    35    21

Eradication, n (%)

   6 (85.7%)    31 (88.6%)    17 (81.0%)

95% CI

   42.1%–99.6%    73.3%–96.8%    58.1%–94.6%

Difference (95% CI) 2

         –7.6% (–31.3%, 16.0%)

 

  

 

  

 

  

 

Modified Intent-to-Treat (MITT)

N

   12    51    29

Eradication, n (%)

   6 (50.0%)    31 (60.8%)    17 (58.6%)

95% CI

   21.1%–78.9%    46.1%–74.2%    38.9%–76.5%

Difference (95% CI) 2

         –2.2% (–27.2%, 22.9%)

 

1  

N = number of patients in the treatment group; n=number of patients within a specified microbiological response category.

2  

Difference in microbiological eradication rates between levofloxacin 750 mg and plazomicin 15 mg/kg as calculated by the levofloxacin eradication percentage minus the plazomicin 15 mg/kg eradication percentage. The 95% CI for the difference is based on a normal approximation with a continuity correction.

The secondary efficacy endpoint of the trial was clinical outcome. In the plazomicin and levofloxacin treatment groups, a majority of the clinically evaluable patients (66.7%–78.6%) were assessed as cured, with resolution of baseline signs and symptoms of infections. Results for the ME and MITT groups were similar. The majority of isolates collected from patients in these populations during the trial were non-MDR Enterobacteriaceae.

Overall in the Phase 2 trial, plazomicin administered at doses of 10 or 15 mg/kg once daily for five days was generally well tolerated. There were no serious adverse events assessed as related to treatment with plazomicin. Five patients (four in the plazomicin 15 mg/kg group and one in the levofloxacin group) prematurely discontinued study drug due to adverse events. Overall, adverse events were experienced by 7 of 22 patients (31.8%) in the plazomicin 10 mg/kg groups, 26 of 74 patients (35.1%) of patients in the plazomicin 15 mg/kg

 

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group, and 21 of 44 patients (47.7%) in the levofloxacin 750 mg group. Most of these were assessed as mild or moderate in severity. Adverse events occurring in at least two patients are shown in the table below.

 

Adverse Event, number of patients (%)

   Plazomicin
10 mg/kg
(22 patients)
     Plazomicin
15 mg/kg
(74 patients)
     Levofloxacin
750 mg
(44 patients)
 

Headache

     2 (9.1%)         6 (8.1%)         3 (6.8%)   

Diarrhoea

     0 (0.0%)         4 (5.4%)         2 (4.5%)   

Dizziness

     0 (0.0%)         4 (5.4%)         0 (0.0%)   

Nausea

     0 (0.0%)         4 (5.4%)         0 (0.0%)   

Vomiting

     0 (0.0%)         4 (5.4%)         1 (2.3%)   

Gastritis

     1 (4.5%)         2 (2.7%)         0 (0.0%)   

Abdominal pain upper

     0 (0.0%)         1 (1.4%)         1 (2.3%)   

Cough

     1 (4.5%)         1 (1.4%)         1 (2.3%)   

Dyspepsia

     1 (4.5%)         1 (1.4%)         1 (2.3%)   

Dyspnoea

     1 (4.5%)         1 (1.4%)         0 (0.0%)   

Hypokalaemia

     0 (0.0%)         1 (1.4%)         2 (4.5%)   

Insomnia

     0 (0.0%)         1 (1.4%)         1 (2.3%)   

Dysgeusia

     0 (0.0%)         0 (0.0%)         2 (4.5%)   

Hypertension

     1 (4.5%)         0 (0.0%)         1 (2.3%)   

Pruritus

     1 (4.5%)         0 (0.0%)         2 (4.5%)   

Tachycardia

     1 (4.5%)         0 (0.0%)         1 (2.3%)   

Upper respiratory tract infection

     0 (0.0%)         0 (0.0%)         2 (4.5%)   

The hearing and balance of patients were closely assessed, as aminoglycosides are known to have safety liabilities associated with these functions. One plazomicin-treated patient reported mild transient vertigo and another plazomicin-treated patient reported mild unilateral tinnitus that persisted and was considered permanent. Neither patient tested positive for changes in hearing function or balance. Kidney function as measured by mean serum creatinine values remained generally stable over the trial. Two patients treated with 15 mg/kg plazomicin had adverse events associated with renal function. Both events were assessed as mild in severity and involved increases in serum creatinine of 0.5 mg/dL and 0.7 mg/dL respectively, which returned to near-baseline values by the last follow-up visit. Two additional patients treated with 15 mg/kg plazomicin experienced serum creatinine abnormalities (an increase from 1.2 to 2.0 mg/dL and an increase from 0.8 to 1.5 mg/dL), neither of which were classified as adverse events, and that returned towards baseline at the last follow-up visit.

The results of this Phase 2 trial demonstrated the efficacy of plazomicin in patients with cUTI that was similar to the efficacy of levofloxacin in terms of achieving both microbiological eradication of the causative pathogen of the infection and clinical cure. Furthermore, plazomicin was generally well tolerated in this patient population.

Antipseudomonal Discovery and Development Program

Beyond our plazomicin program, our research team is focused on discovering medicines with novel mechanisms of action for serious infections caused by MDR Pseudomonas aeruginosa. This pathogen is one of the most common causes of healthcare-associated infections and was responsible for approximately 20% of the three million hospital-treated pneumonia cases in the United States, EU and Japan in 2012. According to the CDC, approximately 13% of healthcare-associated infections caused by P. aeruginosa are multi-drug resistant, and these infections are associated with high morbidity and mortality rates, as well as increased healthcare costs. As a result, the CDC has categorized P. aeruginosa as a “serious” threat requiring prompt and sustained action. We are taking a multifaceted approach to identify new antipseudomonal agents through our small molecule drug and therapeutic antibody discovery programs.

We expect to nominate at least one clinical candidate from our antipseudomonal program in 2014 and to file an IND in 2015. Based on our current operating plans and our planned use of proceeds from this offering, we anticipate that advancement of more than one clinical candidate to an IND will require additional funding.

 

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Small Molecule Drug Discovery Program

In 2006, we initiated a program to identify inhibitors of LpxC. LpxC is an essential enzyme for the formation of bacterial membranes in gram-negative bacteria that is highly conserved among gram-negative species. Inhibition of LpxC disrupts the structural integrity of the outer bacterial membrane, reducing its capacity to protect the cell and retain vital molecules in the space between the outer and inner membrane, leading to bacterial cell death.

Using our discovery engine, we made improvements to known LpxC inhibitors to generate a series of promising molecules that showed greater activity against gram-negative pathogens, improved safety in preclinical models, and better pharmaceutical properties. Given their novel mechanism of action, compounds generated in this program demonstrate no cross-resistance with current antibiotics and therefore retain activity against strains harboring resistance mechanisms that inactivate many other marketed antibiotics. This is illustrated in the figure below with respect to the most advanced compound in this program, ACHN-975, which demonstrates potent activity against a large set of almost 1,000 P. aeruginosa clinical isolates. The figure also shows the potency of other antibiotics commonly used to treat infections caused by P. aeruginosa infections. For these drugs, the dotted lines begin at the MIC value considered non-susceptible, according to 2012 CLSI criteria, demonstrating the current scarcity of effective therapeutic options for P. aeruginosa infections. None of the other drugs had a susceptible MIC 90 against the test set.

 

LOGO

In 2012, we conducted a first-in-human Phase 1 clinical trial of ACHN-975, which demonstrated linear, dose-dependent PK and good tolerability when administered intravenously in single doses at levels predicted to be effective in treating P. aeruginosa infections. In a subsequent multiple-dose trial, the first three subjects that received multiple doses of ACHN-975 developed inflammation at the infusion site, with venous thrombosis at the infusion site in one of these subjects, and the trial was terminated early. No subjects had signs or symptoms of a systemic inflammatory reaction and no other safety findings were observed. All three subjects were discharged from the Phase 1 unit after demonstrating resolution or substantial improvement of the infusion site reactions. We are working to establish preclinical models that reproduce this toxicity. If we are able to validate a model, we intend explore alternative formulations or prodrugs of ACHN-975 to address the local infusion site tolerability. We also have several backup compounds that we may turn to if the reformulation and prodrug efforts are unsuccessful.

Therapeutic Antibody Discovery Program

Therapeutic monoclonal antibodies, or mAbs, have several distinguishing features that make them attractive as antibacterial agents. First, we believe they will not be impacted by resistance mechanisms that inactivate

 

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existing small molecule-based antibiotics. Second, they are highly specific to their target, greatly reducing the potential for toxicity due to off-target binding. Third, humanized or fully human mAbs are well tolerated with low immunogenicity in patients. Finally, mAb therapeutics can achieve sustained exposure with a typical half-life of around 3 weeks, potentially enabling an antibacterial antibody to prevent or cure an infection following a single intramuscular or intravenous dose.

Our goal is to generate mAbs that can be deployed as a monotherapy to treat infections caused by MDR P. aeruginosa . Many of the antibacterial antibodies currently in development by others will likely be limited to prophylactic use for preventing infections or require adjunctive therapy with an effective antibiotic. Based on our experience developing agents for gram-negative pathogens, we have identified a set of targets and a corresponding screening funnel for each target that we believe to be well suited for therapeutic mAb discovery. Our unique approach has the potential to transform the way gram-negative infections are treated by enabling a safe, single-dose primary cure of infection or long-lasting step-down therapy upon discharge from the hospital.

Additional Gram-negative Discovery and Development Program

We are drawing on knowledge gained through our work on LpxC inhibitors to identify compounds that bind and inhibit additional essential enzymes in the gram-negative outer membrane biosynthesis pathway. These targets are attractive for many of the same reasons as LpxC: their inhibition leads to rapid cell death, they are highly conserved among the gram-negative bacteria, and they have no similar mammalian genes, reducing the potential for mechanism-based toxicity in patients. We are seeking to identify these compounds by using structure-guided design and virtual fragment screening based on the crystal structures of these enzymes.

Another one of our programs seeks to identify compounds that bind and inhibit a metabolic enzyme that is essential to gram-negative bacteria. The starting point for this medicinal chemistry campaign is a published series of molecules known to bind the target enzyme, but lacking in microbiological activity against pathogens of interest. We are deploying our discovery platform to design and synthesize novel molecules based on published structural information with enhanced gram-negative activity. We have generated a set of novel compounds with improved activity compared to published compounds against our key target gram-negative species (for instance, MICs of 0.5 µg/mL and 2 µg/mL against wild-type E. coli and K. pneumoniae , respectively), and have identified several lead compound series for further optimization. This improvement in activity has reinforced our understanding and proprietary knowledge of this space, and further validated our small molecule discovery approach.

Government Contracts

BARDA

Our program to develop plazomicin for the treatment of CRE infections of the bloodstream and lung, as well as for disease caused by certain bacterial biothreat pathogens, is partially funded under a contract with BARDA. This contract was awarded in August 2010 and consists of a base amount as well as three options, two of which have been exercised. The base amount and the two exercised options total $103.8 million of committed funding, of which $33.4 million has been recorded as revenues as of September 30, 2013, with $70.4 million remaining available. The potential funding amount under the unexercised option has not yet been determined. The unexercised option relates to the conduct of an open-label safety trial, certain nonclinical studies to support an NDA and certain nonclinical biodefense studies, all of which are discussed above, and we anticipate that BARDA will evaluate award of this option by mid-2015.

Overall, the contract calls for the development, manufacturing, nonclinical and clinical evaluation of, and regulatory filings for, plazomicin as a countermeasure for diseases caused by antibiotic-resistant pathogens. These pathogens include bacteria associated with serious hospital-acquired infections, such as CRE, as well as biothreats, such as F. tularensis , which causes tularemia, and Y. pestis , which causes plague. As the prime contractor, we are

 

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responsible for all technical and regulatory activities under a research plan proposed by us and accepted by BARDA. From time to time, we may propose a change to the research plan to BARDA, and BARDA may or may not choose to accept the change to the research plan, along with any associated additional costs, subject to the availability of funding, as well as other factors. We are also obligated under the contract to satisfy various federal reporting requirements, including technical reporting with respect to our plazomicin development activities, reporting with respect to intellectual property and financial reporting. In addition, technical documents and regulatory filings may be reviewed by BARDA prior to their finalization and/or submission.

Payments under the contract with BARDA are made in installments as activities are conducted in accordance with the research plan. Payments to us are based on direct costs incurred and allowances for overhead, plus a fee, where applicable. In November 2013, we modified the most recent awarded option such that payments under this option would not exceed $60.4 million, even though the cost of the Phase 3 trial and related expenses are expected to exceed the amount available to us under our BARDA contract for direct costs incurred. We currently anticipate that the estimated costs of the plazomicin development program, through the receipt of top-line data, that are not funded by our BARDA contract will approximate the allocated portion of proceeds from this offering, as described in the “Use of Proceeds” section of this prospectus. We intend to utilize such allocated proceeds to fund the cost of the Phase 3 trial and related expenses that are in excess of the payments to us under our BARDA contract for the direct costs of the trial. Under standard government contracting terms, the government receives only limited rights for government use of certain of our pre-existing data and certain data produced with non-federal funding, to the extent such data are required for delivery to BARDA under the project. The U.S. government receives unlimited rights to use and disclose new data first produced under the project with BARDA funding. The U.S. government is entitled to a nonexclusive, worldwide, royalty-free license to practice or have practiced any patent on an invention that is conceived or first reduced to practice under the project, and may obtain additional rights if we do not elect to retain ownership of a subject invention or if we do not satisfy certain disclosure and patent prosecution obligations with respect to a subject invention. The government’s rights do not include the composition of matter patents related to plazomicin, as these were developed and prosecuted prior to our entry into the BARDA contract and without government funding. The BARDA contract does not entitle the government to any sales royalties or other post-commercialization financial rights.

BARDA is entitled to terminate the project for convenience at any time, and is not obligated to provide continued funding beyond current year amounts allotted from Congressionally approved annual appropriations.

DTRA

In June 2007, we entered into a contract with DTRA to develop novel antibacterials for the treatment of biodefense pathogens. To date, we have received $33.4 million out of $35.4 million that was available for drawdown under this contract. In November 2012, DTRA terminated this contract for convenience. We are seeking payment from DTRA for additional expenses we have incurred in connection with this contract. We have not recognized any revenue with respect to these additional amounts. The payments we have received under the DTRA contract and the payments we are requesting are subject to an ongoing audit by the Defense Contract Audit Agency.

The DTRA contract related to the funding of our LpxC program, including ACHN-975. Under the contract’s terms, the U.S. government received rights to use and disclose new data first produced under the project with DTRA funding only to the extent they are related to government applications connected with certain select pathogens. In addition, the U.S. government is entitled to a nonexclusive, worldwide, royalty-free license to practice or have practiced any patent on an invention that was conceived or first reduced to practice under the project, including the composition of matter patent related to ACHN-975, and may obtain additional rights if we do not elect to retain ownership of a subject invention or if we do not satisfy certain disclosure and patent prosecution obligations with respect to a subject invention.

NIAID

In September 2008, we entered into a five-year contract with the U.S. National Institute of Allergy and Infectious Diseases, or NIAID, to develop novel antibacterials for the treatment of biodefense pathogens. We

 

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received over $21.0 million under this contract, which supported a previous research and development program that we currently do not intend to advance. Our NIAID contract expired in August 2013. The U.S. government retains certain rights to data and intellectual property generated under the contract.

USAMRAA

In May 2012, we entered into a one-year contract with the U.S. Army Medical Research Acquisition Authority, or USAMRAA. Under the contract we conducted the first-in-human single ascending dose study of ACHN-975. The total amount of the contract was $2.5 million, and the contract expired in May 2013. The U.S. government retains certain rights to data generated under the contract.

For more information regarding the government contracts referred to above see “Risk Factors—Risks Related to Our United States Government Contracts” and “Risk Factors—Risks Related to Intellectual Property— Provisions in our United States government contracts, including our contract with BARDA, may affect our intellectual property rights .”

Commercial Agreements

ARK Diagnostics, Inc. Development Services Agreement

In August 2013, we entered into a development services agreement with ARK Diagnostics, Inc., or ARK. Under this agreement, we and ARK are co-developing an in vitro assay to measure levels of plazomicin in the blood to enable patients to receive safe and efficacious doses of plazomicin. Such an assay would be used to provide therapeutic drug management, or TDM. ARK is responsible for the manufacture and supply of the developed assay for our plazomicin Phase 3 trial program. Depending on the mutually agreed regulatory approval pathway and commercialization strategy for the assay, we will be required to pay ARK up to an aggregate amount of between $1.0 million and $1.6 million in milestone payments for the achievement of certain development, manufacturing and regulatory milestones, $0.7 million of which have been achieved and paid as of the date of this prospectus. Intellectual property rights relating to the assays developed under the contract are jointly owned by us and ARK, but each party retains ownership of its background intellectual property and improvements thereto.

In addition to the co-development activities performed under the agreement, we are required to negotiate in good faith the terms of an agreement for the commercialization of the assay based upon certain core terms outlined in the development services agreement to be included in such a commercialization agreement. Such core terms include that ARK would have the first right to commercialize the assay in the United States and the EU and to manufacture and supply the assay worldwide for commercialization, while we would have the first right to commercialize the assay in any other country or territory, in addition to step-in rights to commercialize the assay in the United States and the EU if ARK elects not to do so. If we do not agree with ARK on the terms of a commercialization agreement by April 2014, then either we or ARK can request the appointment of an expert panel to establish any unresolved terms of such commercialization agreement, and the panel decision on such unresolved terms would be binding on ARK and on us. The development services agreement provides that if, by January 2016, we have still not agreed the terms of a commercialization agreement with ARK, ARK will provide us with an interim supply of the finished assay for at least two years following the approval of the NDA for plazomicin and interim supply of components to the assay to have the assay made for us by a third party for a further three years, until five years following the approval of the NDA, at a price that is comparable with the pricing offered by ARK to other distributors. If we still have not agreed with ARK on the terms of a commercialization agreement by January 1, 2018, then at our request, we, ARK and a third-party supplier reasonably acceptable to ARK shall enter into a technology transfer and license agreement, whereby on commercially reasonable terms, ARK would grant to the third-party supplier a license under ARK’s applicable intellectual property and perform a transfer of know-how to such third-party supplier, solely to the extent necessary for the purpose of manufacturing and supplying the assay to us for use or commercialization by us and our designees.

 

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The development services agreement will expire upon the later of the completion of the development services and January 1, 2020. Either we or ARK may terminate for the other party’s uncured material breach, and we may terminate without cause upon 60 days written notice to ARK.

License Agreement with Isis Pharmaceuticals, Inc.

On January 25, 2006, we entered into a license agreement with Isis Pharmaceuticals, Inc., or Isis, pursuant to which Isis granted us an exclusive license under certain patents relating to aminoglycoside antibacterial compounds and related know-how to develop and commercialize certain novel aminoglycoside antibacterial compounds. We are required to use commercially reasonable efforts to develop and commercialize licensed compounds under the agreement. In consideration for the rights granted to us by Isis under the license agreement, we issued $1.5 million of our Series A convertible preferred stock to Isis in 2006. In addition, we are required to make payments to Isis upon the achievement of specified development and regulatory milestones totaling up to $19.5 million for the first aminoglycoside product developed under the agreement, including a payment of $4.0 million to Isis upon dosing the first patient in our Phase 3 trial of plazomicin, and up to $9.75 million for the second aminoglycoside product developed under this agreement, and to pay Isis a low double-digit share of non-royalty sublicensing revenues that we receive from sublicensees for the grant of sublicenses under our agreement with Isis, provided that the maximum amount we are required to pay Isis with respect to the sum of all development and regulatory milestones and non-royalty sublicensing revenue payment obligations for plazomicin, as the first aminoglycoside product under the agreement, is $19.5 million. Likewise, our cumulative development and regulatory milestone payment and non-royalty sublicensing revenues payment obligations for a second aminoglycoside product under the agreement with Isis will not exceed $9.75 million. To date, we have made development milestone payments of $3.0 million to Isis with respect to plazomicin, $2.5 million of which was paid in cash and $0.5 million of which was paid in the form of our Series B convertible preferred stock. We are also required to pay additional milestone payments of up to $20.0 million in the aggregate upon the first achievement of specified threshold levels of annual net sales of all aminoglycoside products in a calendar year. If any aminoglycoside product, including plazomicin, is successfully commercialized, we will be required to pay royalties to Isis in the low single digits based on worldwide net sales of licensed products by us, our affiliates and sublicensees.

Our license agreement with Isis will continue for as long as we are obligated to pay royalties to Isis, which will be on a product-by-product basis until the later of (a) ten years from the date of first commercial sale of an aminoglycoside product covered by the agreement in specified markets; and (b) the abandonment, revocation, invalidation or expiration of the last valid claim of a patent covered under the agreement which covers such product, not to exceed twenty years after the first commercial sale in specified markets. Either party may terminate the agreement for the uncured material breach of the other party, and Isis may terminate the agreement if we fail to make timely payments, subject to a specified cure period. We may also terminate the agreement or the license with respect to a particular product without cause upon 60 days’ notice.

License Agreement with the University of Washington

On December 1, 2006, we entered into a license agreement with the University of Washington, or UW, pursuant to which UW granted us an exclusive license under UW’s rights to certain patents and technology covering novel LpxC inhibitor antibacterial compounds, subject to UW’s retained right to use such patents and technology for research and academic purposes. UW also granted us a non-exclusive license in related know-how. Certain of the patents and technology licensed under our agreement with UW are co-owned by Novartis, and the exclusivity of our license is therefore subject to Novartis’ rights to use the licensed patents and technology and to grant licenses to others to do so. This agreement was amended in March 2009 to modify the timing of our reimbursement of certain patent prosecution expenses, and in January 2011 to amend the timing of certain milestone events. We are required to use commercially reasonable efforts to commercialize the licensed technology and to manufacture and maximize the sales of licensed products. In consideration for the rights granted to us by UW under the license agreement, we paid an up-front cash payment to UW upon execution of the agreement. In addition, if we achieve specified development and regulatory milestones, we will be required to make payments to UW totaling up to $2.15 million for the first product under the agreement to achieve the

 

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specified milestone, $150,000 of which has already been paid with respect to ACHN-975, and up to $1.075 million for each of the second and third products to achieve the specified milestone. In addition, if ACHN-975 or any other LpxC inhibitor covered under the agreement is successfully commercialized, we will owe UW a royalty in the low single digits based on worldwide net sales, if any, of licensed products by us and our sublicensees, subject to a requirement to pay to UW a minimum annual royalty following regulatory approval, and, beginning in 2009, a nominal annual license maintenance fee prior to regulatory approval. We are also obligated to pay UW a share of non-royalty sublicensing revenues that we receive from sublicensees for the grant of sublicenses under this agreement, ranging from the mid-single digit to very-low-double digit percentages of such revenues, based on timing of the execution of the sublicense.

The UW Agreement will continue until expiration of the last valid claim of a patent covered under the agreement, which we expect to occur no later than January 2024. However, UW has the right to terminate the agreement if we breach it and fail to cure such breach within a specified cure period or upon our insolvency. We may terminate this agreement for any reason upon 30 days’ notice to UW.

Competition

The pharmaceutical industry is very competitive and subject to rapid and significant innovation. Our potential competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical and generic drug companies, universities, and other research institutions. Many of our competitors have greater financial resources, as well as larger research and development staff and more experienced marketing and manufacturing organizations. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are superior to, or more effectively marketed than, plazomicin or any other drug candidate that we are currently developing or that we may develop, which could render our products obsolete and noncompetitive.

The competition in the antibiotics market is intense. We are initially developing plazomicin as a treatment for presumed or documented bloodstream or pneumonia CRE infections, and if approved, plazomicin will face competition from commercially available antibiotics such as tigecycline, which is marketed by Pfizer as Tygacil, other aminoglycosides that are generically available (e.g., gentamicin, amikacin, tobramycin), and polymyxins that are generically available (colistin and polymyxin B).

In addition, if approved, plazomicin may face additional competition from antibiotics currently in clinical development. We are aware of other antibiotics currently in development. Forest Laboratories and AstraZeneca are developing ceftazidime/avibactam and ceftaroline/avibactam for pneumonia and complicated urinary and intra-abdominal infections. Tetraphase Pharmaceuticals is developing eravacycline for cUTI and intra-abdominal infections. The Medicines Company is developing Carbavance™ for complicated urinary tract infections and MDR gram-negative infections, including CRE.

If approved, we believe that plazomicin would compete effectively against both marketed and known pipeline competitors based on the following:

 

   

Potent in vitro and in vivo activity against CRE, including strains bearing all classes of carbapenemases;

 

   

Activity in the presence of a range of resistance mechanisms, including most aminoglycoside modifying enzymes, fluoroquinolone target site mutations, extended-spectrum beta-lactamases, and carbapenemases;

 

   

Registrational program focused on bloodstream and pneumonia infections due to CRE;

 

   

Superiority trial design with all-cause mortality endpoint; and

 

   

Acceptable safety and tolerability profile.

 

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If we are unable to demonstrate these or other advantages of plazomicin over competing drugs and drug candidates, we may not be able to successfully commercialize plazomicin and our results of operations may suffer. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make plazomicin or any other product candidates that we develop obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or regulatory approval or discovering, developing and commercializing antibiotics before we do.

Intellectual Property

The proprietary nature of, and protection for, our product candidates and our discovery programs, processes and know-how are important to our business. We have sought patent protection in the United States and certain other jurisdictions for plazomicin, ACHN-975, and certain other inventions to which we have rights, where available and when appropriate. Our policy is to pursue, maintain and defend patent rights, whether developed internally or licensed from third parties, and to protect the technology, inventions and improvements that are commercially important to the development of our business. We also rely on trade secrets relating to our proprietary technology platform that may be important to the development of our business.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for our current and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell, or importing our products depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. 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 product candidates, discovery programs and processes. For this and more comprehensive risks related to our intellectual property, see “Risk Factors—Risks Related to Intellectual Property.”

Plazomicin (Aminoglycoside)

The patent portfolio for plazomicin is based upon an Achaogen-owned patent family that includes patents and patent applications directed to plazomicin and structural analogs thereof, pharmaceutical compositions containing plazomicin or analogs thereof, and methods of using plazomicin or analogs thereof in the treatment of bacterial infections. As of December 31, 2013, this patent family included one U.S. patent (U.S. Patent No. 8,383,596, issued February 26, 2013, which we refer to herein as the ‘596 patent), one pending U.S. patent application (Application Serial No. 13/734,729, filed January 4, 2013) and sixteen corresponding foreign patents and patent applications. As of December 31, 2013 we had corresponding granted patents in Australia, China, Eurasia, Japan, and Korea. In addition, as of December 31, 2013, we had corresponding patent applications pending in Brazil, Canada, China, Eurasia, Europe, Hong Kong, Israel, India, Japan, Mexico, and Taiwan. With the exception of the ‘596 patent, which the USPTO has determined is entitled to 923 days of patent term adjustment, we expect any U.S. and foreign patents in this patent family to expire in November 2028. In view of the USPTO determination that the ‘596 patent is entitled to 923 days of patent term adjustment, we expect the ‘596 patent to expire in June 2031.

It is possible, assuming that plazomicin achieves regulatory approval and depending upon the date of any such approval, that the term of the ‘596 patent may be extended up to a maximum of five additional years under the provisions of the Drug Price Competition and Patent Term Restoration Act of 1984, also referred to as the Hatch-Waxman Act. Patent term extension also may be available in certain foreign countries upon regulatory approval.

 

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ACHN-975 (LpxC Inhibitor)

Our patent portfolio for ACHN-975 is comprised of four distinct patent families. Three of these patent families are Achaogen-owned, and one is in-licensed from UW and co-owned by UW with Novartis Corp.

The first of the three Achaogen-owned patent families is directed to a chemical genus that encompasses ACHN-975, pharmaceutical compositions containing a compound encompassed within the chemical genus and methods of using a compound encompassed within the chemical genus in the treatment of bacterial infections. As of December 31, 2013, this patent family included patent applications pending in the United States (Application Serial No. 12/635,551, filed December 10, 2009), Canada, China, Europe, Hong Kong, India, Japan, and Taiwan. We expect any U.S. and foreign patents granted in this patent family to expire in June 2028.

The second of the three Achaogen-owned patent families is directed to ACHN-975 as a composition of matter and structural analogs thereof, pharmaceutical compositions containing ACHN-975 or analogs thereof, and methods of using ACHN-975 or analogs thereof in the treatment of bacterial infections. As of December 31, 2013, this patent family included applications pending in the United States (Application Serial No. 13/289,209, filed November 4, 2011), Argentina, Australia, Brazil, Canada, China, Eurasia, Europe, Israel, India, Japan, Korea, Mexico, New Zealand, Singapore, South Africa, Taiwan, and Venezuela. We expect any U.S. and foreign patents granted in this patent family to expire in November 2031.

The third of the three Achaogen-owned patent families is directed to polymorphs of ACHN-975 and to pharmaceutical compositions containing polymorphs of ACHN-975. As of December 31, 2013, this patent family included an international patent application filed pursuant to the Patent Cooperation Treaty (International Application No. PCT/US2012/054718, filed September 12, 2012), a U.S. patent application (Application Serial No. 13/611,149, filed September 12, 2012) and corresponding foreign applications pending in Argentina, Taiwan, and Venezuela. We expect any U.S. and foreign patents granted in this patent family to expire in September 2032.

As of December 31, 2013, the patent family in-licensed from UW included five issued U.S. patents, two of which (U.S. Patent Nos. 7,989,660 and 8,153,843) we believe may cover ACHN-975 as a composition of matter. In addition, this patent family includes corresponding foreign patents and patent applications in Australia, Canada, China, Eurasia, Europe, Hong Kong, Indonesia, Israel, India, Japan, Korea, Mexico, the Philippines, Singapore, and South Africa. We believe that certain of these corresponding foreign patents and patent applications may cover ACHN-975 as a composition of matter and that certain of them do not. We expect any U.S. and foreign patents granted in this patent family to expire in January 2024.

In the event we are able to develop alternative formulations or prodrugs of ACHN-975 and we continue development and obtain regulatory approval of ACHN-975, and depending upon the date of such regulatory approval, the term of one U.S. patent issuing from one of the three Achaogen-owned patent application families may be eligible for up to five years of patent term extension under the provisions of the Hatch-Waxman Act. Patent term extension also may be available in certain foreign countries upon regulatory approval.

Trade Secrets

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. We seek to protect our proprietary data and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and partners. These agreements are designed to protect our proprietary information. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. Trade secrets and know-how can be difficult to protect. Consequently, we anticipate that trade secrets and know-how will, over time, be disseminated within the industry through independent development, the publication of journal articles, and the movement of personnel skilled in the art from academic to industry scientific positions.

 

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Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with appropriate federal, state, local and foreign statutes and regulations, require the expenditure of substantial time and financial resources.

U.S. Government Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

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

 

   

completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;

 

   

submission to the FDA of an IND which must become effective before human clinical trials may begin;

 

   

approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;

 

   

performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug product for each indication;

 

   

submission to the FDA of an NDA;

 

   

satisfactory completion of an FDA advisory committee review, if applicable;

 

   

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

 

   

FDA review and approval of the NDA.

Preclinical Studies

Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the

 

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clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. To date, we have submitted INDs to the FDA for plazomicin and ACHN-975, which were filed in 2008 and 2012, respectively.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their www.clinicaltrials.gov website.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

 

   

Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

 

   

Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

 

   

Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects 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 drug has been associated with unexpected serious harm to patients.

Special Protocol Assessment

The SPA process is designed to facilitate the FDA’s review and approval of drugs by allowing the FDA to evaluate the proposed design and size of Phase 3 clinical trials that are intended to form the primary basis for determining a drug product’s efficacy. Upon specific request by a clinical trial sponsor, the FDA will evaluate the protocol and respond to a sponsor’s questions regarding, among other things, primary efficacy endpoints, trial conduct and data analysis, within 45 days of receipt of the request.

The FDA ultimately assesses whether the protocol design and planned analysis of the trial are acceptable to support regulatory approval of the product candidate with respect to effectiveness of the indication studied. All agreements and disagreements between the FDA and the sponsor regarding an SPA must be clearly documented in an SPA letter or the minutes of a meeting between the sponsor and the FDA.

 

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Even if the FDA agrees to the design, execution and analyses proposed in protocols reviewed under the SPA process, the FDA may revoke or alter its agreement under the following circumstances:

 

   

public health concerns emerge that were unrecognized at the time of the protocol assessment, or the director of the review division determines that a substantial scientific issue essential to determining safety or efficacy has been identified after testing has begun;

 

   

a sponsor fails to follow a protocol that was agreed upon with the FDA; or

 

   

the relevant data, assumptions, or information provided by the sponsor in a request for SPA change, are found to be false statements or misstatements, or are found to omit relevant facts.

A documented SPA may be modified, and such modification will be deemed binding on the FDA review division, except under the circumstances described above, if FDA and the sponsor agree in writing to modify the protocol and such modification is intended to improve the study.

Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because the FDA has approximately two months to make a “filing” decision.

In addition, under the Pediatric Research Equity Act of 2003, or PREA, as amended and reauthorized, certain NDAs or supplements to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

The FDA also may require submission of a risk evaluation and mitigation strategy, or REMS, plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries, or other risk minimization tools.

The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also 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. The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides 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.

 

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Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

The FDA generally accepts data from foreign clinical trials in support of an NDA if the trials were conducted under an IND. If a foreign clinical trial is not conducted under an IND, the FDA nevertheless may accept the data in support of an NDA if the study was conducted in accordance with GCP requirements and the FDA is able to validate the data through an on-site inspection, if deemed necessary. Although the FDA generally requests that marketing applications be supported by some data from domestic clinical studies, the FDA may accept foreign data as the sole basis for marketing approval if (1) the foreign data are applicable to the U.S. population and U.S. medical practice, (2) the studies were performed by clinical investigators with recognized competence, and (3) the data may be considered valid without the need for an on-site inspection or, if the FDA considers the inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.

The testing and approval process for an NDA requires substantial time, effort and financial resources, and each may take several years to complete. Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all.

After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing in order for FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

Even if the FDA approves a product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Special FDA Expedited Review and Approval Programs

The FDA has various programs, including fast track designation, accelerated approval and priority review, that are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need, or that the drug qualifies as a qualified infectious disease product under the

 

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recently enacted GAIN Act. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. The FDA may review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. We have received fast track designation from the FDA for plazomicin.

The FDA may give a priority review designation to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current PDUFA guidelines. Under the new PDUFA agreement, these six and ten month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission. Most products that are eligible for fast track designation are also likely to be considered appropriate to receive a priority review.

In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on 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 a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical endpoint, and the drug may be subject to accelerated withdrawal procedures.

Moreover, under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, passed in July 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. 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.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. We may explore some of these opportunities for plazomicin as appropriate.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

 

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In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:

 

   

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

   

fines, warning letters or holds on post-approval clinical trials;

 

   

refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;

 

   

product seizure or detention, or refusal to permit the import or export of products; or

 

   

injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution.

Exclusivity and Approval of Competing Products

Hatch-Waxman Exclusivity

Market and data exclusivity provisions under the FDCA can delay the submission or the approval of certain applications for competing products. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the activity of the drug substance. We believe that our product candidates are new chemical entities. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company that references the previously approved drug. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it

 

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contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA or 505(b)(2) NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application or supplement. Three year exclusivity may be awarded for changes to a previously approved drug product, such as new indications, dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. For drug products that contain an “antibiotic” ingredient approved prior to 1997, the statute imposes certain limitations on the award of non-patent exclusivity. However, we do not believe these limitations would apply to any of our investigational antibiotics.

Qualified Infectious Disease Product Exclusivity

Under the GAIN Act provisions of FDASIA, which was signed into law in July 2012, the FDA may designate a product as a “qualified infectious disease product.” In order to receive this designation, a drug must qualify as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called “qualifying pathogen” found on a list of potentially dangerous, drug-resistant organisms to be established and maintained by the FDA under the new law. A sponsor must request such designation before submitting a marketing application. We expect to request qualified infectious disease product designations for our product candidates prior to submitting a marketing application for such product candidates, as appropriate.

Upon approving an application for a qualified infectious disease product, the FDA will extend by an additional five years any non-patent marketing exclusivity period awarded, such as a five-year exclusivity period awarded for a new molecular entity. This extension is in addition to any pediatric exclusivity extension awarded, and the extension will be awarded only to a drug first approved on or after the date of enactment.

The GAIN provisions prohibit the grant of an exclusivity extension where the application is a supplement to an application for which an extension is in effect or has expired, is a subsequent application for a specified change to an approved product, or is an application for a product that does not meet the definition of qualified infectious disease product based on the uses for which it is ultimately approved.

Foreign Regulation

In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. For example, in the European Union, we must obtain authorization of a clinical trial application, or CTA, in each member state in which we intend to conduct a clinical trial. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.

To obtain a marketing authorization of a drug in the European Union, we may submit marketing authorization applications, or MAAs, either under the so-called centralized or national authorization procedures.

 

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Centralized Procedure

The centralized procedure provides for the grant of a single marketing authorization following a favorable opinion by the EMA that is valid in all European Union member states, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory for medicines produced by specified biotechnological processes, products designated as orphan medicinal products, and products with a new active substance indicated for the treatment of specified diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions. The centralized procedure is optional for products that represent a significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest of public health. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee of Medicinal Products for Human Use, or the CHMP. Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment procedure is of 150 days, excluding stop-clocks.

National Authorization Procedures

There are also two other possible routes to authorize medicinal products in several European Union countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure:

 

   

Decentralized procedure . Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one European Union country of medicinal products that have not yet been authorized in any European Union country and that do not fall within the mandatory scope of the centralized procedure.

 

   

Mutual recognition procedure . In the mutual recognition procedure, a medicine is first authorized in one European Union Member State, in accordance with the national procedures of that country. Following this, further marketing authorizations can be sought from other European Union countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

In the European Union, new products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic marketing authorization in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic applicant from commercializing its product in the EU until ten years have elapsed from the initial authorization of the reference product in the EU. The ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

Regulation of In Vitro Diagnostic Assays

In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Diagnostic tests are classified as medical devices under the FDCA. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization

 

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applicable to a medical device are premarket notification, also called 510(k) clearance, and approval of a premarket approval application, or PMA. The FDA classifies all medical devices into one of three classes. Devices deemed to pose lower risk are categorized as either Class I or II, which requires the manufacturer to submit to the FDA a 510(k) pre-market notification requesting clearance of the device for commercial distribution in the United States, unless an exemption applies. Devices deemed by the FDA to pose the greatest risk, such as life sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously 510(k)-cleared device are categorized as Class III, requiring a PMA.

To obtain 510(k) clearance for a medical device, a pre-market notification must be submitted to the FDA demonstrating that the proposed device is substantially equivalent to a previously 510(k)-cleared device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a PMA, or the device must be one that has been reclassified from Class III to either Class II or I. The 510(k) clearance process usually takes from three to twelve months from the date the application is submitted and filed with the FDA, but may take significantly longer and clearance is never assured. Although many 510(k) pre-market notifications are cleared without clinical data, in some cases, the FDA requires significant clinical data to support substantial equivalence. In reviewing a pre-market notification, the FDA may request additional information, including clinical data, which may significantly prolong the review process. After a device receives 510(k) clearance, any subsequent modification of the device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) clearance or could require pre-market approval. The FDA requires each manufacturer to make this determination initially, but the FDA may review any such decision and may disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA may require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or a PMA is obtained.

PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical, preclinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. For diagnostic tests, a PMA application typically includes data regarding analytical and clinical validation studies. As part of its review of the PMA, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the Quality System Regulation, or QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures. FDA review of an initial PMA application is required by statute to take between six to ten months, although the process typically takes longer, and may require several years to complete. If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure the final approval of the PMA. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA. Once granted, PMA approval may be withdrawn by the FDA if compliance with post-approval requirements, conditions of approval or other regulatory standards is not maintained or problems are identified following initial marketing.

We and our partner, ARK, are developing a companion diagnostic assay for plazomicin and will work together to generate the data required for submission of either a 510(k) submission or a PMA application. We will remain in close contact with the Center for Devices and Radiological Health, or CDRH, at the FDA to ensure that any changes in requirements are incorporated into the development plans. We anticipate that meetings with the FDA with regard to plazomicin as well as the companion diagnostic assay will include representatives from the Center for Drug Evaluation and Research, or CDER, and CDRH to ensure that the drug and device submissions are coordinated to enable the FDA to conduct a parallel review of both submissions. On July 14, 2011, the FDA issued for comment a draft guidance document addressing the development and clearance or approval process for “ In vitro Companion Diagnostic Devices.” According to the draft guidance, for novel

 

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therapeutic products such as plazomicin, the companion diagnostic device should be developed and approved or cleared contemporaneously with the therapeutic. While this draft guidance is not yet finalized, we believe our programs for the development of our companion diagnostic are consistent with the draft guidance as proposed.

In the European Economic Area, or EEA, in vitro medical devices are required to conform with the essential requirements of the EU Directive on in vitro diagnostic medical devices (Directive No 98/79/EC, as amended). To demonstrate compliance with the essential requirements, the manufacturer must undergo a conformity assessment procedure. The conformity assessment varies according to the type of medical device and its classification. For low-risk devices, the conformity assessment can be carried out internally, but for higher risk devices it requires the intervention of an accredited EEA Notified Body. If successful, the conformity assessment concludes with the drawing up by the manufacturer of an EC Declaration of Conformity entitling the manufacturer to affix the CE mark to its products and to sell them throughout the EEA. The data generated for the U.S. registration will be sufficient to satisfy the regulatory requirements for the European Union and other countries.

Fraud and Abuse and Data Privacy and Security Laws and Regulations.

In addition to FDA restrictions on marketing of pharmaceutical products, federal and state fraud and abuse laws restrict business practices in the biopharmaceutical industry. These laws include anti-kickback and false claims laws and regulations as well as data privacy and security laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exemptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not meet the requirements of a statutory or regulatory exception or safe harbor. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.

The federal False Claims Act prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. Several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved, and thus non-covered, uses. In addition, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created new federal criminal statutes that prohibit knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the PPACA, signed into

 

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law on March 2010, broadened the reach of both the Anti-Kickback Statute and the criminal healthcare fraud statute by amending the intent requirement such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, 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 civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. PPACA created new federal requirements for reporting, by applicable manufacturers of covered drugs, payments and other transfers of value to physicians and teaching hospitals. Applicable manufacturers are also required to report annually to the government certain ownership and investment interests held by physicians and their immediate family members, and payments or other transfers of value to such physician owners and their immediate family members. In addition, certain states require implementation of commercial compliance programs and compliance with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices, and/or tracking and reporting of gifts, compensation and other remuneration or items of value provided to physicians and other healthcare professionals and entities.

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

To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any drug products or companion diagnostic assay for which we obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

 

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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. By way of example, in the United States, the PPACA contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, addressed new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and for drugs that are line extension products, mandatory discounts for certain Medicare Part D beneficiaries, and annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs. 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 products once approved or additional pricing pressures.

Manufacturing

We do not own or operate manufacturing facilities for the production of any of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all of our required raw materials, drug substance, and finished drug product for our preclinical research and clinical trials. We expect that our in vitro assay will be manufactured by ARK or another third party supplier. For plazomicin, we source raw materials from various commercial suppliers, primarily located in the People’s Republic of China, including sisomicin, the aminoglycoside precursor for plazomicin. Our drug substance is currently manufactured by Hovione Inter Limited and the finished drug product by a U.S. based contract manufacturer. We do not have long-term agreements with these third parties. We do not have any current contractual relationships for the manufacture of commercial supplies of any of our product candidates after they are approved. We currently employ internal resources to manage our manufacturing. If any of our products are approved by any regulatory agency, we intend to enter into agreements with third-party contract manufacturers for the commercial production of those products.

Plazomicin is an organic compound of low molecular weight, commonly referred to as a small molecule. Plazomicin is also considered a semi-synthetic molecule since it is derived from a primary starting material that is a natural product, sisomicin, produced by microbial fermentation. Sisomicin is combined with other starting materials over a series of chemical steps to produce plazomicin. We believe that our use of a synthetic process will enable us to have a cost of manufacturing for plazomicin that is similar to other small molecule antibiotics.

Legal Proceedings

We are not currently party to any material legal proceedings.

Facilities

Our headquarters are located in South San Francisco, California, where we lease approximately 35,000 square feet of office and laboratory space. Our lease for the approximately 16,000 square feet of this space that we currently use extends through April 2017, and we have the option to extend the term of the lease for such space through April 2020. We sublease the remaining approximately 19,000 square feet of this space to a subtenant pursuant to a sublease that expires in March 2014 when the lease as to the subleased space will also expire.

Employees

As of September 30, 2013, we had 38 full-time employees, 28 of whom were primarily engaged in research and development activities and 10 of whom were primarily engaged in business development, finance, legal, human resources, facilities, information technology administration and general management. None of our employees is represented by a labor union and we consider our employee relations to be good.

 

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MANAGEMENT

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

 

Name

   Age     

Position(s)

Executive Officers

     

Kenneth J. Hillan, M.B., Ch.B.

     52       President, Chief Executive Officer, Chief Medical Officer and Director

Becki Filice

     53       Senior Vice President, Development Operations and Portfolio Management

Dennis Hom

     38       Vice President, Finance and Corporate Development

Christine Murray

     53       Vice President, Regulatory Affairs

Non-Employee Directors

     

Bryan E. Roberts, Ph.D.

     46       Chairman of the Board

John C. Doyle

     45       Director

Scott M. Rocklage, Ph.D. (1)

     59       Director

Camille D. Samuels (1)(2)

     42       Director

John W. Smither (1)

     60       Director

Christopher T. Walsh, Ph.D.

     69       Director

 

(1)   Member of the audit committee.
(2)   Member of the compensation committee.

Executive Officers

Kenneth J. Hillan, M.B., Ch.B. Dr. Hillan joined Achaogen in April 2011 as Chief Medical Officer and was appointed Chief Executive Officer and a member of our board of directors in October 2011. Prior to joining Achaogen, from August 1994 to April 2011, Dr. Hillan served at Genentech, Inc. (acquired by Roche in 2009), a pharmaceutical company. Dr. Hillan was responsible for numerous successful drug approvals and led the medical and scientific strategies for its Immunology, Tissue Growth and Repair drug portfolio. He served in a number of key leadership positions in research and development, including Senior Vice President Clinical Development, Inflammation, Vice President Immunology, Tissue Growth and Repair (ITGR), Vice President Development Sciences and Vice President Research Operations and Pathology. Dr. Hillan also previously served as Senior Vice President and head of Clinical Development and Product Development Strategy in Asia-Pacific for Roche in Shanghai, China.

Dr. Hillan has an M.B. Ch.B. (Bachelor of Medicine and Surgery) degree from the Faculty of Medicine at the University of Glasgow, U.K. Dr. Hillan is a Fellow of the Royal College of Surgeons (FRCS), and a Fellow of the Royal College of Pathologists (FRCPath). Dr. Hillan has authored dozens of scientific publications and is a named inventor on almost 50 issued patents.

We believe that Dr. Hillan’s detailed knowledge of our company and his extensive background in the biotechnology industry, including his roles at Genentech, provide a critical contribution to our board of directors.

Becki Filice. Ms. Filice has served as our Senior Vice President, Development Operations and Portfolio Management since November 2012. In this role, she has responsibility for development sciences, clinical operations, biometrics, CMC, project management and human resources. Ms. Filice previously served as our Vice President, Development Operations and Portfolio Management from May 2011 to October 2012. Prior to joining Achaogen, Ms. Filice worked at Genentech, Inc. for 15 years. From June 2009 to April 2011, she held the position of Senior Director, Project Excellence in Global Development. From January 2007 to May 2009, she held the position of Senior Director, Project Portfolio Management in Product Development. Prior to that, she held a number of leadership roles at Genentech, Inc. from March 1996 to December 2006, in the areas of Clinical

 

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Data Management and Clinical Operations, and also served as Project Team Leader for both the Avastin ® and Nutropin AQ ® products. Earlier in her career, Ms. Filice held management positions in clinical research with Ligand Pharmaceuticals Inc. and Syntex, Inc. She started her career as a clinical microbiologist at El Camino Hospital in Mountain View, California. Ms. Filice has a B.A. in Microbiology from University of California, Davis, and an MBA from Santa Clara University, California. She also holds a Project Management Certification from the Pharmaceutical Education and Research Institute and has served as a faculty member of the American Course on Drug Development and Regulatory Sciences (ACDRS).

Dennis Hom. Mr. Hom joined Achaogen in January 2013 as our Vice President, Finance and Corporate Development. From April 2011 to April 2012, Mr. Hom was Executive Director, Corporate Development at Amgen Inc., a biotechnology company. From July 2005 to March 2011, Mr. Hom held various positions in mergers and acquisitions, business development and licensing and sales at Novartis, a pharmaceutical and healthcare products company. Prior to Novartis, Mr. Hom worked in investment banking at a number of firms, including six years at J.P. Morgan and predecessor firm Hambrecht & Quist. Mr. Hom holds a B.S. in Biology from the Massachusetts Institute of Technology.

Christine Murray. Ms. Murray has served as our Vice President, Regulatory Affairs since October 2012. Ms. Murray joined Achaogen in August 2011 as our Senior Director, Regulatory Affairs and Quality Assurance. Ms. Murray has more than 20 years industry experience in global regulatory affairs and drug development gained in both large pharmaceutical and small biotech companies. From June 2008 to July 2011, Ms. Murray was Senior Director, Regulatory Affairs at Alexza Pharmaceuticals, Inc., a specialty pharmaceutical company, where she was responsible for global filing strategies and regulatory agency interactions. From March 2004 to April 2008, Ms. Murray held positions of Director and then Senior Director in the Global Regulatory Affairs department of Gilead Sciences, Inc., a global biotechnology company, where she led regulatory submissions, medical writing and regulatory operations teams. Prior to Gilead, Ms. Murray was an independent regulatory affairs consultant in the U.K., specializing in providing global regulatory and filing strategies. She has been involved in a wide range of regulatory affairs activities from investigational new drug filings to global marketing approvals across a variety of products in the infectious diseases, respiratory, psychiatry and neurology therapeutic areas. Ms. Murray started her career in regulatory affairs at Smithkline Beecham Pharmaceuticals after earlier positions as a clinical biochemist at the Western General Hospital in Edinburgh and Yorkhill Hospital in Glasgow. Ms. Murray has a B.S. in Biochemistry from the University of Liverpool in the U.K., a M.S. degree in Clinical Biochemistry from the University of Newcastle-upon-Tyne in the U.K., and a Regulatory Affairs certification from the University of California, Santa Cruz. She also holds the Regulatory Affairs Certification (U.S.).

Directors

Bryan E. Roberts, Ph.D. Dr. Roberts has served on our board of directors since August 2004, and he has served as our Chairman since December 2009. Dr. Roberts joined Venrock, a venture capital investment firm, in 1997, where he serves as Partner. From 1989 to 1992, Dr. Roberts worked in the corporate finance department of Kidder, Peabody & Co., a brokerage company. Dr. Roberts is currently on the board of directors of two publicly traded companies: Zeltiq Aesthetics, a medical technology company, and Ironwood Pharmaceuticals, a pharmaceutical company, where Dr. Roberts serves as Chairman. He also serves on the board of directors of several private companies and previously served on the board of directors of publicly traded Athenahealth, Inc., XenoPort, Inc., and Sirna Therapeutics, Inc. He has a B.A. in Chemistry from Dartmouth College and a Ph.D. in chemistry and chemical biology from Harvard University.

Dr. Roberts brings to our board of directors substantial experience in the life sciences industry, having served on the board of directors of several private and public companies. Dr. Roberts’ experiences with facilitating the growth of healthcare and biotechnology companies, together with his historical perspective on our company, make him especially qualified to serve on our board of directors as we transition to becoming a public company.

 

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John C. Doyle. Mr. Doyle has served as a member of our board of directors since November 2012. Mr. Doyle joined Castlight Health, a healthcare information company, as Chief Financial Officer in November 2012, and leads the finance, human resources, legal, and corporate development teams. Previously, Mr. Doyle served as our Chief Operating Officer from August 2009 to November 2009 and from February 2011 to November 2012, and as our Chief Financial Officer from November 2009 to February 2011. At Achaogen, Mr. Doyle managed business development, corporate finance, information technology, and business strategy. Prior to joining Achaogen, Mr. Doyle was Vice President of Finance and Corporate Planning at Genentech, Inc., from 2007 to 2009. Mr. Doyle is a member of the 2012 class of Henry Crown Fellows at the Aspen Institute. He has a B.S. in Business Administration from California Polytechnic State University, San Luis Obispo and an M.B.A. from the University of California, Berkeley.

Mr. Doyle brings to our board of directors his deep experience in operational and strategic planning, as well as general executive and leadership expertise, in the pharmaceuticals industry.

Scott M. Rocklage, Ph.D. Dr. Rocklage has served on our board of directors since August 2004. Dr. Rocklage joined 5AM Ventures in 2003 as a Venture Partner and became a Managing Partner in 2004. Dr. Rocklage has over 25 years of healthcare management experience with strategic leadership responsibilities that involved obtaining FDA approval of three NDAs (Ominscan™, Teslascan ® and Cubicin ® ). Dr. Rocklage previously served as Chairman and Chief Executive Officer of Cubist Pharmaceuticals, Inc., President and Chief Executive Officer of Nycomed Salutar, and President, Chief Executive Officer and Chairman of Nycomed Interventional. Dr. Rocklage has also held various research and development positions at Salutar and Catalytica. Dr. Rocklage currently serves as Chairman of the Board of Relypsa, Inc., a publicly traded biotechnology company, and of privately held Rennovia, Inc., Kinestral Technologies, Inc., Novira Therapeutics, Inc. and K2 Therapeutics as well as on the board of directors of privately held Pulmatrix, Inc. and Epirus Biopharmaceuticals, Inc. and the Board of Associates at the Whitehead Institute. Dr. Rocklage was formerly Executive Chairman of Ilypsa (acquired by Amgen), Miikana (acquired by EntreMed) and Semprus (acquired by Teleflex). Dr. Rocklage has a B.S. in Chemistry from the University of California, Berkeley and a Ph.D. in Chemistry from the Massachusetts Institute of Technology.

Dr. Rocklage brings to our board of directors his extensive healthcare management experience, scientific background and strategic leadership track record.

Camille D. Samuels. Ms. Samuels has served as a member of our board of directors since August 2004. Ms. Samuels was previously a Managing Director at Versant Ventures, which she joined in 2000. Prior to joining Versant Ventures, Ms. Samuels held business development and strategic marketing roles at Tularik Inc. (acquired by Amgen) and Genzyme (acquired by Sanofi). She also worked as a management consultant to healthcare and biotech companies at LEK Consulting. Ms. Samuels also serves on the board of directors of KYTHERA Biopharmaceuticals, a publicly traded biotechnology company, and of privately held Carmenta Biosciences, and previously served on the board of directors of many privately held biotechnology companies including Novacardia (acquired by Merck), ParAllele (acquired by Affymetrix), and Transcept Pharmaceuticals, Inc. Ms. Samuels has a B.A. in Biology from Duke University and an M.B.A. from Harvard Business School.

Ms. Samuels brings to our board of directors substantial experience as a venture capitalist both generally and in the life sciences industry, having served on the boards of several private and public companies, as well as relevant strategic and operational experience.

John W. Smither has served on our board of directors since December 2013. Since November 2007, Mr. Smither has been Chief Financial Officer of KYTHERA Biopharmaceuticals, Inc., a publicly traded biotechnology company. From 1998 to 2007, Mr. Smither held various positions at Amgen Inc., a publicly traded biotechnology company, including Executive Director of Corporate Accounting, Vice President of Finance and Administration of Amgen’s European Division, and Head of Internal Audit. Prior to joining Amgen, Mr. Smither served as Audit Partner at Ernst & Young LLP, a public accounting firm, and as the Chief Financial Officer of

 

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several early stage companies. Mr. Smither has a B.S. in Business Administration from California State University, Los Angeles. Mr. Smither is a Certified Public Accountant (inactive) and a member of the American Institute of Certified Public Accountants, the California Society of Certified Public Accountants and Financial Executives International.

Mr. Smither brings to our board of directors his substantive expertise in finance and accounting, and his extensive experience in the biotechnology industry.

Christopher T. Walsh, Ph.D. Dr. Walsh has served on our board of directors since October 2008. Dr. Walsh has been the Hamilton Kuhn Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School since 1991 and formerly was president of the Dana-Farber Cancer Institute from 1992 to 1995 and chairman of the Department of Biological Chemistry and Molecular Pharmacology at Harvard Medical School from 1987 to 1995. He has performed extensive research in enzyme stereochemistry, reaction mechanisms and the mechanisms of action of anti-infective and immunosuppressive agents. Dr. Walsh serves on the Scientific Advisory Board for LS9, Inc., Epizyme Corporation, Verastem, Inc., Hua Medicine, and Abide Therapeutics. Dr. Walsh is also a member of the board of directors of Ironwood Pharmaceuticals, Inc., a publicly traded pharmaceuticals company, and Proteostasis Therapeutics, Inc., a privately held biotechnology company. Dr. Walsh has an A.B. in Biology from Harvard University and a Ph.D. in Life Sciences from The Rockefeller University, New York.

Dr. Walsh brings to our board of directors his extensive expertise gained as a scientist at preeminent research institutions and as a director and scientific advisor to numerous life sciences and pharmaceutical companies.

Board Composition

In accordance with our amended and restated certificate of incorporation to take effect following the consummation of this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election. After the consummation of this offering, our directors will be divided among the three classes as follows:

 

   

the Class I directors will be             and             , and their terms will expire at the annual meeting of stockholders to be held in 2015;

 

   

the Class II directors will be             and             , and their terms will expire at the annual meeting of stockholders to be held in 2016; and

the Class III directors will be             ,             and             , and their terms will expire at the annual meeting of stockholders to be held in 2017.

Our amended and restated certificate of incorporation will provide that the number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control at our company.

Voting Arrangements

Pursuant to an amended and restated voting agreement, as amended, that we entered into with certain holders of our common stock and certain holders of our convertible preferred stock:

 

   

a majority-in-interest of the Series A convertible preferred stock held by the holders party to such agreement has the right to designate two directors for election to our board of directors, and has selected Dr. Rocklage and Ms. Samuels as such directors;

 

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a majority-in-interest of the Series B convertible preferred stock held by the holders party to such agreement has the right to designate one director for election to our board of directors, and has selected Dr. Roberts as such director;

 

   

a majority-in-interest of the Series C convertible preferred stock held by the holders party to such agreement has the right to designate one director for election to our board of directors, which seat is currently vacant;

 

   

a majority of the directors comprising our board of directors has the right to designate two directors for election to our board of directors, and has designated Mr. Doyle and Dr. Walsh as such directors;

 

   

a majority-in-interest of the holders of our common stock has the right to designate one director for election to our board of directors, which seat is currently vacant; and

 

   

our then-incumbent Chief Executive Officer has the right to be nominated to serve on our board of directors.

The holders of our common stock and convertible preferred stock who are parties to the amended and restated voting agreement, as amended, are obligated to vote for such designees. The provisions of this voting agreement will terminate upon the consummation 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 appointed, or the earlier of their death, resignation or removal.

Director Independence

We have applied to list our common stock on The NASDAQ Global Market. Under the rules of The NASDAQ Stock Market LLC, or NASDAQ, independent directors must comprise a majority of a listed company’s board of directors within twelve months from the date of listing. In addition, NASDAQ rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy additional independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and in NASDAQ rule 5605(c)(2)(A). Under NASDAQ rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

To be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or (2) be an affiliated person of the listed company or any of its subsidiaries.

In                 , our board of directors undertook a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that none of our directors, other than Dr. Hillan due to his employment with the Company and Mr. Doyle due to his past employment as an executive officer of the Company, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under NASDAQ rules. Our board of directors also determined that                 , who are members of our audit committee,                 , who will comprise our compensation committee, and                 , who comprise our nominating and governance committee, satisfy the independence standards for those committees established by applicable SEC rules and NASDAQ rules. In making this determination, our board of directors considered the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

 

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Board Diversity

Upon completion of our initial public offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:

 

   

diversity of personal and professional background, perspective and experience;

 

   

personal and professional integrity, ethics and values;

 

   

experience in corporate management, operations or finance, such as serving as an officer or former officer of a publicly held company, and a general understanding of marketing, finance and other elements relevant to the success of a publicly-traded company in today’s business environment;

 

   

experience relevant to our industry and with relevant social policy concerns;

 

   

experience as a board member or executive officer of another publicly held company;

 

   

relevant academic expertise or other proficiency in an area of our operations;

 

   

practical and mature business judgment, including ability to make independent analytical inquiries;

 

   

promotion of a diversity of business or career experience relevant to our success; and

 

   

any other relevant qualifications, attributes or skills.

Currently, our board of directors evaluates, and following the completion of our initial public offering will evaluate, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

Board Committees

Our board of directors has established an audit committee and a compensation committee and, intends to establish a nominating and corporate governance committee prior to the completion of this offering. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below.

Audit Committee

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee:

 

   

appoints our independent registered public accounting firm;

 

   

evaluates the independent registered public accounting firm’s qualifications, independence and performance;

 

   

determines the engagement of the independent registered public accounting firm;

 

   

reviews and approves the scope of the annual audit and the audit fee;

 

   

discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;

 

   

approves the retention of the independent registered public accounting firm to perform any proposed permissible audit and non-audit services;

 

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monitors the rotation of partners of the independent registered public accounting firm on our engagement team as required by law;

 

   

is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;

 

   

reviews our critical accounting policies and estimates;

 

   

reviews related party transactions; and

 

   

annually reviews the audit committee charter and the audit committee’s performance.

The current members of our audit committee are Dr. Rocklage, Ms. Samuels and Mr. Smither. Mr Smither serves as the chairman of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. Our board of directors has determined that Mr. Smither is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable NASDAQ rules and regulations. Under the rules of the SEC and NASDAQ, members of the audit committee must also meet heightened independence standards. Our board has determined that each of the members of the audit committee meet these heightened independence standards. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ.

Compensation Committee

Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and approves corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and sets the compensation of these officers, other than the Chief Executive Officer, based on such evaluations. The board of directors shall retain the authority to determine and approve, upon the recommendation of the compensation committee, the compensation of the Chief Executive Officer, unless such authority has been delegated to the compensation committee. The compensation committee also approves grants of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. The current members of our compensation committee are Ms. Samuels,                 .                 serves as the chairman of the committee. Each of the members of our compensation committee is an independent, outside and non-employee director under the applicable rules and regulations of the SEC, NASDAQ and the Internal Revenue Code of 1986, as amended, relating to compensation committee independence. The compensation committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ.

Nominating and Corporate Governance Committee

Upon completion of this offering, the nominating and corporate governance committee will be responsible for making recommendations to our board of directors regarding candidates for directorships and composition and organization of our board of directors. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters. The current members of our nominating and corporate governance committee will be                 .                 will serve as the chairman of the committee. Each of the members of our nominating and corporate governance committee will be an independent director under the applicable rules and regulations of the SEC and NASDAQ relating to nominating and corporate governance committee independence. The nominating and corporate governance committee will operate under a written charter.

There are no family relationships among any of our directors or executive officers.

 

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Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2013, Ms. Samuels served as the sole member of the compensation committee. The compensation committee was not formally involved in the determination of executive officer compensation during the fiscal year ended December 31, 2013, which was instead determined by the full board of directors. Dr. Hillan and Mr. Hom participated in deliberations by the board of directors with respect to executive officer compensation during the fiscal year ended December 31, 2013, but neither were present when the Board approved such executive officer compensation. None of our executive officers currently serves, or has served during the last completed three fiscal years, as a member of the board of directors or compensation committee of any other entity that has or had one or more executive officers serving as a member of our board of directors or compensation committee.

Code of Business Conduct and Ethics

In connection with this offering, we intend to adopt a new code of business conduct and ethics that applies to all of our employees, officers, directors and consultants, including those officers responsible for financial reporting. Following the completion of this offering, the code of business conduct and ethics will be available on our website at www.achaogen.com. We expect that any amendments to the code, or any waivers of its requirements for which disclosure is required, will be disclosed on our website. The information contained on or accessible through our website is not a part of this prospectus.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

The following is a discussion and analysis of compensation arrangements of our named executive officers, or NEOs. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.

Our NEOs for 2013 were as follows:

 

   

Kenneth J. Hillan, M.B., Ch.B., President and Chief Executive Officer;

 

   

Becki Filice, Senior Vice President, Development Operations and Portfolio Management; and

 

   

Dennis Hom, Vice President, Finance and Corporate Development.

Summary Compensation Table

The following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2013 and December 31, 2012.

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($)
    Option
Awards(1)
($)
    Non-Equity
Incentive Plan
Compensation(2)
($)
    All Other
Compensation(3)
($)
    Total
($)
 

Kenneth J. Hillan, M.B., Ch.B.,

President and Chief Executive Officer

   

 

2013

2012

  

  

   

 

367,200

360,000

  

  

   

 

—  

—  

  

  

   

 

—  

965,541

  

  

   

 

—  

126,000

  

  

   

 

7,500

—  

  

  

   

 

374,700

1,451,541

  

  

Becki Filice,

Senior Vice President, Development Operations and Portfolio Management(4)

   

 

2013

2012

  

  

   

 

285,600

271,667

  

  

   

 

—  

—  

  

  

   

 

—  

227,617

  

  

   

 

—  

70,000

  

  

   

 

7,500

7,500

  

  

   

 

293,100

576,784

  

  

Dennis Hom,

Vice President, Finance and Corporate Development

    2013        248,106        —          403,440        —          7,443        658,989   

 

(1)   For the option awards column, amounts shown represent the grant date fair value of stock awards and options granted during 2012 or 2013, as applicable, as calculated in accordance with ASC Topic 718. See footnote 10 of the financial statements included in this prospectus for the assumptions used in calculating this amount.
(2)   The amounts reported in the Non-Equity Incentive Plan Compensation column represent the annual cash performance-based bonuses earned by our NEOs pursuant to the achievement of certain Company and individual performance objectives. The amounts listed for 2012 were paid to the named executive officers in early 2013. For Ms. Filice, the amount represents the payment of her performance bonus with a pro rata adjustment to reflect her promotion to Senior Vice President in November 2012. Annual cash performance-based bonuses for our NEOs for 2013 have not yet been determined. Please see the descriptions of the annual performance bonuses in “Narrative to Summary Compensation Table and Outstanding Equity Awards at 2013 Fiscal Year End— Terms and Conditions of Annual Bonuses ” below.
(3)   The amounts reported in the All Other Compensation column constitute the Company’s matching contribution under its 401(k) plan.
(4)   Ms. Filice was promoted to our Senior Vice President in November 2012. For more information, please see the descriptions of Ms. Filice’s employment with us in “Narrative to Summary Compensation Table and Outstanding Equity Awards at 2013 Fiscal Year End— Terms and Conditions of Employment Agreements with our NEOs ” below.

 

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Outstanding Equity Awards at 2013 Fiscal Year End

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2013.

 

      Option Awards  

Name

   Vesting
Commencement
Date(1)
    Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
     Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
     Option
Exercise
Price
($)
     Option
Expiration
Date
 

Kenneth J. Hillan, M.B., Ch.B.

     4/18/2011 (2)      1,460,000         0         0.63         6/7/2021   
     4/18/2011 (3)      490,000         0         0.63         6/7/2021   
     4/18/2011 (4)      245,000         0         0.63         6/22/2021   
     3/8/2012        1,460,400         0         0.66         3/8/2022   
     3/8/2012 (5)      1,106,600         0         0.66         3/8/2022   

Becki Filice

     5/23/2011 (6)      193,750         106,250         0.63         6/7/2021   
     9/14/2011 (7)      17,437         13,563         0.66         9/14/2021   
     3/8/2012        347,600         0         0.66         3/8/2022   
     3/8/2012 (8)      365,400         0         0.66         3/8/2022   

Dennis Hom

     1/3/2013 (2)      784,425         0         0.43         6/10/2023   
     1/3/2013 (8)      261,475         0         0.43         6/10/2023   

 

(1)   Except as otherwise noted, options are exercisable immediately, in whole or in part, conditioned upon the NEO entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the options vest and/or are released from the Company’s repurchase option, as to 1/48th of the shares subject to such option on each monthly anniversary of the vesting commencement date (and if there is no corresponding day, on the last day of the month), such that all shares will be vested on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.
(2)  

The option is exercisable immediately, in whole or in part, conditioned upon the NEO entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the option vest and/or are released from the Company’s repurchase option, as to 1/4 th of the shares subject to the option on the first anniversary of the vesting commencement date, and thereafter as to 1/48th of the shares subject to such option on each monthly anniversary of the vesting commencement date, such that all shares will be vested on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.

(3)   The option is exercisable immediately, in whole or in part, conditioned upon the NEO entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the option vest and/or are released from the Company’s repurchase option, as to 100% of the shares subject to the option on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.
(4)   The option is exercisable immediately, in whole or in part, conditioned upon the NEO entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the option vest and/or are released from the Company’s repurchase option, as to 100% of the shares subject to the option on the sixth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.
(5)   The option is exercisable immediately, in whole or in part, conditioned upon Dr. Hillan entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the option vest and/or are released from the Company’s repurchase option, as to 522,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $3.00 per share, as to 522,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $5.00 per share, and as to 62,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $7.00 per share (in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like) respectively, subject to Dr. Hillan continuing to provide services to the Company through such vesting date.
(6)  

The shares subject to the option vest and become exercisable as to 1/4 th of the shares subject to the option on the first anniversary of the vesting commencement date, and thereafter as to 1/48th of the shares subject to the option on each monthly anniversary of the vesting commencement date, such that all shares will be vested and exercisable on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.

(7)  

The shares subject to the option vest and become exercisable as to 1/48 th of the shares subject to the option on each monthly anniversary of the vesting commencement date (and if there is no corresponding day, on the last day of the month), such that all shares will be vested and exercisable on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.

 

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(8)   The option is exercisable immediately, in whole or in part, conditioned upon the NEO entering into a restricted stock purchase agreement with respect to any unvested shares. The shares subject to the option vest and/or are released from the Company’s repurchase option, as to 1/3rd of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $3.00, $5.00 and $7.00 (in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like), respectively, subject to the holder continuing to provide services to the Company through such vesting date.

Narrative to Summary Compensation Table and Outstanding Equity Awards at 2013 Fiscal Year End

Terms and Conditions of Employment Agreements with our NEOs

We have entered into agreements with each of the NEOs in connection with his or her employment with us. These agreements set forth the terms and conditions of employment of each named executive officer, including base salary, target annual bonus opportunity and standard employee benefit plan participation. Our board of directors or the compensation committee reviews each NEO’s base salary and target bonus opportunity from time to time to ensure compensation adequately reflects the NEO’s qualifications, experience, role and responsibilities. For fiscal year 2013, Dr. Hillan’s base salary was $367,200, Ms. Filice’s base salary was $285,600, and Mr. Hom’s base salary was $250,000. In addition, for 2013, Dr. Hillan, Ms. Filice, and Mr. Hom each had an annual bonus target of 35%, 30%, and 25%, respectively, of base salary awarded based on the achievement of certain milestones established by our board of directors. Mr. Hom joined as our Vice President, Finance and Corporate Development on January 3, 2013, so his salary has been, and his bonus will be, pro-rated for the portion of 2013 served. For fiscal year 2012, Dr. Hillan’s base salary was $360,000. Ms. Filice’s base salary was $270,000 for the first ten months of 2012 and then was $280,000 for the remaining two months of 2012 to reflect Ms. Filice’s promotion to Senior Vice President in November 2012. In addition, for 2012, Dr. Hillan had an annual bonus target of 35% of base salary. Ms. Filice’s annual bonus target was 25% for the first ten months of 2012 and then was 30% for the remaining two months of 2012 to reflect Ms. Filice’s promotion to Senior Vice President. Ms. Filice’s bonus target was pro ratably adjusted to reflect her target achievement before and after her promotion. Please see the section below entitled “— Terms and Conditions of Annual Bonuses ” for a further description of our annual bonus program for our NEOs.

In the event Dr. Hillan’s employment is terminated other than the period commencing three months prior to and ending 12 months following a “change of control” (as defined below), other than (a) for “cause” (as defined below) or (b) as a result of his death or disability, and he executes and does not revoke a general release of claims in favor of the Company, then (i) Dr. Hillan will receive a severance payment equal to six months of his base salary, payable in six equal monthly installments, and (ii) 25% of Dr. Hillan’s then-unvested option grants will immediately vest and become exercisable. In the event Dr. Hillan’s employment is terminated within the period commencing three months prior to and ending 12 months following a change of control, other than (a) for “cause” (as defined below) or (b) as a result of his death or disability, or in the event he resigns for “good reason” (as defined below) within such period, and, in either case, he executes and does not revoke a general release of claims in favor of the Company, then (i) Dr. Hillan will receive a severance payment equal to his annual base salary, payable in 12 equal monthly installments, and (ii) 50% of Dr. Hillan’s then-unvested option grants will immediately vest and become exercisable. Ms. Filice and Mr. Hom do not have any severance or change of control benefits under their employment agreements. Please see the section below entitled “— Terms and Conditions of Equity Award Grants ” for a description of additional vesting acceleration of each of our NEO’s outstanding equity awards upon a change of control.

For purposes of our employment agreement with Dr. Hillan, “cause” means (i) an act of dishonesty made by Dr. Hillan in connection with his responsibilities as an employee, (ii) Dr. Hillan’s conviction of, or plea of nolo contendere to, a felony, (iii) Dr. Hillan’s gross misconduct, or (iv) Dr. Hillan’s continued substantial violations of his employment duties after he has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that he has not substantially performed his duties.

 

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For purposes of our employment agreement with Dr. Hillan, “good reason” means Dr. Hillan’s resignation within 30 days following the expiration of the Company cure period (discussed below) following the occurrence of one or more of the following, without Dr. Hillan’s express written consent: (i) a material reduction in Dr. Hillan’s annual base salary unless such reduction is part of a Company-wide reduction for similarly situated persons where the reduction applied to Dr. Hillan is substantially similar to the reduction for the other similarly situated employees; (ii) the significant reduction of Dr. Hillan’s duties or responsibilities relative to his duties or responsibilities in effect immediately prior to such reduction; provided, however, that a reduction in duties or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such for the operations of the Company following a change of control and is not made the Chief Executive Officer of the acquiring corporation) shall not constitute “good reason”; or (iii) a material change in the geographic location at which Dr. Hillan must perform services (it being understood that a relocation more than 50 miles is material). Before Dr. Hillan may resign for good reason, (A) Dr. Hillan must provide the Company with written notice within 90 days of the event that he believes constitutes good reason specifically identifying the acts or omissions constituting the grounds for good reason and (B) the Company must have an opportunity within 30 days following delivery of such notice to cure the good reason condition.

For purposes of our employment agreement with Dr. Hillan, “change of control” means: (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity or its parent), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent, as applicable, outstanding immediately after such transaction or series of transactions; (ii) a sale, lease or other conveyance of all or substantially all of the assets of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

Terms and Conditions of Annual Bonuses

For 2012 and 2013, all of our NEOs were eligible for performance-based cash incentives pursuant to the achievement of certain performance objectives. The performance goals for these annual performance cash incentives were reviewed and approved by our board of directors. The determination of the amount of bonuses paid to our NEOs generally reflects a number of considerations, including individual performance and financing and research goals.

Target Bonus Opportunity

Each NEO’s target bonus opportunity is expressed as a percentage of base salary which can be achieved by meeting corporate goals and may be increased or decreased based on individual performance. For each of our NEOs, their target bonus opportunity is originally set in their offer letters with the Company as described above. Our board of directors or our compensation committee has historically reviewed these target percentages to ensure they are adequate, but does not follow a formula. Instead, our board of directors or our compensation committee has set these rates based on each participating executive’s experience in her or his role with the company and the level of responsibility held by each executive, which the board of directors or our compensation committee believe directly correlates to her or his ability to influence corporate results. For fiscal year 2013, our board of directors used a guideline target bonus opportunity of 35% of base salary for Dr. Hillan, 30% of base salary for Ms. Filice, and 25% of base salary for Mr. Hom. For fiscal year 2012, our board of directors used a guideline target bonus opportunity of 35% for Dr. Hillan. Our board of directors used a guideline target bonus opportunity of 25% for Ms. Filice for the first ten months of 2012 and then used 30% for Ms. Filice for the remaining two months of 2012 to reflect Ms. Filice’s promotion to Senior Vice President. Ms. Filice’s bonus target was pro ratably adjusted to reflect her target achievement before and after her promotion.

 

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Performance Goals and Weighting

For determining the performance bonus amounts for our NEOs for 2012 and 2013, our board of directors set certain corporate performance goals, using a mixture of research, clinical, regulatory, government funding, workplace satisfaction and other financing targets. These performance goals were not expected to be attained based on average or below average performance. After determining performance targets, each performance target was given a different weight for determining the overall bonus amount based on the importance to the success of the Company for each performance target. For fiscal year 2013, plazomicin clinical, regulatory, partnering, and government funding targets were weighted at 40%, ACHN-975 clinical and government funding targets were weighted at 20%, additional research targets were weighted at 15%, a financing target was weighted at 15%, and workplace satisfaction targets were weighted at 10%. The financing target can also increase bonus amounts by an additional 15%. For fiscal year 2012, plazomicin clinical, regulatory and government funding targets were weighted at 35%, ACHN-975 clinical and government funding targets were weighted at 25%, research, clinical, regulatory and government funding targets for a subsequently terminated aminoglycoside program were weighted at 15%, additional research targets were weighted at 15% and workplace satisfaction targets were weighted at 10%. An additional financing target for 2012 could have increased or decreased bonus amounts by 20%.

In addition, after considering the corporate performance goals, the board then has the discretion to increase or decrease bonus amounts for each NEO based on individual performance and individual contributions to the Company’s success.

Achievement Level

In early 2013, the board of directors established the corporate performance goals and weightings for 2013 described above. For each of these performance goals, the board of directors set a target achievement level. There was no minimum or maximum achievement for each performance target; instead the board weighs the achievement, partial achievement or non-achievement for each performance target when deciding the overall achievement level. The board of directors has not yet determined target achievement for 2013 or determined bonus amounts for 2013.

In early 2012, the board of directors established the corporate performance goals and weightings for 2012 described above. For each of these performance goals, the board of directors set a target achievement level. There was no minimum or maximum achievement for each performance target; instead the board weighs the achievement, partial achievement or non-achievement for each performance target when deciding the overall achievement level. In early 2013, the board of directors reviewed our 2012 performance with respect to determining bonuses to executive officers. The board of directors determined the target achievement at 85%, as detailed in the below table:

 

Performance Goal

   Target
Achievement
Percentage
   Actual 2012
Achievement
Percentage

Plazomicin Clinical, Regulatory and Government Funding Targets

   35%    35%

ACHN-975 Clinical and Government Funding Targets

   25%    10%

Research, Clinical, Regulatory and Government Funding Targets for Subsequently Terminated Aminoglycoside Program

   15%    5%

Additional Research Targets

   15%    15%

Workplace Satisfaction Targets

   10%    10%

Financing Targets

   +/-20%    +10%
  

 

  

 

Total

   100%(+/-20%)    85%

Following its review and determinations of the target achievement for 2012, the board of directors awarded cash bonuses to the NEOs of 100% of their target bonus opportunities, increasing each NEO’s bonus payment compared to the 85% achievement of the corporate performance goals as a result of each executive’s outstanding individual performance and additional responsibilities undertaken in 2012, particularly the positive reception of

 

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our planned plazomicin development program from the FDA and BARDA and successfully managing the Company through a staff reduction. The NEO’s 2012 bonuses are set forth in the “Summary Compensation Table” above.

Terms and Conditions of Equity Award Grants

Dr. Hillan and Ms. Filice received options to purchase our common stock in fiscal year 2012. Mr. Hom received options to purchase our common stock in fiscal year 2013. The table above entitled “Outstanding Equity Awards at 2013 Fiscal Year End” describes the material terms of other option awards made in past fiscal years to our NEOs.

In June 2013, our board of directors granted two separate option awards to Mr. Hom which were exercisable immediately with an exercise price of $0.43 per share, which the board determined was the fair market value on the date of grant. The first option award of 784,425 shares granted to Mr. Hom vests as to 1/4 th of the shares subject to the option on the first anniversary of the vesting commencement date of January 3, 2013, and thereafter as to 1/48 th of the shares subject to such option on each monthly anniversary of the vesting commencement date such that 100% of the shares subject to the option will be vested and exercisable on the fourth anniversary of the vesting commencement date, subject to Mr. Hom continuing to provide services to the Company through such vesting date. The second option award of 261,475 shares granted to Mr. Hom vests as to 1/3rd of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $3.00, $5.00 and $7.00 (in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like), respectively, subject to Mr. Hom continuing to provide services to the Company through such vesting date.

In March 2012, our board of directors granted two separate option awards to each of Dr. Hillan and Ms. Filice, which were exercisable immediately, with an exercise price of $0.66 per share, which the board determined was the fair market value on the date of grant. The first option awards of 1,460,400 shares and 347,600 shares granted to Dr. Hillan and Ms. Filice, respectively, vest as to 1/48th of the shares subject to such option on each monthly anniversary of the vesting commencement date (and if there is no corresponding day, on the last day of the month) such that 100% of the shares subject to the option will be vested and exercisable on the fourth anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date. The second option awards of 1,566,600 shares and 365,400 shares granted to Dr. Hillan and Ms. Filice, respectively, vest as to 1/3rd of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $3.00, $5.00 and $7.00 (in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like), respectively, subject to the holder continuing to provide services to the Company through such vesting date.

In February 2013, we modified the option award granted to Dr. Hillan in March 2012 to purchase 1,566,600 shares of our common stock to reduce the number of shares subject to such award by 460,000 shares. As a result of the modification, the option vests as to as to 522,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $3.00 per share, 522,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $5.00 per share, and the remaining 62,200 of the shares subject to the option on the date that the closing trading price of the Company’s common stock first reaches or exceeds $7.00 per share (in each case, as appropriately adjusted for stock splits, stock dividends, recapitalizations and the like), respectively, subject to Dr. Hillan continuing to provide services to the Company through such vesting date.

In accordance with our Change in Control Plan effective as of March 8, 2012, in the event of the consummation of a change in control (as defined below) on or prior to December 31, 2014, each option and other equity award granted to our full-time employees who remain employed with the Company immediately prior to the Company’s entry into an acquisition agreement, including our NEOs, vests as to 100% of the shares subject to such equity award effective as of immediately prior to the change in control, subject to each such employee

 

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executing and not revoking a general release of claims against the Company. There are no other benefits or payments payable under our Change in Control Plan, which will terminate on December 31, 2014 if the Company does not enter into an acquisition agreement prior to that time. For purposes of the Change in Control Plan, “change in control” means (i) any acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company or its stockholders is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions, or (ii) a sale, lease, exclusive license or other conveyance of all or substantially all of the assets of the Company.

Terms and Conditions of 401(k) Plan

Our U.S. eligible employees, including our NEOs, participate in our 401(k) Plan. Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) Plan, we provide matching contributions equal to 50% of employees’ contribution, up to 6% of annual earnings. The maximum employee contribution to the 401(k) Plan is 100% of an employee’s annual eligible compensation, subject to regulatory and plan limitations.

Director Compensation

Prior to the consummation of this offering, we generally did not compensate our non-employee directors for their service on our board of directors, and we did not pay director fees to our directors who are our employees. However, we provide reimbursement to our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of our board of directors. In addition, in December 2012, we granted an option to purchase 325,000 shares of our common stock to each of our non-employee directors at that time that were not affiliated with one of our venture capital stockholders, which options vest in substantially equal monthly installments over the four years following the date of grant, subject to each such director continuing to be a service provider to us.

Our non-employee directors received no compensation from us during the year ended December 31, 2013. Dr. Hillan received no additional compensation for his service as a director. As of December 31, 2013, Mr. Doyle held options to purchase 969,269 shares of our common stock and Dr. Walsh held options to purchase 475,000 shares of our common stock. No other non-employee director held any options to purchase shares of our common stock or any other equity award as of December 31, 2013.

Employee Equity Plans

The principal features of our equity incentive plans are summarized below. These summaries are qualified in their entirety by reference to the text of the plans or agreements, which are filed as exhibits to the registration statement.

2014 Equity Incentive Award Plan

We intend to adopt a 2014 Equity Incentive Award Plan, or the 2014 Plan, which will be effective on the closing of this offering. The principal purpose of the 2014 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the 2014 Plan are summarized below.

 

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Share Reserve. Under the 2014 Plan,                      shares of our common stock will be initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalent awards, stock payment awards, performance awards and other stock-based awards, plus the number of shares remaining available for future awards under our Amended and Restated 2003 Stock Plan, as amended, or the 2003 Plan, as of the consummation of this offering. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2014 Plan will be increased by (i) the number of shares represented by awards outstanding under our 2003 Plan that are forfeited or lapse unexercised and which following the effective date are not issued under our 2003 Plan and (ii) an annual increase on the first day of each fiscal year beginning in 2015 and ending in 2025, equal to the least of (A)                  shares, (B)                  % of the shares of our common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (C) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than                  shares of stock may be issued upon the exercise of incentive stock options.

The following counting provisions will be in effect for the share reserve under the 2014 Plan:

 

   

to the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2014 Plan;

 

   

to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2014 Plan, such tendered or withheld shares will be available for future grants under the 2014 Plan;

 

   

to the extent that shares of our common stock are repurchased by us prior to vesting so that shares are returned to us, such shares will be available for future grants under the 2014 Plan;

 

   

the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2014 Plan; and

 

   

to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the 2014 Plan.

Administration. The compensation committee of our board of directors is expected to administer the 2014 Plan unless our board of directors assumes authority for administration. The compensation committee must consist of at least three members of our board of directors, each of whom is intended to qualify as an “outside director” within the meaning of Section 162(m) of the Code, a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act and an “independent director” within the meaning of the rules of the applicable stock exchange, or other principal securities market on which shares of our common stock are traded. The 2014 Plan provides that the board or compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives of the company to a committee consisting of one or more members of our board of directors or one or more of our officers, other than awards made to our non-employee directors, which must be approved by our full board of directors.

Subject to the terms and conditions of the 2014 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2014 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2014 Plan. Our board of directors may at any time remove the compensation committee as the administrator and revest in itself the authority to administer the 2014 Plan. The full board of directors will administer the 2014 Plan with respect to awards to non-employee directors.

Eligibility. Options, SARs, restricted stock and all other stock-based and cash-based awards under the 2014 Plan may be granted to individuals who are then our officers, employees or consultants or are the officers,

 

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employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. Only employees of our company or certain of our subsidiaries may be granted incentive stock options, or ISOs.

Awards. The 2014 Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, deferred stock, dividend equivalents, performance awards, stock payments and other stock-based and cash-based awards, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

 

   

Nonstatutory Stock Options , or NSOs, will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years.

 

   

Incentive Stock Options will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2014 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

 

   

Restricted Stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse; however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire.

 

   

Restricted Stock Units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

   

Deferred Stock Awards represent the right to receive shares of our common stock on a future date. Deferred stock may not be sold or otherwise hypothecated or transferred until issued. Deferred stock will not be issued until the deferred stock award has vested, and recipients of deferred stock generally will have no voting or dividend rights prior to the time when the vesting conditions are satisfied and the shares are issued. Deferred stock awards generally will be forfeited, and the underlying shares of deferred stock will not be issued, if the applicable vesting conditions and other restrictions are not met.

 

   

Stock Appreciation Rights , or SARs, may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2014 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. Except as required by Section 162(m) of the Code with respect to a SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Code, there are no restrictions specified in the 2014 Plan on the exercise of SARs

 

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or the amount of gain realizable therefrom, although restrictions may be imposed by the administrator in the SAR agreements. SARs under the 2014 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

 

   

Dividend Equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the award. Dividend equivalents may be settled in cash or shares and at such times as determined by the compensation committee or board of directors, as applicable.

 

   

Performance Awards may be granted by the administrator on an individual or group basis. Generally, these awards will be based upon specific performance targets and may be paid in cash or in common stock or in a combination of both. Performance awards may include “phantom” stock awards that provide for payments based upon the value of our common stock. Performance awards may also include bonuses that may be granted by the administrator on an individual or group basis and which may be payable in cash or in common stock or in a combination of both.

 

   

Stock Payments may be authorized by the administrator in the form of common stock or an option or other right to purchase common stock as part of a deferred compensation or other arrangement in lieu of all or any part of compensation, including bonuses, that would otherwise be payable in cash to the employee, consultant or non-employee director.

Change in Control. In the event of a change in control where the acquirer does not assume or replace awards granted, prior to the consummation of such transaction, awards issued under the 2014 Plan will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. In addition, the administrator will also have complete discretion to structure one or more awards under the 2014 Plan to provide that such awards will become vested and exercisable or payable on an accelerated basis in the event such awards are assumed or replaced with equivalent awards but the individual’s service with us or the acquiring entity is subsequently terminated within a designated period following the change in control event. The administrator may also make appropriate adjustments to awards under the 2014 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Adjustments of Awards. In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of our assets to stockholders (other than normal cash dividends) or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2014 Plan or any awards under the 2014 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to:

 

   

the aggregate number and type of shares subject to the 2014 Plan;

 

   

the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and

 

   

the grant or exercise price per share of any outstanding awards under the 2014 Plan.

Amendment and Termination. Our board of directors or the compensation committee (with board approval) may terminate, amend or modify the 2014 Plan at any time and from time to time. However, we must generally obtain stockholder approval:

 

   

to increase the number of shares available under the 2014 Plan (other than in connection with certain corporate events, as described above);

 

   

to grant options with an exercise price that is below 100% of the fair market value of shares of our common stock on the grant date;

 

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to extend the exercise period for an option beyond ten years from the date of grant; or

 

   

to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.

Termination. The board of directors may terminate the 2014 Plan at any time. No incentive stock options may be granted pursuant to the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan, and no additional annual share increases to the 2014 Plan’s aggregate share limit will occur from and after such anniversary. Any award that is outstanding on the termination date of the 2014 Plan will remain in force according to the terms of the 2014 Plan and the applicable award agreement.

We intend to file with the SEC a registration statement on Form S-8 covering the shares of our common stock issuable under the 2014 Plan.

Amended and Restated 2003 Stock Plan, as Amended

Our board of directors initially adopted the 2003 Plan on December 17, 2002. Our board of directors then approved an amendment and restatement of the 2003 Plan on April 4, 2013.

Following the completion of this offering, we will not make any further grants under the 2003 Plan. As discussed above, upon the completion of this offering, any shares of our common stock that are available for issuance immediately prior to the completion of this offering under the 2003 Plan will become available for issuance under the 2014 Plan. However, the 2003 Plan will continue to govern the terms and conditions of the outstanding awards granted under the 2003 Plan which, as of the date of this prospectus, constitute all of our outstanding stock options and restricted stock awards.

Types of Awards.  The 2003 Plan provides for the grant of non-qualified options and stock purchase rights to employees, non-employee members of the board of directors, consultants and other persons having a unique relationship with us or our subsidiaries. The 2003 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code, to employees of such company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Section 424(e) and (f) of the Code).

Share Reserve.  As of December 31, 2013, we have reserved an aggregate of 20,193,957 shares of our common stock for issuance under the 2003 Plan. As of December 31, 2013, options to purchase a total of 15,461,893 shares of our common stock were issued and outstanding, a total of 3,335,029 shares of common stock had been issued upon the exercise of options or pursuant to other awards granted under the 2003 Plan and 1,398,910 shares remained available for future grants. Such remaining share balance will become available for issuance under the 2014 Plan immediately prior to the closing of this offering.

Administration.  Our board of directors or a committee appointed by our board of directors administers the 2003 Plan. The administrator has the authority to select the employees to whom options and/or stock purchase rights will be granted under the 2003 Plan, the number of shares to be subject to those awards under the 2003 Plan, and the terms and conditions of the awards granted. In addition, the administrator has the authority to construe and interpret the 2003 Plan and to adopt rules for the administration, interpretation and application of the 2003 Plan that are consistent with the terms of the 2003 Plan.

Payment.  The exercise price of options or purchase price of stock purchase rights granted under the 2003 Plan may be paid in such form as determined by the administrator, including, without limitation, cash, check, promissory notice, other shares, provided shares acquired directly from the Company have been owned by the

 

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holder for more than six months on the date of surrender and have a fair market value on the date of surrender equal to the aggregate exercise price or purchase price of the shares as to which such award relates, consideration received by the Company under a cashless exercise program implemented by the Company, or any combination of the foregoing methods of payment.

Transfer. The 2003 Plan does not allow for the transfer of awards other than by will or the laws of descent and distribution. If the administrator makes an award transferable, such option or stock purchase right may only be transferred by will, by the laws of descent and distribution, or to family members (within the meaning of Rule 701 of the Securities Act) through gifts or domestic relations orders, as permitted by Rule 701 of the Securities Act.

Certain Events.  In the event of a dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off combination, repurchase, or exchange of shares or other securities of the Company, or other change in the corporate structure of the Company affecting shares occurs, the administrator may make appropriate adjustments to the number of shares available reserved for issuance under the 2003 Plan, the number of shares covered by each outstanding option or stock purchase agreement, and/or the exercise price or purchase price under each outstanding option or stock purchase agreement. In the event of a proposed dissolution or liquidation of the Company, the administrator will notify each holder as soon as practicable prior to the effective date of such proposed transaction, and then all such awards will terminate immediately prior to the consummation of such proposed action. In the event that we are a party to a merger or change in control, outstanding options may be assumed or substituted by the surviving corporation or its parent. In the event the successor corporation refuses to assume or substitute for the option or stock purchase right, then the vesting of such awards will be fully accelerated and the administrator will notify the holder in writing or electronically that such awards will be fully exercisable and vested for a period of 15 days from the date of such notice, and such awards will terminate upon expiration of such period.

Amendment; Termination. Our board of directors may amend or terminate the 2003 Plan or any portion thereof at any time; an amendment of the 2003 Plan shall be subject to the approval of our stockholders only to the extent required by applicable laws. Unless terminated sooner by our board of directors or extended with stockholder approval, the 2003 Plan will terminate ten years from the later of (i) the effective date of the Amended and Restated 2003 Plan and (ii) the earlier of the most recent board or shareholder approval of an increase in the number of shares reserved for issuance under the Plan. No awards may be granted under our 2003 Plan after it is terminated.

We intend to file with the SEC a registration statement on Form S-8 covering the shares of our common stock issuable pursuant to outstanding awards under the 2003 Plan.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a description of transactions since January 1, 2011 to which we have been a party, in which the amount involved exceeds $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Funding Agreement with The Wellcome Trust Limited

In March 2010, we entered into a funding agreement with The Wellcome Trust Limited as trustee of the Wellcome Trust, which provided an unsecured convertible loan up to a maximum amount of $5.6 million to progress our plazomicin program. The Wellcome Trust Limited as trustee of the Wellcome Trust became a holder of more than 5% of our capital stock in April 2010 following conversion of an earlier loan by it to us into 8,522,248 shares of our Series C convertible preferred stock.

In March 2013, The Wellcome Trust Limited as trustee of the Wellcome Trust converted the full amount of the loan outstanding under the March 2010 funding agreement into 6,414,790 shares of our Series D convertible preferred stock.

Sales of Convertible Promissory Notes

In November 2012, we sold convertible promissory notes with an aggregate principal amount of $2.7 million in a bridge financing to existing stockholders, which we refer to as the 2012 Bridge Notes. The 2012 Bridge Notes earned simple interest of 6% per annum and were convertible into shares of our convertible preferred stock. The table below sets forth the principal amount of convertible promissory sold to our 5% stockholders and their affiliates in November 2012.

 

Name

   Principal Amount  

5AM Co-Investors LLC

   $ 23,241.13   

5AM Ventures LLC

   $ 164,061.89   

Alta Partners VIII, L.P.(1)

   $ 235,890.06   

ARCH Venture Fund VI, L.P.

   $ 447,527.97   

Domain Partners VII, L.P.

   $ 626,832.05   

DP VII Associates, L.P.

   $ 10,691.42   

Frazier Healthcare VI, L.P.(1)

   $ 336,985.79   

Venrock Associates IV, L.P.

   $ 364,287.67   

Venrock Entrepreneurs Fund IV, L.P.

   $ 8,950.56   

Venrock Partners, L.P.

   $ 74,289.62   

Versant Affiliates Fund II-A, L.P.

   $ 7,277.46   

Versant Side Fund II, L.P.

   $ 3,426.86   

Versant Venture Capital II, L.P.

   $ 383,502.95   

 

(1)   Alta Partners VIII, L.P. and Frazier Healthcare VI, L.P. were holders of more than 5% of our capital stock at the time of the sale of the 2012 Bridge Notes, but were no longer holders of more than 5% of our capital stock at December 31, 2013.

 

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Sales of Series D Preferred Stock

In March, May and November 2013, we sold an aggregate of 23,018,354 shares of our Series D convertible preferred stock at a price of $1.09 per share for aggregate gross proceeds of $25.1 million, inclusive of amounts of principal and accrued interest from the 2012 Bridge Notes that were converted. The table below sets forth the number of shares of Series D convertible preferred stock sold to our 5% stockholders and their affiliates:

 

Name

   Number of Shares of
Series D Convertible
Preferred Stock Purchased
     Aggregate
Purchase Price
 

5AM Co-Investors LLC

     177,685       $ 193,676.65   

5AM Ventures LLC

     1,254,296       $ 1,367,182.64   

Alta Partners VIII, L.P.(1)

     1,137,402       $ 1,239,768.18   

ARCH Venture Fund VI, L.P.

     3,421,468       $ 3,729,400.12   

Domain Partners VII, L.P.

     4,792,295       $ 5,223,601.55   

DP VII Associates, L.P.

     81,739       $ 89,095.51   

Frazier Healthcare VI, L.P.(1)

     314,243       $ 342,524.87   

Omega Fund IV, L.P.

     2,137,542       $ 2,329,920.78   

Venrock Associates IV, L.P.

     3,428,622       $ 3,737,197.98   

Venrock Entrepreneurs Fund IV, L.P.

     84,241       $ 91,822.69   

Venrock Partners, L.P.

     699,202       $ 762,130.18   

Versant Affiliates Fund II-A, L.P.

     55,641       $ 60,648.69   

Versant Side Fund II, L.P.

     26,205       $ 28,563.45   

Versant Venture Capital II, L.P.

     2,931,973       $ 3,195,850.57   

The Wellcome Trust Limited as trustee of the Wellcome Trust

     2,393,231       $ 2,608,621.79   

 

(1)   Alta Partners VIII, L.P. and Frazier Healthcare VI, L.P. were holders of more than 5% of our capital stock at the time of the sale of the Series D convertible preferred stock to them at the initial closing, but were no longer holders of more than 5% of our capital stock at December 31, 2013.

Additionally, as noted above under “—Funding Agreement with The Wellcome Trust Limited,” following the initial closing of the Series D convertible preferred stock financing, The Wellcome Trust Limited as trustee of the Wellcome Trust also converted the $5.6 million principal amount of the loan outstanding under our March 2010 funding agreement into 6,414,790 shares of our Series D convertible preferred stock at a conversion price equal to $0.872 per share, a 20% discount to the per share price in the Series D convertible preferred stock financing, in accordance with the terms of the funding agreement.

Investor Rights Agreement

We and the holders of our convertible preferred stock, as well as certain warrant holders, have entered into a third amended and restated investor rights agreement, pursuant to which these stockholders and warrant holders will have, among other things, registration rights under the Securities Act with respect to their shares of common stock following this offering. Prior to the completion of this offering, all outstanding shares of our convertible preferred stock will be converted into common stock. See “Description of Capital Stock—Registration Rights” for more information about the investor rights agreement.

Voting Agreement

We have entered into an amended and restated voting agreement with certain holders of our common stock and holders of our convertible preferred stock. Upon the closing of this offering, the voting agreement will terminate. For a description of the amended and restated voting agreement, see the section titled “Management—Voting Arrangements.”

 

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Right of First Refusal and Co-Sale Agreement

We have entered into an amended and restated right of first refusal and co-sale agreement with certain holders of our common stock and holders of our convertible preferred stock. This agreement provides for rights of first refusal and co-sale relating to the shares of our common stock held by certain key holders of our common stock and holders of our convertible preferred stock. Upon the closing of this offering, the amended and restated right of first refusal and co-sale agreement will terminate.

Director and Executive Officer Compensation

Please see “Executive and Director Compensation” for information regarding compensation of directors and executive officers.

Employment Agreements

We have entered into employment agreements with our executive officers. For more information regarding these agreements, see “Executive and Director Compensation—Narrative to Summary Compensation Table and Outstanding Equity Awards at 2013 Fiscal Year End.”

Indemnification Agreements and Directors’ and Officers’ Liability Insurance

We have entered into indemnification agreements with each of our directors and intend to enter into indemnification agreements with each of our executive officers. These agreements, among other things, require or will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer.

Policies and Procedures for Related Party Transactions

In connection with our transition to becoming a public company, our board of directors will adopt a written related person transaction policy to set forth the policies and procedures for the review and approval or ratification of related person transactions, to be effective upon the completion of this offering. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had, has or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.

As provided by our audit committee charter to be effective upon consummation of this offering, our audit committee will be responsible for reviewing and approving in advance the related party transactions covered by the company’s related transaction policies and procedures.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth information relating to the beneficial ownership of our common stock as of December 31, 2013, by:

 

   

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of common stock;

 

   

each of our current directors;

 

   

each of our named executive officers; and

 

   

all current directors and executive officers as a group.

The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of December 31, 2013 through the exercise of any stock option, warrants or other rights. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by that person.

The percentage of shares beneficially owned before the offering is computed on the basis of 118,577,787 shares of our common stock outstanding as of December 31, 2013, which reflects the assumed conversion of all of our outstanding shares of convertible preferred stock into an aggregate of 114,256,264 shares of common stock. In addition, the percentage of shares beneficially owned after the offering gives effect to the issuance of              shares in the offering. Shares of our common stock that a person has the right to acquire within 60 days of December 31, 2013 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the address for each beneficial owner listed is c/o Achaogen, Inc., at 7000 Shoreline Court, Suite 371, South San Francisco, California 94080.

 

            Percentage of Shares
Beneficially Owned

Name of Beneficial Owner

   Number of Shares
Beneficially Owned
     Before
Offering
    After
Offering

5% and Greater Stockholders

       

Entities Affiliated with Domain Partners(1)

     22,230,370         18.75  

Entities Affiliated with Venrock(2)

     19,211,146         16.20  

The Wellcome Trust Limited as trustee of the Wellcome Trust(3)

     17,330,269         14.62  

ARCH Venture Fund VI, L.P.(4)

     15,605,248         13.16  

Entities Affiliated with Versant Venture Capital(5)

     14,092,756         11.88  

Omega Fund IV, L.P.(6)

     9,749,289         8.22  

Entities Affiliated with 5AM Ventures(7)

     6,614,162         5.58  

Named Executive Officers and Directors

       

Kenneth J. Hillan, M.B., Ch.B.(8)

     4,762,000         3.86  

Becki Filice(9)

     937,979         *     

Dennis Hom(10)

     1,045,900         *     

Bryan E. Roberts, Ph.D.(2)

     19,211,146         16.20  

John C. Doyle(11)

     739,060         *     

Scott M. Rocklage, Ph.D.

     —           —       

Camille D. Samuels

     —           —       

John W. Smither

     —           —       

Christopher T. Walsh, Ph.D.(12)

     244,791         *     

All current directors and executive officers as a group (10 persons)(13)

     27,552,101         21.71  

 

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*   Indicates beneficial ownership of less than 1% of the total outstanding common stock.
(1)   Includes (i) 21,857,563 shares of common stock held by Domain Partners VII, L.P. and (ii) 372,807 shares of common stock held by DP VII Associates, L.P. James C. Blair, Brian H. Dovey, Jesse I. Treu, Kathleen K. Schoemaker, Brian K. Halak and Nicole Vitullo, the managing members of One Palmer Square Associates VII, L.L.C., the general partner of Domain Partners VII, L.P. and DP VII Associates, L.P., share voting and investment power with respect to these shares. and therefore each of the foregoing managing members may be deemed to have voting and investment power with respect to such shares. Each of the foregoing managing members disclaims beneficial ownership of such shares except to the extent of their pecuniary interest therein, if any. The address of each of the persons and entities affiliated with Domain Partners is One Palmer Square, Suite 515, Princeton, New Jersey 08542.
(2)   Includes (i) 3,189,048 shares of common stock held by Venrock Partners, L.P., (ii) 15,637,877 shares of common stock held by Venrock Associates IV, L.P. and (iii) 384,221 shares of common stock held by Venrock Entrepreneurs Fund IV, L.P. Venrock Management IV, LLC, Venrock Partners Management, LLC and VEF Management IV, LLC, collectively referred to in this note as the Venrock GP Entities, are the sole general partners of Venrock Associates IV, L.P., Venrock Partners, L.P. and Venrock Entrepreneurs Fund IV, L.P., respectively, collectively referred to in this note as the Venrock IV Funds, and have voting and investment power over the shares held by the Venrock IV Funds. Bryan E. Roberts is a Member of each of the Venrock GP Entities and may therefore be deemed to have voting and investment power with respect to the shares held by the Venrock IV Funds, but each of Dr. Roberts and the Venrock GP Entities disclaims beneficial ownership of the shares held by the Venrock IV Funds, except to the extent of their respective pecuniary interests therein. The address of each of the persons and entities affiliated with Venrock is 3340 Hillview Avenue, Palo Alto, CA 94304.
(3)   Responsibility for the activities of The Wellcome Trust lies with the Board of Governors of The Wellcome Trust Limited, which is comprised of William Castell, Alan Brown, Damon Buffini, Kay Davies, Michael Ferguson, Richard Hynes, Anne Johnson, Eliza Manningham-Buller, Peter Rigby, and Peter Smith. The Board of Governors share all voting and investment power with respect to the shares held by The Wellcome Trust Limited as trustee of the Wellcome Trust. The address of each of the persons and entities affiliated with The Wellcome Trust Limited as trustee of the Wellcome Trust is 215 Euston Road, London NW1 2BE, United Kingdom.
(4)   Shares held of record by ARCH Venture Fund VI, L.P., referred to herein as ARCH VI. ARCH Venture Partners VI, L.P., referred to herein as ARCH GPLP, as the sole general partner of ARCH VI, may be deemed to beneficially own certain of the shares held of record by ARCH VI. ARCH GPLP disclaims beneficial ownership of all shares held of record by ARCH VI in which ARCH GPLP does not have an actual pecuniary interest. ARCH Venture Partners VI, LLC, referred to herein as ARCH GPLLC, as the sole general partner of ARCH GPLP, may be deemed to beneficially own certain of the shares held of record by ARCH VI. ARCH GPLLC disclaims beneficial ownership of all shares held of record by ARCH VI in which it does not have an actual pecuniary interest. Keith Crandell, Clinton Bybee and Robert Nelsen are the managing directors of ARCH GPLLC, and may be deemed to beneficially own certain of the shares held of record by ARCH VI. The managing directors disclaim beneficial ownership of all shares held of record by ARCH VI in which they do not have an actual pecuniary interest. The address of each of the persons and entities affiliated with ARCH Venture Fund VI, L.P. is 8725 West Higgins Road, Suite 290, Chicago, IL 60631.
(5)   Includes (i) 13,715,867 shares of common stock held by Versant Venture Capital II, L.P., referred to herein as VVC II, (ii) 254,331 shares of common stock held by Versant Affiliates Fund II-A, L.P, referred to herein as VAF II-A, and (iii) 122,558 shares of common stock held by Versant Side Fund II, L.P., referred to herein as VSF II. Versant Ventures II, LLC, referred to herein as VV II, serves as the sole general partner of VAF II-A, VSF II and VVC II and owns no shares directly. Brian G. Atwood, Ross A. Jaffe, M.D., Samuel D. Colella, Donald B. Milder, Rebecca B. Robertson, Bradley J. Bolzon, Ph.D., William J. Link, Ph.D., Charles M. Warden, and Barbara N. Lubash, as managing directors of VV II, share voting and investment authority over the shares held by VAF II-A, VSF II and VVC II; however, they disclaim beneficial ownership of the shares held by VAF II-A, VSF II and VVC II except to the extent of their pecuniary interests therein. The address of each of the persons and entities affiliated with Versant Venture Capital is c/o Versant Ventures, 3000 Sand Hill Road Building 4, Suite 210 Menlo Park, California 94025.
(6)   Shares held of record by Omega Fund IV, L.P., referred to herein as Omega IV. Omega Fund IV GP, L.P. is the general partner of Omega IV. Omega Fund IV GP Manager, Ltd., referred to herein as Omega IV GP Ltd, is the general partner of Omega Fund IV GP, L.P. Otello Stampacchia, Renee Aguiar-Lucander, Richard Lim, and Anne-Mari Paster are all the shareholders and all the directors of Omega IV GP Ltd. Together they have shared voting and investment power over the shares held by Omega IV. The address of Omega IV and the above named individuals is c/o Omega Fund Management Limited, 1 Royal Plaza, Royal Avenue, St. Peter Port, Guernsey, GY1 2HL. The address of Omega IV GP LP and Omega IV GP Ltd is c/o Omega Fund Management (US) Inc., 545 Boylston St., Suite 802, Boston, MA 02116.
(7)   Includes (i) 5,790,998 shares of common stock held by 5 AM Ventures LLC and (ii) 823,164 shares of common stock held by 5 AM Co-Investors LLC. John D. Diekman, Ph.D. and Andrew J. Schwab are the managing members of 5AM Ventures LLC and 5AM Co-Investors LLC and may be deemed to have voting and investment power over the shares held by 5AM Ventures LLC and 5AM Co-Investors LLC. Dr. Diekman and Mr. Schwab disclaim beneficial ownership of such shares, except to the extent of their pecuniary interest therein, if any. The address of each of the persons and entities affiliated with 5AM Ventures is 2200 Sand Hill Road, Suite 110, Menlo Park, CA 94025.
(8)   Consists of 4,762,000 shares that may be acquired pursuant to the exercise of stock options within 60 days of December 31, 2013 by Dr. Hillan.
(9)   Consists of 937,979 shares that may be acquired pursuant to the exercise of stock options within 60 days of December 31, 2013 by Ms. Filice.
(10)   Consists of 1,045,900 shares that may be acquired pursuant to the exercise of stock options within 60 days of December 31, 2013 by Mr. Hom.
(11)   Consists of 739,060 shares that may be acquired pursuant to the exercise of stock options within 60 days of December 31, 2013 by Mr. Doyle.
(12)   Consists of 244,791 shares that may be acquired pursuant to the exercise of stock options within 60 days of December 31, 2013 by Dr. Walsh.
(13)   Includes: (i) 19,211,146 shares held by entities affiliated with Dr. Roberts and (ii) 8,340,955 shares that may be acquired by our current executive officers and directors pursuant to the exercise of stock options within 60 days of December 31, 2013.

 

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DESCRIPTION OF CAPITAL STOCK

The following summary describes our capital stock and the material provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, which will become effective immediately prior to the closing of this offering, the amended and restated investor rights agreement to which we and certain of our stockholders are parties and of the General Corporation Law of the State of Delaware. Because the following is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should refer to our amended and restated certificate of incorporation, amended and restated bylaws, and amended and restated investor rights agreement, copies of which have been filed as exhibits to the registration statement of which this prospectus is part.

General

Upon the consummation of this offering, we will have authorized under our amended and restated certificate of incorporation             shares of common stock, $0.001 par value per share, and             shares of preferred stock, $0.001 par value per share.

The following information assumes the conversion of all outstanding shares of our convertible preferred stock into shares of common stock immediately prior to the consummation of this offering and does not assume the exercise of any warrants: As of December 31, 2013, there were 118,577,787 shares of our common stock outstanding held by 70 stockholders of record. As of December 31, 2013, there were outstanding options to purchase 15,461,893 shares of common stock and outstanding warrants to purchase 455,028 shares of common stock. In January 2014, a warrant was exercised to purchase 10,000 shares of common stock.

In connection with this offering, we will consummate a reverse stock split of our outstanding capital stock at a ratio to be determined.

Common Stock

Voting Rights

Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. In the election of directors, a plurality of the votes cast at a meeting of stockholders is sufficient to elect a director. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors. In all other matters, except as noted below under “—Amendment of our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws” and “—Election and Removal of Directors” and except where a higher threshold is required by law, a majority of the votes cast affirmatively or negatively (excluding abstentions and broker non-votes) will decide such matters.

Dividends

Subject to preferences that may be applicable to any then outstanding preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then outstanding shares of preferred stock.

 

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Other Rights and Preferences

Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Preferred Stock

Upon the consummation of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to             shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of our company or other corporate action. Upon consummation of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Warrants

The following table sets forth information about outstanding warrants to purchase shares of our stock as of December 31, 2013. Immediately prior to the consummation of this offering, all warrants to purchase shares of our convertible preferred stock will convert into warrants to purchase shares of our common stock, and the following table reflects that conversion.

 

Class of Stock

   Number of
Shares
     Exercise
Price/Share
     Expiration
Date

Common stock

     10,000       $ 0.14       (1)

Common stock

     114,753       $ 1.22       March 15, 2015

Common stock

     330,275       $ 1.09       November 1, 2021

 

(1)   Exercised in January 2014.

Registration Rights

We are party to an amended and restated investor rights agreement, which provides certain of our preferred stockholders and warrantholders the right to demand that we file a registration statement for their shares of common stock or request that their shares of common stock be covered by a registration statement that we are otherwise filing, in each case, to the extent their shares of common stock were issued upon conversion of convertible preferred stock or upon the exercise of such warrants.

Pursuant to the amended and restated investor rights agreement, in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, these holders are entitled to notice of such registration and are entitled to certain “piggyback” registration rights allowing the holder to include their common stock in such registration, subject to certain marketing and other limitations. Certain of our stockholders also have the right, beginning 180 days following the effective date of the registration statement to which this prospectus relates, to require us, on not more than two occasions, to file a registration statement under the Securities Act to register the resale of their shares of common stock with anticipated gross proceeds, before deduction of underwriting discounts and expenses related to issuance, in excess of $5.0 million. We may, in certain circumstances, defer such registrations, and any underwriters will

 

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have the right, subject to certain limitations, to limit the number of shares included in such registrations. Further, certain of our preferred stockholders and warrantholders may require us to register the resale of all or a portion of their shares of common stock on a registration statement on Form S-3 once we are eligible to use Form S-3, subject to certain conditions and limitations. In an underwritten offering, the underwriter has the right, subject to specified conditions, to limit the number of registrable securities such holders may include.

The holders of registration rights have waived their rights to include any of their shares in this offering.

Anti-Takeover Effects of Provisions of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws and Delaware Law

Some provisions of Delaware law, our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. 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 these proposals because negotiation of these proposals could result in an improvement of their terms.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.

Stockholder Meetings

Our charter documents provide that a special meeting of stockholders may be called only by our board of directors, the chairman of our board of directors, our Chief Executive Officer or, in the absence of a Chief Executive Officer, our President.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action by Written Consent

Our amended and restated certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.

Election and Removal of Directors

Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. For more information on the classified board, see

 

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“Management—Board Composition.” This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors. Our amended and restated certificate of incorporation provides that directors may be removed only for cause with the vote of holders of 66 2/3% of the voting power of all the then-outstanding shares of our voting stock. Our amended and restated certificate of incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the General Corporation Law of the State of Delaware, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.

Amendment of our Amended and Restated Certificate of Incorporation or our Amended and Restated Bylaws

The amendment of any of the above provisions in our amended and restated certificate of incorporation, except for the provision making it possible for our board of directors to issue preferred stock, or the amendment of any provision in our amended and restated bylaws (other than by action of the board of directors), would require approval by holders of at least 66 2/3% of our then outstanding voting stock.

The provisions of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation and our amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Delaware as Sole and Exclusive Forum

Our amended and restated certificate of incorporation provides that unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or otherwise wrongdoing by, any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or the bylaws, or (v) any action asserting a claim against us or any of our directors, officers or employees governed by the internal affairs doctrine. Although our amended and restated certificate of incorporation contains the choice of forum provision described above, it is possible that a court could rule that such a provision is inapplicable for a particular claim or action or that such provision is unenforceable.

 

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The NASDAQ Global Market Listing

We have applied for listing of our common stock on The NASDAQ Global Market under the symbol “AKAO.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is             . The transfer agent and registrar’s address is             .

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of our common stock, including shares issued upon the exercise of outstanding options or warrants, in the public market after this offering, or the perception that those sales may occur, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. Although we have applied to have our common stock listed on The NASDAQ Global Market, we cannot assure you that there will be an active public market for our common stock.

Sale of Restricted Shares

Based on the number of shares of our common stock outstanding as of December 31, 2013, upon the closing of this offering and assuming (1) the conversion of our outstanding convertible preferred stock into common stock, assuming an initial public offering price of             per share (the midpoint of the price range set forth on the cover page of this prospectus), (2) no exercise of the underwriters’ option to purchase additional shares of common stock, and (3) no exercise of outstanding options or warrants other than the exercise of a common stock warrant for 10,000 shares in January 2014, we will have outstanding an aggregate of approximately             shares of common stock. All of the             shares of common stock to be sold in this offering, and any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 of the Securities Act. All remaining shares of common stock held by existing stockholders immediately prior to the completion of this offering will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below. We expect that substantially all of these shares will be subject to the 180-day lock-up period under the lock-up agreements described below.

As a result of the lock-up agreements referred to below and the provisions of Rule 144 and Rule 701 under the Securities Act, the shares of our common stock (excluding the shares sold in this offering) that will be available for sale in the public market, subject to any waivers by the underwriters under the lock-up agreements, are as follows:

 

Approximate Number of Shares

  

First Date Available for Sale into Public Market

shares    90 days after the date of this prospectus
shares    180 days after the date of this prospectus

In addition, of the 15,461,893 shares of our common stock that were subject to stock options outstanding as of December 31, 2013, options to purchase 7,069,398 shares of common stock were vested as of December 31, 2013 and, upon exercise, these shares will be eligible for sale subject to the lock-up agreements described below and Rule 144 and Rule 701 under the Securities Act.

Lock-Up Agreements

In connection with this offering, we, our officers, directors and holders of substantially all of our outstanding capital stock and other securities have agreed with the underwriters not to issue, sell, transfer or otherwise dispose of our common stock or any securities convertible into or exercisable or exchangeable for our common stock for a period of 180 days from the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC and Cowen and Company, LLC, subject to certain exceptions, as described more fully in “Underwriting.”

Credit Suisse Securities (USA) LLC and Cowen and Company, LLC may, in their sole discretion and at any time or from time to time before the termination of the 180-day period, without public notice, release all or any

 

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portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our shareholders who will execute a lock-up agreement providing consent to the sale of shares prior to the expiration of the lock-up period.

Following the lock-up periods set forth in the agreements described above, and assuming that the representatives of the underwriters do not release any parties from these agreements, all of the shares of our common stock that are restricted securities or are held by our affiliates as of the date of this prospectus will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.

Rule 144

In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for at least 90 days, a person (or persons whose shares are required to be aggregated) who is not deemed to have been one of our “affiliates” for purposes of Rule 144 at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, including the holding period of any prior owner other than one of our “affiliates,” is entitled to sell those shares in the public market (subject to the lock-up agreement referred to above, if applicable) without complying with the manner of sale, volume limitations or notice provisions of Rule 144, but subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the sales proposed to be sold for at least one year, including the holding period of any prior owner other than “affiliates,” then such person is entitled to sell such shares in the public market without complying with any of the requirements of Rule 144 (subject to the lock-up agreement referred to above, if applicable).

In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of the Exchange Act for at least 90 days, our “affiliates,” as defined in Rule 144, who have beneficially owned the shares proposed to be sold for at least six months are entitled to sell in the public market, upon expiration of any applicable lock-up agreements and within any three-month period, a number of those shares of our common stock that does not exceed the greater of:

 

   

1% of the number of common shares then outstanding, which will equal approximately             shares of common stock immediately after this offering (calculated on the basis of the assumptions described above and assuming no exercise of the underwriter’s option to purchase additional shares and no exercise of outstanding options or warrants); or

 

   

the average weekly trading volume of our common stock on The NASDAQ Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Such sales under Rule 144 by our “affiliates” or persons selling shares on behalf of our “affiliates” are also subject to certain manner of sale provisions, notice requirements and to the availability of current public information about us. Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted securities have entered into lock-up agreements as referenced above and their restricted securities will become eligible for sale (subject to the above limitations under Rule 144) upon the expiration of the restrictions set forth in those agreements.

Rule 701

In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who acquired common stock from us in connection with a written compensatory stock or option plan or other written agreement in compliance with Rule 701 under the Securities Act before the effective date of the registration statement of which this prospectus is a part (to the extent such common stock is not subject to a lock-up agreement) is entitled to rely on Rule 701 to resell such shares beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act in reliance on Rule 144, but without compliance with the holding period requirements contained in Rule 144. Accordingly, subject to any applicable lock-up

 

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agreements, beginning 90 days after we become subject to the public company reporting requirements of the Exchange Act, under Rule 701 persons who are not our “affiliates,” as defined in Rule 144, may resell those shares without complying with the minimum holding period or public information requirements of Rule 144, and persons who are our “affiliates” may resell those shares without compliance with Rule 144’s minimum holding period requirements (subject to the terms of the lock-up agreement referred to above, if applicable).

Registration Rights

Upon the closing of this offering, the holders of 114,115,833 shares of our common stock, warrants to purchase our capital stock and the 445,028 shares of common stock issuable upon the exercise of those warrants will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up arrangement described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates, immediately upon the effectiveness of the registration statement of which this prospectus is a part. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See “Description of Capital Stock—Registration Rights.”

Equity Incentive Plans

We intend to file with the SEC a registration statement under the Securities Act covering the shares of common stock that we may issue upon exercise of outstanding options under our Amended and Restated 2003 Stock Plan and the shares of common stock that we may issue pursuant to future awards under our 2014 Equity Incentive Award Plan. Such registration statement is expected to be filed and become effective as soon as practicable after the completion of this offering. Accordingly, shares registered under such registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up agreements described above, if applicable.

 

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

The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended, referred to herein as the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, referred to herein as the IRS, in each case in effect as of the date of this prospectus. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the tax on net investment income imposed by Section 1411 of the Code. In addition, it does not address consequences relevant to Non-U.S. Holders subject to particular rules, including, without limitation:

 

   

U.S. expatriates and former citizens or long-term residents of the United States;

 

   

persons subject to the alternative minimum tax;

 

   

persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

   

banks, insurance companies, and other financial institutions;

 

   

brokers, dealers or traders in securities;

 

   

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

   

tax-exempt organizations or governmental organizations;

 

   

persons deemed to sell our common stock under the constructive sale provisions of the Code;

 

   

persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and

 

   

tax-qualified retirement plans.

If an entity treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND

 

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DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of a Non-U.S. Holder

For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for United States federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation created or organized under the laws of the United States, 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 that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) or (2) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.

Distributions

As described in the section entitled “Dividend Policy,” we do not anticipate paying any cash dividends in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions 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. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “—Sale or Other Taxable Disposition.”

Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the applicable withholding agent with the required certification, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

 

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Sale or Other Taxable Disposition

A Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

 

   

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable);

 

   

the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 or more days during the taxable year of the disposition and certain other requirements are met; or

 

   

our common stock constitutes a U.S. real property interest, referred to herein as a USRPI, by reason of our status as a U.S. real property holding corporation, referred to herein as a USRPHC, for U.S. federal income tax purposes.

Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually or constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period.

Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Payments of dividends on our common stock will not be subject to backup withholding, provided the holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above, or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

 

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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends paid on, or gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and IRS guidance, withholding under FATCA generally will apply to payments of dividends on our common stock made on or after July 1, 2014, and to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2017.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.

 

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement to be dated the date of this prospectus, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC and Cowen and Company, LLC are acting as representatives, the following respective numbers of shares of common stock:

 

Underwriter

   Number of Shares

Credit Suisse Securities (USA) LLC

  

Cowen and Company, LLC

  

William Blair & Company, L.L.C.

  

Needham & Company, LLC

  
  

 

Total

  
  

 

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to             additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel including the validity of the shares, and subject to other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The offering of the shares by the underwriters is also subject to the underwriters’ right to reject any order in whole or in part.

The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $         per share. After the initial public offering the representatives may change the public offering price and selling concession to broker/dealers.

The following table summarizes the compensation we will pay:

 

     Per Share    Total
     Without
Over-allotment
   With
Over-allotment
   Without
Over-allotment
   With
Over-allotment

Underwriting discounts and commissions paid by us

   $                $                $                $            

We estimate that our out of pocket expenses for this offering (not including any underwriting discounts and commissions) will be approximately $         million.

We have agreed to reimburse the underwriters for expenses of up to $         related to clearance of this offering with the Financial Industry Regulatory Authority, Inc., or FINRA.

The underwriters have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, issue, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act

 

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relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of the representatives for a period of 180 days after the date of this prospectus. The restrictions described in this paragraph do not apply to (a) grants of employee stock options or other equity-based awards pursuant to the terms of our equity inventive plans, (b) issuances of shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock pursuant to the exercise of such options or other equity-based awards, (c) issuances of shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, or (d) the issuance of shares of our common stock in this offering, provided that in the cases of clauses (b) and (c), the recipients of such shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock agree to be bound by a lockup letter in the form executed by our directors, officers and existing security holders.

Our officers, directors and substantially all of our existing security holders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of the representatives for a period of 180 days after the date of this prospectus. The restrictions described in this paragraph do not apply to:

(a) transfers of our common stock or other securities as a bona fide gift or gifts or by testate succession or intestate distribution;

(b) any shares of our common stock acquired by the lock-up signatory in the open market;

(c) the exercise of stock options or other similar awards granted pursuant to our equity incentive plans, provided that such restrictions shall apply to any of the lock-up signatory’s shares of common stock issued upon such exercise;

(d) any shares of our common stock or such other securities that are transferred to us for the primary purpose of satisfying any tax or other governmental withholding obligation, through cashless surrender or otherwise, with respect to any award of equity-based compensation granted pursuant to our equity incentive plans or in connection with tax or other obligations as a result of testate succession or intestate distribution;

(e) the exercise of warrants, whether for cash or through net exercise, to purchase our common stock or any security convertible into or exercisable or exchangeable for shares of our common stock, provided that such restrictions shall apply to any of the lock-up signatory’s shares of common stock issued upon such exercise;

(f) the establishment of any contract, instruction or plan, referred to herein as a Plan, that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act, provided that no sales of the lock-up signatory’s shares of common stock shall be made pursuant to such a Plan prior to the expiration of the 180-day period referred to above, and provided that to the extent a public announcement or filing under the Exchange Act is required or voluntarily made by or on behalf of the lock-up signatory or us regarding the establishment of such Plan, such announcement or filing shall include a statement to the effect that no transfer of the lockup signatory’s shares of common stock may be made under such Plan during the 180-day period referred to above;

(g) transfers not involving a disposition for value to a member or members of the lock-up signatory’s family or to a trust, the direct or indirect beneficiaries of which are the lock-up signatory and/or a member or members of his or her family;

 

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(h) distributions not involving a disposition for value of shares of our common stock or such other securities to members, partners or stockholders of the lock-up signatory or to any corporation, partnership or other person or entity that is a direct or indirect affiliate of the lock-up signatory;

(i) the transfer of the lock-up signatory’s shares of our common stock or any security convertible into or exercisable or exchangeable for shares of our common stock that occurs because of operation of law; and

(j) the transfer of the lock-up signatory’s shares of our common stock or any security convertible into or exercisable or exchangeable for shares of our common stock to us pursuant to any contractual arrangement in effect on the date of the lock-up agreement that provides for the repurchase of the lock-up signatory’s shares of common stock or such other securities by us or in connection with the termination of the lock-up signatory’s employment or other service relationship with us or the lock-up.

In the case of any transfer or distribution pursuant to clause (a), (g), (h) or (i), each done, distribute or transferee must execute a lock-up letter containing the foregoing restrictions. In the case of any transfer or distribution pursuant to clause (a) or (g) through (i), no filing by any party under the Exchange Act or other public announcement shall be required or voluntarily made (other than a filing on Form 5 after the expiration of the 180-day period referred to above).

We have agreed to indemnify the several underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

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

Prior to the offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations between us and the representatives. In determining the initial public offering price, we and the representatives expect to consider a number of factors including:

 

   

the information set forth in this prospectus and otherwise available to the underwriters;

 

   

our prospects and the history and prospects for the industry in which we compete;

 

   

an assessment of our management;

 

   

our prospects for future earnings;

 

   

the recent market prices of, and demand for, publicly-traded common stock of generally comparable companies;

 

   

the general condition of the securities markets at the time of the offering; and

 

   

other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that shares of our common stock will trade in the public market at or above the initial public offering price.

In connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Exchange Act.

 

   

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

   

Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, creating a syndicate short position. The short position may be

 

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either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

 

   

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. 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 the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. 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.

 

   

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.

 

   

In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common stock until the time, if any, at which a stabilizing bid is made.

These stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The NASDAQ Global Market or otherwise and, if commenced, may be discontinued at any time.

A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make Internet distributions on the same basis as other allocations.

Other Relationships

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. The underwriters are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities.

 

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Selling Restrictions

Notice to Prospective Investors in the European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each such Member State referred to herein as a Relevant Member State, each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of shares which are the subject of the offering contemplated by this prospectus to the public in that Relevant Member State other than:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision 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 for any such offer; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

Notice to Prospective Investors in the United Kingdom

Each of the underwriters severally represents, warrants and agrees as follows:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity, within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA, received by it in connection with the issue or sale of the shares in circumstances in which Section 21 of the FSMA does not apply to us; and

(b) it has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

 

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LEGAL MATTERS

The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by Latham & Watkins LLP, Menlo Park, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Davis Polk & Wardwell LLP.

EXPERTS

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2012 and 2011, and for each of the two years in the period ended December 31, 2012, as set forth in their report. We have included our consolidated financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to Achaogen, Inc. and the common stock offered hereby, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement.

A copy of the registration statement and the exhibits and schedules filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street N.E., Room 1580, Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from such offices upon the payment of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.

Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.achaogen.com. You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider the contents of our website in making an investment decision with respect to our common stock.

 

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Table of Contents

Achaogen, Inc.

Index to Consolidated Financial Statements

Years Ended December 31, 2011 and 2012 and Nine Months Ended September 30, 2012 and 2013

Contents

 

Report of Independent Registered Public Accounting Firm

     F-2   

Consolidated Balance Sheets

     F-3   

Consolidated Statements of Operations and Comprehensive Loss

     F-4   

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

     F-5   

Consolidated Statements of Cash Flows

     F-6   

Notes to Consolidated Financial Statements

     F-7   

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Achaogen, Inc.

We have audited the accompanying consolidated balance sheets of Achaogen, Inc. as of December 31, 2011 and 2012, and the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2012. 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 audits 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 consolidated financial position of Achaogen, Inc. at December 31, 2011 and 2012, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Redwood City, California

December 17, 2013

 

F-2


Table of Contents

Consolidated Balance Sheets

(in thousands except for share and per share amounts)

 

     December 31,
2011
    December 31,
2012
    September 30,
2013
    Pro forma
cash and cash
equivalents
and

stockholders’
equity as of
September 30,
2013
 
                 (unaudited)     (unaudited)  

Assets

        

Current assets:

        

Cash and cash equivalents

   $ 12,528      $ 7,073      $ 8,212      $ 18,212   
        

 

 

 

Contracts receivable

     4,889        4,258        4,415     

Prepaids and other current assets

     467        397        164     
  

 

 

   

 

 

   

 

 

   

Total current assets

     17,884        11,728        12,791     

Property and equipment, net

     1,341        1,344        852     

Restricted cash

     162        127        127     

Deposit and other assets

     91        67        51     
  

 

 

   

 

 

   

 

 

   

Total assets

   $ 19,478      $ 13,266      $ 13,821     
  

 

 

   

 

 

   

 

 

   

Liabilities, Convertible Preferred Stock, and Stockholders’ (Deficit) Equity

        

Current liabilities:

        

Accounts payable

   $ 2,930      $ 2,910      $ 3,058     

Accrued liabilities

     3,458        1,567        2,569     

Related-party convertible notes payable

     —          2,687        —       

Notes payable, current portion

     447        4,536        4,872     

Other current liabilities

     289        334        145     
  

 

 

   

 

 

   

 

 

   

Total current liabilities

     7,124        12,034        10,644     

Deferred rent

     312        69        117     

Derivative liability

     —          1,398        —       

Related-party convertible loan payable

     3,148        5,441        —       

Notes payable, noncurrent portion

     3,500        6,311        2,914     

Other long-term liabilities

     256        237        176      $ —     
  

 

 

   

 

 

   

 

 

   

Total liabilities

     14,340        25,490        13,851     

Commitments and contingencies (Note 7)

        

Convertible preferred stock, $0.001 par value, 79,202,910 shares authorized at December 31, 2011 and 2012 and 132,202,910 shares authorized at September 30, 2013 (unaudited); 78,326,923 shares issued and outstanding at December 31, 2011 and 2012 and 98,585,753 shares issued and outstanding at September 30, 2013 (unaudited); liquidation value $100,727 at December 31, 2011 and 2012, and $122,809 at September 30, 2013 (unaudited)

     100,354        100,354        122,287        —     

Stockholders’ (deficit) equity:

        

Common stock, $0.001 par value, 105,000,000 shares authorized at December 31, 2011 and 2012 and 163,000,000 shares authorized at September 30, 2013 (unaudited); 3,563,106, 4,112,466 and 4,321,523 shares issued and outstanding at December 31, 2011 and 2012 and September 30, 2013 (unaudited), respectively

     3        4        4        119   

Additional paid-in capital

     2,028        3,030        3,917        136,265   

Accumulated deficit

     (97,247     (115,612     (126,238     (126,238
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (95,216     (112,578     (122,317     10,146   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, convertible preferred stock, and stockholders’ (deficit) equity

   $ 19,478      $ 13,266      $ 13,821      $ 23,821   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Achaogen, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands except for share and per share amounts)

 

     Year Ended December 31,     Nine Months Ended
September 30,
 
     2011     2012     2012     2013  
                 (unaudited)  

Contract revenue

   $ 22,474      $ 17,941      $ 13,971      $ 12,320   

Operating expenses:

        

Research and development

     35,210        26,581        23,036        16,685   

General and administrative

     7,979        7,349        5,668        5,418   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     43,189        33,930        28,704        22,103   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (20,715     (15,989     (14,733     (9,783

Interest expense and other, net

     (166     (2,427     (1,799     (1,104

Interest income and other, net

     15        51        47        261   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss and comprehensive loss

   $ (20,866   $ (18,365   $ (16,485   $ (10,626
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per common share

   $ (5.97   $ (4.80   $ (4.39   $ (2.50
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share

     3,494,897        3,828,104        3,755,025        4,243,898   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     $ (0.21     $ (0.10
    

 

 

     

 

 

 

Weighted-average common shares outstanding used to calculate pro forma basic and diluted net loss per common share (unaudited) (Note 2)

       88,651,224          103,995,544   
    

 

 

     

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Achaogen, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands except for share and per share amounts)

 

    Convertible
Preferred Stock
    Common Stock     Additional
Paid-In
Capital
    Accumulated
Deficit
    Total
Stockholders’
Deficit
 
  Shares     Amount     Shares     Amount        

Balance at January 1, 2011

    78,326,923      $ 100,354        3,442,504      $ 3      $ 1,124      $ (76,381   $ (75,254

Issuance of common stock under stock plan

    —          —          120,602        —          36        —          36   

Vesting of early exercised options

    —          —          —          —          2        —          2   

Stock-based compensation expense

    —          —          —          —          866        —          866   

Net loss and comprehensive loss

    —          —          —          —          —          (20,866     (20,866
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

    78,326,923        100,354        3,563,106        3        2,028        (97,247     (95,216

Issuance of common stock under stock plan

    —          —          549,360        1        173        —          174   

Stock-based compensation expense

    —          —          —          —          829        —          829   

Net loss and comprehensive loss

    —          —          —          —          —          (18,365     (18,365
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2012

    78,326,923        100,354        4,112,466        4        3,030        (115,612     (112,578

Sale of shares of Series D convertible preferred stock, net of issuance costs of $148 (unaudited)

    11,338,412        12,209        —          —          —          —          —     

Issuance of shares of Series D convertible preferred stock in exchange for convertible notes and interest payable to related parties (unaudited)

    2,505,628        2,732        —          —          —          —          —     

Issuance of shares of Series D convertible preferred stock upon conversion of the related-party loan payable to The Wellcome Trust (unaudited)

    6,414,790        6,992        —          —          —          —          —     

Issuance of common stock under stock plan (unaudited)

    —          —          209,057        —          61        —          61   

Stock-based compensation expense (unaudited)

    —          —          —          —          826        —          826   

Net loss and comprehensive loss (unaudited)

    —          —          —          —          —          (10,626     (10,626
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013 (unaudited)

    98,585,753      $ 122,287        4,321,523      $ 4      $ 3,917      $ (126,238   $ (122,317
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Achaogen, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

     Year Ended
December 31,
    Nine Months Ended
September 30,
 
     2011     2012     2012     2013  
                 (unaudited)  

Cash flows from operating activities:

        

Net loss

   $ (20,866   $ (18,365   $ (16,485   $ (10,626

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation and amortization

     580        565        414        415   

Stock-based compensation expense

     866        829        617        826   

Loss on fixed assets disposition

     2        —          —          —     

Non-cash interest expense relating to notes payable

     37        524        360        378   

Non-cash interest expense relating to related-party convertible loan payable

     —          1,246        1,030        197   

Non-cash restructuring charges

     —         —         —         196   

Change in operating assets and liabilities:

        

Contracts receivable

     261        631        684        (157

Prepaids and other assets

     120        98        312        249   

Accounts payable and accrued liabilities

     1,383        (1,911     (601     1,150   

Other liabilities

     500        (379     (236     (201
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

     (17,117     (16,762     (13,905     (7,573
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Purchase of property and equipment

     (1,237     (568     (249     (120

Change in restricted cash

     —          35        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (1,237     (533     (249     (120
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from issuance of convertible preferred stock, net of issuance costs

     —          —          —          12,209   

Proceeds from issuance of related-party convertible notes payable

     —          2,687        —          —     

Proceeds from the exercise of stock options, net of repurchases

     36        174        77        61   

Proceeds from issuance of related-party convertible loan payable

     —          2,445        2,445        —     

Proceeds from issuance of notes payable

     3,943        7,996        7,996        —     

Repayment of notes payable

     —          (1,462     (362     (3,438
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     3,979        11,840        10,156        8,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (14,375     (5,455     (3,998     1,139   

Cash and cash equivalents, beginning of period

     26,903        12,528        12,528        7,073   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 12,528      $ 7,073      $ 8,530      $ 8,212   
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosures of cash flow information

        

Interest paid

   $ 27      $ 699      $ 467      $ 555   
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental disclosures of noncash investing and financing information

        

Conversion of related-party convertible loan and notes payable to convertible preferred stock

   $ —        $ —        $ —        $ 9,724   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

F-6


Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements

(Amounts as of September 30, 2013 and for the nine-month periods ended September 30, 2012 and 2013 are unaudited)

1. Organization and Basis of Presentation and Consolidation

Achaogen, Inc. (together with its consolidated subsidiary, the “Company”) is a clinical-stage biopharmaceutical company committed to the discovery, development, and commercialization of novel antibacterials to treat multi-drug resistant gram-negative infections. The Company is developing plazomicin, its lead product candidate, for the treatment of serious bacterial infections due to multi-drug resistant Enterobacteriaceae, including carbapenem-resistant Enterobacteriaceae. The Company expects to initiate a Phase 3 superiority trial of plazomicin in the first quarter of 2014.

The Company was incorporated in Delaware in 2002 and commenced operations in 2004. Since commencing operations in 2004, the Company has devoted substantially all of its resources to identifying and developing its product candidates, including conducting preclinical studies and clinical trials and providing general and administrative support for these operations.

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and include the consolidated accounts of the Company and its subsidiary. Intercompany accounts and transactions have been eliminated in consolidation. During 2012, the Company established a wholly owned foreign subsidiary in the United Kingdom. There have been no significant activities for this entity during the fiscal year ended December 31, 2012 and the nine months ended September 30, 2013 (unaudited).

The Company has incurred losses and negative cash flows from operations since its inception. As of September 30, 2013 (unaudited), the Company had cash and cash equivalents of approximately $8.2 million and an accumulated deficit of approximately $126.2 million (unaudited). Management expects to continue to incur additional losses in the foreseeable future as the Company continues its research and development activities. Management plans to finance operations through equity or debt financing arrangements, government contracts, and/or third party collaboration funding; however, if the Company is unable to raise additional funding to meet its working capital needs, it will be forced to delay or reduce the scope of its research programs and/or limit or cease its operations.

The Company believes that its available cash and cash equivalents as of September 30, 2013, and the additional $10.0 million raised through the issuance of the Company’s Series D convertible preferred stock in November 2013 (see Note 15), will be sufficient to fund operations through at least July 31, 2014, and additional capital will be needed thereafter.

2. Summary of Significant Accounting Policies

Use of Estimates

The accompanying financial statements have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent liabilities. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accruals, fair value of liabilities, convertible preferred stock and related warrants, common stock and stock-based awards and income taxes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

Unaudited Interim Financial Statements

The accompanying consolidated balance sheet as of September 30, 2013, the consolidated statements of operations and comprehensive loss and cash flows for the nine months ended September 30, 2012 and 2013 and the consolidated statements of convertible preferred stock and stockholders’ deficit as of September 30, 2013 are unaudited. The financial data and other information disclosed in these notes to the financial statements related to September 30, 2013 and the nine-month periods ended September 30, 2012 and 2013 are also unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s consolidated financial position as of September 30, 2013 and the results of its consolidated operations and cash flows for the nine months ended September 30, 2012 and 2013. The results for the nine months ended September 30, 2013 are not necessarily indicative of results to be expected for the year ending December 31, 2013 or for any other interim period or for any future year.

Unaudited Pro Forma Stockholders’ Equity

Pro forma basic and diluted net loss per share has been computed to give effect to (i) the assumed conversion of the 98,585,753 shares of convertible preferred stock outstanding as of September 30, 2013 into 105,081,950 shares of common stock in connection with the Company’s proposed initial public offering, or IPO, (ii) the conversion of all warrants exercisable for convertible preferred stock outstanding as of September 30, 2013 into warrants exercisable for shares of common stock, resulting in the reclassification of the related convertible preferred stock warrant liabilities, included in other long-term liabilities, to additional paid-in capital, and (iii) the sale and issuance of 9,174,314 shares of Series D convertible preferred stock in November 2013 and the assumed conversion into 9,174,314 shares of common stock (see Note 15) in connection with the IPO, which when added to the existing 4,321,523 shares of common stock outstanding as of September 30, 2013 (unaudited), results in a total of 118,577,787 shares of common stock. In addition, the Company expects that there will be a net exercise of a common stock warrant for 10,000 shares at an exercise price of $0.14 per share, which warrant will expire upon completion of the IPO if not exercised. The pro forma net loss per share attributable to common stockholders does not include the shares expected to be sold and related proceeds to be received from the IPO. For purposes of pro forma basic and diluted loss per share attributable to common stockholders, all shares of convertible preferred stock have been treated as though they had been converted to common stock in all periods in which such shares were outstanding.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, contracts receivable, prepaid and other current assets, accounts payable, accrued liabilities, and certain related-party convertible notes payable approximate fair value due to their short-term maturities.

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. Cash equivalents include only securities having an original maturity of three months or less at the time of purchase. The Company limits its credit risk associated with cash and cash equivalents by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds. As of December 31, 2011 and 2012 and September 30, 2013 (unaudited), cash and cash equivalents consisted of bank deposits, cash, and investments in money market funds.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Restricted Cash

At December 31, 2011 and 2012 and September 30, 2013 (unaudited), the Company had long-term restricted cash of $162,000, $127,000, and $127,000, respectively. The restricted cash, which consists of a money market account with one of the Company’s financial institutions, serves as collateral for a letter of credit provided as a security deposit under the Company’s facility lease. The facility lease expires on April 14, 2017.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. The Company has one operating segment.

Customer Concentration

For the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2013 (unaudited), all of the Company’s revenue has been generated solely from funding pursuant to U.S. government contracts, and accordingly all contracts receivable relate to funding from U.S. government contracts.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash and cash equivalents. Cash and cash equivalents are deposited in checking and money market accounts at one financial institution. Management believes that the financial institution is financially sound, and, accordingly, minimal credit risk exists with respect to this financial institution. The Company is exposed to credit risk in the event of default by the financial institution holding its cash and cash equivalents to the extent recorded in the balance sheets. Such deposits exceed federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Contracts Receivable

Contracts receivable represent amounts owed to the Company under certain government contracts. The Company had no amounts reserved for doubtful accounts as of December 31, 2011 and 2012, and September 30, 2013 (unaudited), respectively, as the Company expects full collection of the receivable balances.

Property and Equipment, Net

Property and equipment consists of office equipment, laboratory equipment, and leasehold improvements and is stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years. Leasehold improvements are amortized over their estimated useful lives or the remaining lease term, whichever is shorter. Maintenance and repair costs are charged as expense to the Company’s consolidated statement of operations and comprehensive loss when incurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

recoverable. If indicators of impairment exist, an impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment charge is determined based upon the excess of the carrying value of the asset over its estimated fair value, with estimated fair value determined based upon an estimate of discounted future cash flows or other appropriate measures of estimated fair value. As of December 31, 2011 and 2012, management believes that no revision to the remaining useful lives or write-down of long-lived assets is required. For the nine months ended September 30, 2013 (unaudited), the Company recorded impairment charges of $194,000 related to the cessation of use of leasehold improvements and property and equipment in certain areas of leased property. See Note 14 for further information regarding the restructuring activities and the impairment.

Convertible Preferred Stock Warrant Liabilities

The Company accounts for its Series A and Series C convertible preferred stock warrant liabilities as freestanding warrants for shares that are puttable or redeemable. These warrants are classified as liabilities on the consolidated balance sheets at their estimated fair value. At the end of each reporting period, changes in estimated fair value during the period are recorded as a component of interest expense and other, net. The Company will continue to adjust the liability for changes in estimated fair value until the earlier of the expiration of the warrants, exercise of the warrants, or conversion of the warrants, including upon the completion of an IPO, to common stock warrants that will no longer be subject to remeasurement.

Stock-Based Compensation

The Company uses the Black-Scholes option-pricing valuation model to estimate the grant-date fair value of stock option awards with time-based vesting terms. The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions regarding a number of complex and subjective variables. The Company records stock-based compensation expense, net of the estimated impact of forfeited awards. As such, the Company recognizes stock-based compensation expense only for those stock-based awards that are expected to vest over their requisite service period, based on the vesting provisions of the individual underlying grants.

During 2012 and 2013, the Company also issued stock-based option awards with market-based conditions that vest upon achievement of certain market price thresholds of the Company’s common stock. The estimated fair value for market-based stock option awards is determined using a lattice valuation model with a Monte-Carlo simulation. The model takes into consideration the historical volatility of the Company’s stock and the risk-free interest rate at the date of grant. In addition, the model is used to estimate the derived service period for the awards. The derived service period is the estimated period of time that would be required to satisfy the market condition, assuming the market condition will be satisfied. Stock-based compensation expense is recognized over the implicit service period derived from the Monte-Carlo simulation model, as applicable, but is accelerated if the market condition is achieved earlier than estimated.

For non-employee stock-based awards, the measurement date on which the estimated fair value of the stock-based award is calculated is equal to the earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached or (ii) the date at which the counterparty’s performance is complete. The Company recognizes stock-based compensation expense for the estimated fair value of the vested portion of non-employee awards in its consolidated statements of operations and comprehensive loss.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Revenue Recognition

The Company recognizes revenue when: (i) evidence of an arrangement exists, (ii) fees are fixed or determinable, (iii) services have been delivered, and (iv) collectability is reasonably assured. The Company currently generates revenue entirely from government contracts. Government contracts are agreements that provide the Company with payments for certain types of expenditures in return for research and development activities over a contractually defined period. Revenue from government contracts is recognized in the period during which the related costs are incurred and the related services are rendered, provided that the applicable conditions under the government contracts have been met.

Funds received from third parties under contract arrangements are recorded as revenue if the Company is deemed to be the principal participant in the contract arrangements because the activities under the contracts are part of the Company’s development programs. If the Company is not the principal participant, the funds from contracts are recorded as a reduction to research and development expense. Contracts funds received are not refundable and are recognized when the related qualified research and development costs are incurred and when there is reasonable assurance that the funds will be received. Funds billed and received in advance are recorded as deferred revenue.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses include certain payroll and personnel expenses; laboratory supplies; consulting costs; external contract research and development expenses; and allocated overhead, including rent, equipment depreciation and utilities, and relate to both Company-sponsored programs as well as costs incurred pursuant to collaboration agreements and government contracts. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed.

The Company estimates preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Leases

The Company enters into lease agreements for its laboratory and office facilities. These leases qualify as operating leases and are therefore classified as operating leases. Rent expense is recognized on a straight-line basis over the term of the lease and, accordingly, the Company records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Incentives granted under the Company’s facilities leases, including allowances to fund leasehold improvements and rent holidays, are capitalized and are recognized as reductions to rental expense on a straight-line basis over the term of the lease.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement.

Net Loss and Unaudited Pro Forma Net Loss Per Share

Basic net loss per common share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common share equivalents outstanding during the period. Because the Company has reported a net loss for the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), diluted net loss per common share is the same as basic net loss per common share for those periods.

The following table sets forth the computation of the basic and diluted net loss per share during the years ended December 31, 2011 and 2012, and for the nine-month periods ended September 30, 2012 and 2013 (in thousands, except share and per share data):

 

     Years Ended December 31,     Nine Months  Ended
September 30,
 
     2011     2012     2012     2013  
                 (unaudited)  

Net loss

   $ (20,866   $ (18,365   $ (16,485   $ (10,626

Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share

     3,494,897        3,828,104        3,755,025        4,243,898   

Basic and diluted net loss per common share

   $ (5.97   $ (4.80   $ (4.39   $ (2.50
  

 

 

   

 

 

   

 

 

   

 

 

 

The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):

 

     December 31,      September 30,  
     2011      2012      2012      2013  
            (unaudited)  

Convertible preferred stock

     84,823,120         84,823,120         84,823,120         105,081,950   

Warrants to purchase convertible preferred stock

     224,845         445,028         445,028         445,028   

Options to purchase common stock

     10,339,985         14,745,603         15,138,626         15,461,893   

Warrants to purchase common stock

     10,000         10,000         10,000         10,000   

The unaudited pro forma basic and diluted loss per share for the year ended December 31, 2012 and the nine-month period ended September 30, 2013 have been computed using the weighted-average number of shares of common stock outstanding after giving pro forma effect to the conversion of all shares of convertible preferred stock upon an IPO by treating all shares of convertible preferred stock as if they had been converted to common

 

F-12


Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

stock in all periods in which such shares were actually outstanding. The following table sets forth the computation of the Company’s unaudited pro forma basic and diluted net loss per share during the year ended December 31, 2012 and the nine-month period ended September 30, 2013 (in thousands, except for share and per share amounts):

 

     Year Ended
December 31,
2012
    Nine Months
Ended
September 30,
2013
 
           (unaudited)  

Pro forma basic and diluted net loss per common share

    

Numerator:

    

Net loss

   $ (18,365   $ (10,626

Denominator:

    

Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share

     3,828,104        4,243,898   

Pro forma adjustments to reflect the assumed conversion of convertible preferred stock and warrants

     84,823,120        99,751,646   
  

 

 

   

 

 

 

Shares used to calculate pro forma basic and diluted net loss per common share

     88,651,224        103,995,544   
  

 

 

   

 

 

 

Pro forma basic and diluted net loss per common share

   $ (0.21   $ (0.10
  

 

 

   

 

 

 

3. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The carrying amount of certain financial instruments, including cash and cash equivalents, contracts receivable, accounts payable, accrued liabilities, and certain related-party convertible notes approximate fair value due to their relatively short maturities. Assets and liabilities recorded at fair value on a recurring basis in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 : Quoted prices in active markets for identical assets or liabilities.

Level 2 : Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s financial instruments have consisted of Level 1 assets and Level 3 liabilities. Where quoted prices are available in an active market, securities are classified as Level 1 of the valuation hierarchy. Level 1 securities include highly liquid money market funds and fixed- income securities issued by the U.S. government or its agencies.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuation hierarchy. Level 3 liabilities that are measured at estimated fair value on a recurring basis consist of convertible preferred stock warrant liabilities and derivative liabilities associated with certain convertible loans.

The estimated fair values of the outstanding preferred stock warrant liabilities are measured using the Black-Scholes option-pricing model. Inputs used to determine estimated fair value include the estimated fair value of the underlying preferred stock at the measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends on convertible preferred stock and expected volatility of the price of the underlying convertible preferred stock.

The estimated fair value of the derivative liability associated with the convertible loan due to beneficial conversion features, or BCF, on certain of the Company’s convertible loans is measured by multiplying (1) the intrinsic value of the 20% conversion discount on the effective date and (2) the number of shares converted.

During the periods presented, the Company has not changed the manner in which it values liabilities that are measured at estimated fair value using Level 3 inputs. There were no transfers within the hierarchy during the years ended December 31, 2011 and 2012 or during the nine months ended September 30, 2013 (unaudited).

As of December 31, 2011 and 2012, and September 30, 2013, financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):

As of September 30, 2013 (unaudited):

 

     Level 1      Level 2      Level 3      Total  
     (in thousands)  

Assets

           

Cash

   $ 2,385       $ —         $ —         $ 2,385   

Money market funds

     5,827         —           —           5,827   

Restricted cash

     127         —           —           127   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 8,339       $ —         $ —         $ 8,339   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported as:

           

Cash and cash equivalents

   $ 8,212            
  

 

 

          

Restricted cash

   $ 127            
  

 

 

          

Liabilities

           

Convertible preferred stock warrant liabilities

   $ —         $ —         $ 176       $ 176   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

F-14


Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

As of December 31, 2012:

 

     Level 1      Level 2      Level 3      Total  
     (in thousands)  

Assets

           

Cash

   $ 5,246       $ —         $ —         $ 5,246   

Money market funds

     1,827         —           —           1,827   

Restricted cash

     127         —           —           127   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 7,200       $ —         $ —         $ 7,200   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported as:

           

Cash and cash equivalents

   $ 7,073            
  

 

 

          

Restricted cash

   $ 127            
  

 

 

          

Liabilities

           

Convertible preferred stock warrant liabilities

   $ —         $ —         $ 237       $ 237   

Derivative liability in connection with convertible note payable

     —           —           1,398         1,398   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ —         $ —         $ 1,635       $ 1,635   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011:

 

     Level 1      Level 2      Level 3      Total  
     (in thousands)  

Assets

           

Cash

   $ 1,701       $ —         $ —         $ 1,701   

Money market funds

     10,827         —           —           10,827   

Restricted cash

     162         —           —           162   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 12,690       $ —         $ —         $ 12,690   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported as:

           

Cash and cash equivalents

   $ 12,528            
  

 

 

          

Restricted cash

   $ 162            
  

 

 

          

Liabilities

           

Convertible preferred stock warrant liabilities

   $ —         $ —         $ 126       $ 126   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

F-15


Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The following table provides a summary of changes in the estimated fair value of the Company’s liabilities measured at estimated fair value using significant Level 3 inputs for the years ended December 31, 2011 and 2012 and the nine months ended September 30, 2013 (unaudited) (in thousands):

 

     Estimated
Fair Value of
Convertible
Preferred
Stock

Warrant
Liabilities
    Estimated
Fair Value
of
Derivative
Liability
 

Balance at January 1, 2011

   $ 55      $ —     

Initial estimated fair value of convertible preferred stock warrant liabilities for newly issued warrants

     86        —     

Change in estimated fair value of convertible preferred warrant liabilities included in interest income and other

     (15     —     
  

 

 

   

 

 

 

Balance at December 31, 2011

     126        —     

Initial estimated fair value of convertible preferred stock warrant liabilities for newly issued warrants

     163        —     

Change in estimated fair value of convertible preferred warrant liabilities included in interest income and other

     (52     —     

Initial estimated fair value of derivative liability

     —          1,398   
  

 

 

   

 

 

 

Balance at December 31, 2012

     237        1,398   

Change in estimated fair value of convertible preferred stock warrant liabilities included in interest expense and other, net (unaudited)

     (61     —     

Extinguishment of derivative liability (unaudited)

     —          (1,398
  

 

 

   

 

 

 

Balance at September 30, 2013 (unaudited)

   $ 176      $ —     
  

 

 

   

 

 

 

The changes in the estimated fair value of the warrant liabilities of $15,000, $52,000 and $61,000 are recorded as interest income and other, net for the years ended December 31, 2011 and 2012, and the nine-month period ended September 30, 2013 (unaudited), respectively.

4. Balance Sheet Components

Property and Equipment

Property and equipment consist of the following (in thousands):

 

     December 31,     September  30,
2013
 
     2011     2012    
                 (unaudited)  

Office equipment

   $ 1,036      $ 1,126      $ 1,017   

Laboratory equipment

     2,621        2,823        2,943   

Leasehold improvements

     972        1,231        869   
  

 

 

   

 

 

   

 

 

 
     4,629        5,180        4,829   

Less: accumulated depreciation and amortization

     (3,288     (3,836     (3,977
  

 

 

   

 

 

   

 

 

 

Property and equipment, net

   $ 1,341      $ 1,344      $ 852   
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Depreciation and amortization expense for the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), was $580,000, $565,000, $414,000 and $415,000, respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

     December 31,      September  30,
2013
 
     2011      2012     
                   (unaudited)  

Accrued clinical and development expenses

   $ 1,922       $ 525       $ 1,504   

Payroll and related expenses

     1,113         737         678   

Other

     423         305         387   
  

 

 

    

 

 

    

 

 

 
   $ 3,458       $ 1,567       $ 2,569   
  

 

 

    

 

 

    

 

 

 

5. License and Collaboration Agreements

Isis Pharmaceuticals

In January 2006, the Company entered into a license agreement with Isis Pharmaceuticals, Inc., or Isis. Isis granted the Company an exclusive, worldwide license with the right to grant and authorize sublicenses related to the research and development of aminoglycoside products. As an up-front fee, the Company issued 1,071,428 shares of preferred Series A convertible stock at a fair value of $1.40 per share. This license fee of $1,500,000 was recorded as research and development expense in 2006. In further consideration of this license, and in accordance with the terms of the agreement, the Company will be required to make milestone payments with respect to development, regulatory and commercialization milestones, and to pay a percentage of revenue received from sublicensees (if any). All such milestone and sublicense revenue payments may total, in the aggregate, up to but no more than $19,500,000 for the first product and $9,750,000 for the second product commercialized under the agreement with Isis. The Company is also required to pay additional milestone payments of up to $20,000,000 in the aggregate upon the first achievement of specified threshold levels of annual net sales of all aminoglycoside products in a calendar year. The Company is also obligated to pay royalties equal to a low single-digit percentage of annual worldwide net sales of all licensed products, including plazomicin.

In December 2008, the Company met its first milestone under the license with Isis when it filed an Investigational New Drug application, or IND, for the first aminoglycoside product. The Company paid Isis $500,000 in cash and opted to pay the remaining amount of $500,000 in the form of 263,158 shares of Series B convertible preferred stock with a value of $1.90 per share. The $1,000,000 milestone payment was recorded as research and development expense.

In July 2010, the Company met its second milestone under the license with Isis when it initiated Phase 2 clinical trials for the first aminoglycoside product. The Company paid Isis $2,000,000 in cash and recorded the amount as research and development expense. There are no outstanding payments due as of December 31, 2012 and September 30, 2013 (unaudited).

University of Washington

In December 2006, the Company entered into a license agreement with the University of Washington, referred to herein as the UW Agreement. Under the UW Agreement, the University granted the Company rights

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

to the licensed patents resulting from the University’s research program on certain novel LpxC inhibitor antibacterial compounds and related technology. The Company paid an up-front fee, which was recorded as research and development expense in the Company’s consolidated statements of operations and comprehensive loss. The Company is obligated to reimburse the University for all reasonable out-of-pocket costs related to maintaining the licensed patents. For the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the Company paid, and recorded as research and development expense in the Company’s consolidated statements of operations and comprehensive loss, $52,000, $26,000, $19,000 and $1,000, respectively, in costs related to maintaining these patents. Since December 2009, and until the grant of regulatory approval for products covered by the UW Agreement, the Company has been and will continue to be obligated to pay a nominal annual license maintenance fee to the University. If the Company commercializes products covered by the licensed patents, the Company will be obligated to pay royalties equal to a low single-digit percentage of annual worldwide net sales of such products, subject to a specified minimum annual royalty following the regulatory approval to market a licensed product. In further consideration of this license, the Company may be obligated to make product development and regulatory milestone payments of up to $2,150,000 for the first product commercialized under the UW Agreement to achieve the specified milestone, and up to $1,075,000 for each of the second and third products to achieve the specified milestones.

In April 2012, the Company met its first milestone under the UW Agreement when it filed an IND for a product candidate from the Company’s LpxC inhibitor program. During 2012, the Company paid $150,000 in cash and recorded the amount as research and development expense. At December 31, 2012 and September 30, 2013 (unaudited), the Company had $10,000 and zero, respectively, in outstanding payments due under the UW Agreement.

University of Montreal

In conjunction with its aminoglycoside program, the Company entered into a multi-year research collaboration with the University of Montreal effective April 2006. The research collaboration required a total three-year funding commitment of $450,000 by the Company through April 23, 2009. The collaboration agreement was renewed in April 2009 with an additional $450,000 funding commitment through April 2012. The agreement expired in April 2012. For the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the Company paid, and recorded as research and development expense, $188,000, $38,000, $38,000 and zero, respectively.

6. Government Contracts

Certain of the Company’s drug discovery and development activities are performed under contracts with U.S. government agencies. Management has determined that the Company is the principal participant in the following contract arrangements, and, accordingly, the Company records amounts earned under the arrangements as revenue.

Defense Threat Reduction Agency

In June 2007, the Company was awarded a contract by the Defense Threat Reduction Agency, or DTRA, to develop novel antibacterials for the treatment of infections due to biodefense pathogens. The original contract provided the Company with up to $18,790,000 in funding over two years. The contract was subsequently modified to extend through the end of November 2012 and to provide for a total of $35.4 million of funding for drawdown. In November 2012, DTRA terminated the contract for convenience.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

During 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the Company recognized revenue of $6,787,000, $1,542,000, $657,000 and zero, respectively, under this agreement, of which $1,151,000, $804,000 and zero were included in contracts receivable at December 31, 2011 and 2012, and September 30, 2013 (unaudited), respectively.

National Institute for Allergy and Infectious Disease

In September 2008, the Company was awarded a contract by the National Institute for Allergy and Infectious Disease, or NIAID, to conduct research and development of extended-spectrum aminoglycoside antibiotics for the treatment of serious gram-negative infections. As amended in September 2011, this contract provided the Company with up to $22,188,000 over a five-year term through August 2013. During the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the Company recognized revenue of $6,235,000, $2,561,000, $2,253,000 and $167,000, respectively, under this agreement, of which $1,718,000, $202,000 and $40,000 were included in contracts receivable at December 31, 2011 and 2012, and September 30, 2013 (unaudited), respectively.

Biomedical Advanced Research and Development Authority

In August 2010, the Company was awarded a contract with the Biomedical Advanced Research and Development Authority, or BARDA, for the development, manufacturing, nonclinical and clinical evaluation of, and regulatory filings for, plazomicin as a countermeasure for disease caused by antibiotic-resistant pathogens and biothreats. The original contract included committed funding of $27,600,000 for the first two years of the contract and subsequent options exercisable by BARDA to provide additional funding. In September 2012, BARDA modified the contract to increase the total contract committed funding to $43,398,000 through March 2014. In April 2013, the Company was awarded an additional $60,410,000 under the contract to support its Phase 3 clinical trial of plazomicin to increase the total committed funding under this contract to $103,808,000. During the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the Company recognized revenue of $9,343,000, $11,609,000, $9,467,000 and $11,882,000, respectively, under this agreement, of which $2,020,000, $1,810,000 and $4,300,000 were included in contracts receivable at December 31, 2011 and 2012, and September 30, 2013 (unaudited), respectively.

U.S. Army Medical Research Acquisition Authority

In May 2012, the Company was awarded a one-year, $2,499,000 contract by the U.S. Army Medical Research Acquisition Authority to support its Phase 1 clinical study of ACHN-975, a product candidate from its LpxC inhibitor program. The Company recognized revenue of $2,228,000, $1,594,000, and $271,000 for the year ended December 31, 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), respectively, of which $1,442,000 and $75,000 were included in contracts receivable at December 31, 2012 and September 30, 2013 (unaudited), respectively.

7. Commitments

Facility Lease Agreement

In December 2010, the Company entered into an amended and restated lease agreement for its facility in South San Francisco, consisting of approximately 35,000 square feet. As part of the amended and restated lease agreement, the landlord agreed to complete certain leasehold improvement work on the additional premises in the amount of $362,000. Such tenant allowance was recorded as a leasehold improvement and is being amortized over the term of the lease. In April 2013, the Company subleased 19,000 square feet to a subtenant. The sublease

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

will expire in March 2014. In June 2013, the Company further amended its lease to extend the lease term through April 2017 for the remaining space of 16,234 square feet. This extension of the lease term does not include the space being subleased.

The Company has provided a letter of credit in the amount of $127,000 as a security deposit on the lease, which letter of credit is collateralized by a money market account. The Company records the collateralized deposit as restricted cash.

The Company recognizes rent expense on a straight-line basis over the lease period and has accrued for rent expense incurred but not paid. Aggregate rent expense, net of sublease income, was $963,000, $957,000, $718,000 and $515,000 for the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), respectively. The Company received $194,000 of sublease income for the nine months ended September 30, 2013 (unaudited) and expects to receive sublease income of $194,000 through March 31, 2014, which is the end of both the lease and sublease term.

Future minimum payments under all noncancelable operating leases as of December 31, 2012, are as follows (in thousands):

 

2013

   $ 1,200   

2014

     308   
  

 

 

 

Total minimum lease payments

   $ 1,508   
  

 

 

 

Future minimum payments under all noncancelable operating leases, excluding expected future sublease income, as of September 30, 2013 (unaudited), are as follows (in thousands):

 

2013

   $ 308   

2014

     439   

2015

     578   

2016

     595   

2017

     179   
  

 

 

 

Total minimum lease payments

   $ 2,099   
  

 

 

 

Guarantees and Indemnifications

As permitted under Delaware law and in accordance with the Company’s bylaws, the Company is required to indemnify its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its directors. The Company believes the fair value of the indemnification rights and agreements is minimal. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of December 31, 2011 and 2012 and September 30, 2013 (unaudited).

8. Borrowings

Oxford Finance and SVB Loan Agreement

In November 2011, the Company entered into a loan and security agreement, referred to herein as the Loan Agreement, with Oxford Finance LLC and Silicon Valley Bank, or SVB, under which the Company could borrow up to $12,000,000 through June 30, 2012, with $8,000,000 being drawable by the Company at its option, and the remaining $4,000,000 being drawable upon the occurrence of an IND Event, as defined in the Loan Agreement.

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The Company borrowed $4,000,000 in November 2011, and the remaining $8,000,000 in April 2012, upon the occurrence of an IND Event.

The interest rate, which was fixed at the closing of each tranche, equals the three-month LIBOR plus 7.75%. The interest rates for the tranches under the Loan Agreement are 8.18% and 8.22% per annum. Payments are monthly in arrears and interest only until September 1, 2012, followed by 30 equal monthly payments of principal and interest through the scheduled maturity date of February 1, 2015. In addition, a final payment equal to 8.25% of the aggregate amount drawn will be due on February 1, 2015, or upon termination of the Loan Agreement, which is being accreted as interest expense over the term of the loan using the effective-interest method.

In accordance with the terms of the Loan Agreement, the Company agreed to issue warrants to Oxford Finance LLC and SVB upon each drawdown to purchase preferred stock equal to 3% of the advanced amount using a share strike price equal to the lower of the price per share of the Company’s Series C convertible preferred stock or the price per share in its next round convertible preferred stock financing. During 2011 and 2012, the Company issued warrants to Oxford Finance LLC and SVB to purchase 110,092 and 220,183 shares, respectively, of its Series C convertible preferred stock at an exercise price of $1.09 per share. The fair value of these warrants at the date of issuance was approximately $86,000 and $163,000 and was recorded as a debt discount and is being amortized as interest expense over the term of the loan using the effective-interest method.

As of December 31, 2012 and September 30, 2013 (unaudited), these warrants remained outstanding and exercisable. Immediately prior to the closing of the IPO, these warrants will automatically convert into warrants exercisable for shares of common stock, resulting in the reclassification of the related preferred stock warrant liabilities to additional paid-in capital.

The loans are secured by substantially all of the Company’s assets, except for intellectual property. Under the Loan Agreement, the Company also agreed to certain restrictions regarding the pledging or encumbrance of its intellectual property. The Loan Agreement includes customary administrative covenants, but does not include any financial maintenance or operating related covenants. In addition, Oxford Finance LLC and SVB were granted the rights, at their discretion, to participate in certain future equity financings, other than the Company’s IPO, by investing up to $250,000 in the Company on the same terms, conditions, and pricing afforded to others participating in such subsequent offerings. Neither Oxford Finance LLC nor SVB exercised their right to participate in the Company’s Series D financing. Future minimum debt obligation payments are as follows as of the dates indicated (in thousands):

 

     December 31,
2011
    December 31,
2012
    September 30,
2013
 
                 (unaudited)  

2012

   $ 810      $ —        $ —     

2013

     1,774        5,325        1,331   

2014

     1,774        5,325        5,325   

2015

     626        1,878        1,878   
  

 

 

   

 

 

   

 

 

 

Total minimum payments

     4,984        12,528        8,534   

Less amount representing interest payments

     (984     (1,990     (1,434
  

 

 

   

 

 

   

 

 

 

Present value of future obligation payments

     4,000        10,538        7,100   

Unamortized discount on notes payable

     (79     (135     (58

Accretion of the final payment

     26        444        744   

Less current portion

     (447     (4,536     (4,872
  

 

 

   

 

 

   

 

 

 

Notes payable, net of current portion

   $ 3,500      $ 6,311      $ 2,914   
  

 

 

   

 

 

   

 

 

 

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The Company recorded interest expense related to the loan of $81,000, $1,160,000, $806,000 and $832,000, for the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), respectively. The annual effective interest rates of the notes payable, including the accretion of the final payments, are approximately 11.9% and 13.1%.

Funding Agreement with The Wellcome Trust

In March 2010, the Company entered into a Funding Agreement, referred to herein as the 2010 Wellcome Funding Agreement, with The Wellcome Trust Limited, a company registered in England and Wales, as trustee for The Wellcome Trust, which is referred to herein as the Trust. Under the 2010 Wellcome Funding Agreement, the Trust provided an unsecured convertible loan of $5,594,000 to the Company to progress its aminoglycoside program. The funds were advanced to the Company in two tranches of (a) $3,148,000 upon the signing of the 2010 Wellcome Funding Agreement and (b) the remaining amount upon the satisfaction of a milestone defined under the 2010 Wellcome Funding Agreement.

The Trust, at its discretion, had the right to convert any outstanding balance on the loan into the Company’s stock at a conversion price representing a 20% discount to the applicable share price: (a) after the first round of equity financing following the execution of the 2010 Wellcome Funding Agreement, using the share price from such round; (b) immediately prior to the completion of a sale of the Company, using the price per share paid in the sale; (c) in case of an IPO, prior to the admission to the trading of the Company’s common stock on the applicable exchange, using the share price in the IPO; and (d) in certain other circumstances, including the occurrence of an event of default, using the share price from the first round of equity financing following the execution of the 2010 Wellcome Funding Agreement, or if such has not yet occurred, using a share price determined by independent accountants appointed jointly by the parties. In addition, the Trust also had the right to demand repayment of the entire loan amount or part of the loan together with accrued interest, which accrued at the rate of 2% per annum above the three-month dollar LIBOR, upon the occurrence of certain circumstances related to a sale or IPO of the Company or in the event of default of the 2010 Wellcome Funding Agreement. In addition, the Trust was able to demand repayment of such amounts at any time after the third anniversary of the end of the drawdown period. However, the Trust could not require the Company to repay the loan and accrued interest if, as a result of such repayment, the Company would likely become insolvent.

The discount feature of the loan, and the control of conversion by the lender under this funding agreement created a beneficial conversion feature, or BCF, which is accounted for as derivative liability and recorded in long-term liabilities. The accounting for a BCF requires that the BCF be recognized by allocating the intrinsic value of the conversion option to additional paid-in capital, resulting in a discount on the convertible instrument. The fair value of the BCF is measured by multiplying (1) the intrinsic value of the 20% conversion discount on the effective date with (2) the number of shares converted.

In March 2013, the outstanding balance of the 2010 Wellcome Funding Agreement of $5,594,000, was converted into Series D convertible preferred stock at a conversion price that represented a 20% discount to the issue price. The debt discount was accreted over the life of the debt up to date of redemption, and the Company recorded interest expense related to the 2010 Wellcome Funding Agreement of $74,000, $1,115,000, $898,000 and $153,000 for the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), respectively. As of December 31, 2011 and 2012 and September 30, 2013 (unaudited), $3,148,000, $5,441,000 and zero, respectively, have been recorded as a net long-term liability.

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Convertible Notes Purchase Agreement

In November 2012, the Company entered into a Note Purchase Agreement, referred to herein as the 2012 Bridge Loan Agreement, with a group of existing investors. Under the 2012 Bridge Loan Agreement, the investors severally agreed to purchase convertible promissory notes for a principal amount of up to $3,000,000 in aggregate. For value received, the Company agreed to pay to the investors the principal loan amount plus accrued interest calculated at a rate equal to 6% per annum, computed on the basis of the actual days elapsed and a year of 365 days, on the earlier of (a) May 31, 2013 or (b) when such amounts become automatically due and payable or are declared due and payable by the investors upon default. As of December 31, 2012 and September 30, 2013 (unaudited), $2,687,000 and zero, respectively, have been recorded as a current liability.

On March 6, 2013, the investors under the 2012 Bridge Loan Agreement converted the entire outstanding notes amount plus accrued interest into shares of the Company’s Series D convertible preferred stock at a conversion price of $1.09 per share, which was the issuance price of Series D convertible preferred stock. The Company issued 2,505,628 shares of Series D convertible preferred stock to the investors upon conversion of outstanding loans and accrued interest in the aggregate of $2,732,000 under the 2012 Bridge Loan Agreement.

9. Convertible Preferred Stock

The authorized, issued and outstanding shares of convertible preferred stock and liquidation preferences as of December 31, 2011 and 2012 and September 30, 2013 were as follows:

As of September 30, 2013 (unaudited):

 

     Shares      Liquidation
Amount
     Carrying
Value
 

Series

   Authorized      Outstanding        

Series A

     12,386,071         12,285,711       $ 17,200,000       $ 17,062,000   

Series B

     14,266,839         14,249,997         27,075,000         26,991,000   

Series C

     52,550,000         51,791,215         56,452,000         56,301,000   

Series D

     53,000,000         20,258,830         22,082,000         21,933,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
     132,202,910         98,585,753       $ 122,809,000       $ 122,287,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2011 and 2012:

 

     Shares      Liquidation
Amount
     Carrying
Value
 

Series

   Authorized      Outstanding        

Series A

     12,386,071         12,285,711       $ 17,200,000       $ 17,062,000   

Series B

     14,266,839         14,249,997         27,075,000         26,991,000   

Series C

     52,550,000         51,791,215         56,452,000         56,301,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
     79,202,910         78,326,923       $ 100,727,000       $ 100,354,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company recorded Series A, B, C, and D convertible preferred stock at fair values on the dates of issuance, net of issuance costs. The Company has classified the convertible preferred stock as temporary equity in the consolidated balance sheets due to certain change in control events that are outside the Company’s control, including liquidation, sale or transfer of control of the Company, as holders of the convertible preferred stock can cause redemption of the shares. A redemption event will only occur upon the liquidation or winding up of the Company, a greater than 50% change of control, or a sale of substantially all of its assets. As the redemption

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

event is outside of the Company’s control, all shares of preferred stock have been presented outside of permanent equity in accordance with ASC 480-10-S99-3A, “ Classification and Measurement of Redeemable Securities .”

In May 2013, the Company completed the first of two tranches of its Series D round of financing. The proceeds from the financing were received in two tranches. The majority of the first tranche was received in March 2013 and the Company issued 12,212,853 shares of Series D convertible preferred stock at $1.09 per share to the investors in exchange for cash proceeds of $10,581,000 and conversion of outstanding loans and accrued interest in the aggregate of $2,732,000 under the 2012 Agreement. The conversion price of $1.09 per share represented no discount to the issue price. The remaining amount of the first tranche was received in May 2013 from a new investor for additional cash proceeds of $1,778,000 for the issuance of 1,631,187 shares at a price of $1.09 per share.

The second tranche was closed on November 21, 2013. Under the terms of the stock purchase agreement, the Company issued 9,174,314 additional shares of Series D convertible preferred stock at $1.09 per share for gross cash proceeds of $10,000,002. The second tranche was not contingent upon specific Company milestones or achieving specific financial covenants.

The rights, privileges, and preferences of Series A, B, C, and D convertible preferred stock are listed below:

Conversion Rights

Each share of Series A, B, C, and D convertible preferred stock is convertible at the stockholders’ option at any time into common stock determined by dividing the original issue price of $1.40, $1.90, $1.09, and $1.09, respectively, by the conversion price for such series. The conversion price is subject to adjustment for dilutive issuances, stock splits, reclassifications, and the like. As of September 30, 2013 (unaudited), the conversion prices of Series A, B, C, and D convertible preferred stock were $1.22, $1.43, $1.09, and $1.09 per share, respectively. As of December 31, 2011 and 2012, the conversion prices of Series A, B, and C convertible preferred stock were $1.22, $1.43, and $1.09 per share, respectively. Conversion of all outstanding convertible preferred stock is automatic upon (a) the closing of a firmly underwritten public offering in which the aggregate valuation of the Company immediately prior to the offering is not less than $200,000,000 and the gross cash proceeds received by the Company before underwriting discounts, commissions, and fees are not less than $40,000,000 or (b) the written consent of the holders of at least a majority of the Company’s outstanding preferred stock.

Dividends

Holders of the Series A, B, C, and D convertible preferred stock are each entitled to noncumulative dividends, if and when declared by the board of directors. Dividends to Series A, B, C, and D convertible preferred stockholders are to be paid in advance of any distributions to common stockholders. No dividends have been declared to date.

Voting

Each holder of shares of convertible preferred stock is entitled to voting rights equivalent to the number of shares of common stock into which the respective shares are convertible. Certain financing, acquisition, disposition, and recapitalization transactions require the vote of the majority of the shares of outstanding preferred stock, provided that at least 1,500,000 shares of convertible preferred stock are issued and outstanding.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Liquidation Preference

In the event of a liquidation or winding up of the Company, whether voluntary or involuntary, before payment is made to the holders of any other series of preferred stock or to the holders of common stock, holders of the Series A, B, C, and D convertible preferred stock are entitled to be paid a liquation preference of $1.40, $1.90, $1.09, and $1.09 per share, respectively, together with any declared but unpaid dividends. Any remaining assets would then be distributed among the holders of the common stock on a pro rata basis based on the number of shares of common stock held by them. If the holders of a series of convertible preferred stock would be entitled to greater proceeds if they had converted their shares of such series of preferred stock to common stock prior to such liquidation or winding up of the Company, such series will be deemed to have been so converted for the purpose of calculating the proceeds to be received the holders of such series of preferred stock. If assets are insufficient to make payment in full to all holders of Series A, B, C, and D convertible preferred stock, then the assets or consideration will be distributed ratably among the Series A, B, C, and D convertible preferred stockholders.

Election of Board of Directors

The holders of the Series A, B, and C convertible preferred stock are entitled to elect two members, one member and one member, respectively, of the board of directors at each meeting or pursuant to each consent of stockholders for the election of directors. The holders of common stock, voting as a separate class, are entitled to elect two members of the board of directors at each meeting or pursuant to consent of stockholders for the election of directors. Convertible preferred stockholders together with common stockholders, voting together as a single class, are entitled to elect any additional members of the board of directors. The holders of the Series D convertible preferred stock do not have the right, voting as a separate class, to elect any member of the board of directors.

Warrants

In connection with a loan agreement in 2005, the Company issued warrants to two lenders, SVB and Gold Hill Venture Lending 03, L.P., referred to herein as Gold Hill, to purchase 100,000 shares of the Company’s Series A convertible preferred stock at an exercise price of $1.40 per share. The warrants are exercisable immediately and expire 10 years from the issuance date, or March 15, 2015. The value of the warrants was estimated using the Black-Scholes pricing model, and at issuance, the Company initially recorded the relative fair value of the warrants as a debt discount against the related loan payable balance in its balance sheets. The recorded value of the warrants is being amortized to interest expense using the straight-line method over the term of the related loans.

In connection with the Loan Agreement described in Note 8, the Company issued warrants to Oxford Finance LLC and SVB to purchase 110,092 and 220,183 shares of the Company’s Series C convertible preferred stock at an exercise price of $1.09 per share during 2011 and 2012, respectively. The warrants are exercisable immediately and expire November 1, 2021. The Company estimated the fair value of these warrants as of the issuance date to be $163,000 and $86,000, which were recorded as a debt discount to the loan and consequently a reduction to the carrying value of the loan. The fair value of the warrants was calculated using the Black-Scholes pricing model, and was based on the contractual term of the warrants of 10 years, a risk-free interest rate of 1.95% to 2.01%, an expected volatility of 60% to 64% and a 0% expected dividend yield.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

As of December 31, 2012 and September 30, 2013 (unaudited), the following warrants to purchase shares of common stock and convertible preferred stock were outstanding and exercisable:

 

Warrant Holder

  Issue Date     In Connection With   Warrant to
Purchase
  Shares     Purchase
Price
    Expiration Date  

Oxford Finance LLC

    4/30/2012      Loan agreement   Series C     128,440      $ 1.09        11/1/2021   

SVB

    4/30/2012      Loan agreement   Series C     91,743      $ 1.09        11/1/2021   

Oxford Finance LLC

    11/1/2011      Loan agreement   Series C     64,220      $ 1.09        11/1/2021   

SVB

    11/1/2011      Loan agreement   Series C     45,872      $ 1.09        11/1/2021   

SVB

    3/16/2005      Loan agreement   Series A     35,703      $ 1.40        3/15/2015   

Gold Hill

    3/16/2005      Loan agreement   Series A     64,297      $ 1.40        3/15/2015   

Fred Hutchison Cancer Research Center

    12/7/2004      Collaboration agreement   Common stock     10,000      $ 0.14       

 

12/7/2014 or

IPO, if earlier

  

  

The carrying value of outstanding preferred stock warrants is recorded as a liability as of December 31, 2011 and 2012 and September 30, 2013 (unaudited). The Company will continue to adjust the preferred stock warrant liabilities for changes in the fair value of the warrants until the earlier of the exercise of the warrants, at which time the liability will be reclassified to temporary equity, or the conversion of the underlying preferred stock into common stock, at which time the liability will be reclassified to stockholders’ deficit, or the expiration of the warrant. The fair value of the preferred stock warrants was estimated to be $126,000, $237,000, $242,000 and $176,000 as of December 31, 2011 and 2012, September 30, 2012 (unaudited) and 2013 (unaudited) respectively, using the following assumptions:

 

     Year Ended December 31,    Nine Months Ended
September 30,
     2011    2012    2012    2013
               (unaudited)    (unaudited)

Preferred stock fair value per share

   $1.09–$1.25    $0.91–$1.09    $0.91–$1.09    $0.77–$0.89

Volatility

   58%    63%–69%    63%–69%    62%–68%

Risk-free interest rate

   0.4%–1.9%    0.3%–1.6%    0.3%–1.5%    0.2%–2.3%

Remaining contractual term (in years)

   3.2–9.8    2.2–8.8    2.5–9.1    1.5–8.1

Dividend yield

   0%    0%    0%    0%

10. Common Stock

Amended and Restated 2003 Stock Plan

The Company’s Amended and Restated 2003 Stock Plan, referred to herein as the 2003 Plan, provides for the granting of incentive and non-statutory stock options to employees, directors and consultants at the discretion of the board of directors.

Incentive stock options may be granted under the 2003 Plan with exercise prices not less than the estimated fair value of common stock, and non-statutory stock options may be granted with an exercise price of not less than 85% of the estimated fair value of the common stock on the date of grant. Options granted under the 2003 Plan to individuals owning over 10% of the total combined voting power of all classes of stock are exercisable up to five years from the date of grant, and the exercise price will not be less than 110% of the estimated fair value of the common stock on the date of grant. Options granted under the 2003 Plan expire no later than 10 years from the date of grant. Options granted under the 2003 Plan vest over periods determined by the board of directors, generally over four years. The board of directors determines the fair value of common stock at the date of grant. During 2012 and 2013, the board of directors also granted options to purchase common stock that vest upon the achievement of market-based common stock price targets.

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The 2003 Plan allows for early exercise of certain options prior to vesting. Upon termination of employment, the unvested shares are subject to repurchase at the original exercise price. Stock options granted or modified after March 21, 2002 that are subsequently exercised for cash prior to vesting are not deemed to be issued until those shares vest. The amounts received in exchange for these shares have been recorded as a liability for early exercise of stock options in the accompanying balance sheets and will be reclassified to equity as the shares vest. As of December 31, 2011 and 2012, and September 30, 2013 (unaudited) there were no shares subject to repurchase relating to the early exercise of options.

Total stock-based compensation recognized in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2011 and 2012, and for the nine months ended September 30, 2012 and 2013, was classified as follows (in thousands):

 

     Years Ended December 31,      Nine Months  Ended
September 30,
 
     2011      2012          2012              2013      
                   (unaudited)  

Research and development

   $ 242       $ 241       $ 165       $ 264   

General and administrative

     624         588         452         562   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 866       $ 829       $ 617       $ 826   
  

 

 

    

 

 

    

 

 

    

 

 

 

A summary of stock option activity is as follows:

 

     Shares
Available  for Grant
    Outstanding Options  
       Number of
Shares
    Weighted-Average
Exercise Price
 

Balance, January 1, 2011

     642,047        8,467,775      $ 0.43   

Additional shares reserved

     4,330,000        —       

Options granted

     (4,218,800     4,218,800      $ 0.64   

Options exercised

     —          (120,602   $ 0.30   

Options forfeited

     1,918,399        (1,918,399   $ 0.59   

Options expired

     307,589        (307,589   $ 0.40   
  

 

 

   

 

 

   

Balance, December 31, 2011

     2,979,235        10,339,985      $ 0.49   

Additional shares reserved

     2,500,000            

Options granted

     (8,689,600     8,689,600      $ 0.57   

Options exercised

            (549,360   $ 0.32   

Options forfeited

     2,561,052        (2,561,052   $ 0.63   

Options expired

     1,173,570        (1,173,570   $ 0.44   
  

 

 

   

 

 

   

Balance, December 31, 2012

     524,257        14,745,603      $ 0.52   

Additional shares reserved (unaudited)

     1,800,000        —       

Options granted (unaudited)

     (1,850,700     1,850,700      $ 0.48   

Options exercised (unaudited)

     —          (209,057   $ 0.29   

Options forfeited (unaudited)

     832,502        (832,502   $ 0.56   

Options expired (unaudited)

     92,851        (92,851   $ 0.50   
  

 

 

   

 

 

   

Balance, September 30, 2013 (unaudited)

     1,398,910        15,461,893      $ 0.52   
  

 

 

   

 

 

   

 

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Table of Contents

Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The following table summarizes information about stock options outstanding as of September 30, 2013 (unaudited):

 

     Options Outstanding      Vested and Exercisable  

Exercise Price

   Number of Options      Weighted-Average
Remaining Contractual
Life (in Years)
     Number of Options      Weighted-Average
Exercise Price
 

$0.07

     337,333         0.94         337,333       $ 0.07   

$0.15

     16,000         2.63         16,000       $ 0.15   

$0.21

     295,000         3.56         295,000       $ 0.21   

$0.24

     790,400         4.18         790,400       $ 0.24   

$0.31

     635,000         6.40         634,165       $ 0.31   

$0.37

     297,925         5.25         297,925       $ 0.37   

$0.42

     376,458         5.93         376,458       $ 0.42   

$0.43

     4,402,500         9.26         652,211       $ 0.43   

$0.60

     541,800         10.00         —           —     

$0.63

     3,552,499         7.49         1,998,498       $ 0.63   

$0.66

     4,216,978         8.38         1,163,768       $ 0.66   
  

 

 

       

 

 

    
     15,461,893         7.81         6,561,758       $ 0.52   
  

 

 

       

 

 

    

As of December 31, 2012:

 

     Options Outstanding      Vested and Exercisable  

Exercise Price

   Number of Options      Weighted-Average
Remaining Contractual
Life (in Years)
     Number of Options      Weighted-Average
Exercise Price
 

$0.07

     377,333         1.70         377,333       $ 0.07   

$0.15

     56,000         2.53         56,000       $ 0.15   

$0.21

     315,000         4.31         315,000       $ 0.21   

$0.24

     792,900         4.93         792,900       $ 0.24   

$0.31

     642,500         7.15         639,790       $ 0.31   

$0.37

     388,566         6.00         385,883       $ 0.37   

$0.42

     383,645         6.68         379,997       $ 0.42   

$0.43

     3,459,600         9.84         119,400       $ 0.43   

$0.63

     3,613,415         8.23         1,634,098       $ 0.63   

$0.66

     4,716,644         9.13         660,554       $ 0.66   
  

 

 

       

 

 

    
     14,745,603         8.30         5,360,955       $ 0.53   
  

 

 

       

 

 

    

Stock Options Granted to Employees and Non-Employee Directors

During the years ended December 31, 2011 and 2012 and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited) the Company granted stock options to employees to purchase 4,178,800, 8,614,600, 6,610,000 and 1,850,700 shares, respectively, of common stock under the 2003 Plan with a weighted-average estimated grant-date fair value of $0.35, $0.23, $0.23 and $0.34 per share, respectively. During the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), the intrinsic value of stock options exercised was $42,000, $135,000, $94,000 and $65,000, respectively. As of December 31, 2011 and 2012, and September 30, 2013 (unaudited), there were total unrecognized compensation costs of $1,385,000, $2,122,000 and $1,948,000, respectively, related to these stock

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

options. These costs are expected to be recognized over a weighted-average period of 2.9 and 2.7 years as of December 31, 2012 and September 30, 2013 (unaudited), respectively.

The Company estimated the fair value of stock options using the Black-Scholes option valuation model for options with time-based vesting terms. The Black-Scholes model requires the input of highly complex and subjective assumptions, including (a) the expected term of the award, (b) the expected stock price volatility, (c) the risk-free interest rate and (d) expected dividends. The estimated fair value of these employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of the employee stock options was estimated using the following weighted-average assumptions:

 

     Year Ended December 31,    Nine Months Ended
September 30,
     2011    2012    2012    2013
               (unaudited)    (unaudited)

Expected term

   5.8–7.9 years    6.0–6.1 years    6.0–6.1 years    5.4–6.1 years

Expected volatility

   56%–61%    56%–69%    56%–69%    68%–69%

Risk-free interest rate

   1.1%–2.6%    0.8%–1.2%    0.9%–1.2%    1.2%–1.8%

Expected dividend yield

   0%    0%    0%    0%

Expected forfeiture rate

   6%    9%    7%    8%

The Company has opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. When selecting these public companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, stages of clinical development, risk profiles, position within the industry and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available. The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history of not paying dividends and its expectation that it will not declare dividends for the foreseeable future.

During the years ended December 31, 2012 and the nine-month periods ended September 30, 2013 (unaudited), the Company issued 2,663,150 and 261,475 shares of options, respectively, to purchase common stock that vests upon the achievement of market-based common stock price targets. The fair value was estimated at the grant date using a Monte-Carlo simulation model. The Monte-Carlo simulation model requires the use of a range of assumptions. The range of risk-free interest rates was 0.4% to 2.2%, expected volatility rates ranged from 65% to 70% and the dividend rate was 0%. The expected life assumption is not used in the Monte-Carlo simulation model, but the output of the model indicated an expected life of 3.4 to 5.5 years. The associated stock-based compensation expense is being recognized on a straight-line basis over the implicit service period derived from that simulation model.

In addition, ASC 718 requires forfeitures to be estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those of estimates. Forfeitures were estimated based on management’s assessment of industry averages.

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

Stock Options Granted to Non-Employees

During the years ended December 31, 2011 and 2012, the Company granted to non-employees options to purchase 40,000 and 75,000 shares, respectively. The Company did not grant stock options to non-employees for the nine-month periods ended September 30, 2012 (unaudited) or 2013 (unaudited). Stock-based compensation expense of approximately $26,000, $10,000, $4,000 and $35,000 was recorded for the years ended December 31, 2011 and 2012, and nine months ended September 30, 2012 (unaudited) and 2013 (unaudited) respectively. The Company measures the estimated fair value of the award each period until the award is fully vested. The fair value of options granted to non-employees during the years ended December 31, 2011 and 2012 was estimated using the Black-Scholes method with the following weighted-average assumptions.

 

     Year Ended December 31,    Nine Months Ended
September 30,
     2011    2012    2012    2013
               (unaudited)    (unaudited)

Remaining contractual term

   7.3–10.0 years    6.3–9.9 years    6.6–7.1 years    6.1–9.9 years

Expected volatility

   56%–63%    56%–70%    56%–70%    68%–69%

Risk-free interest rate

   1.6%–3.4%    0.9%–1.8%    1.0%–1.4%    1.1%–2.4%

Expected dividend yield

   0%    0%    0%    0%

11. Income Taxes

The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

 

     Year ended
December 31,
 
     2011     2012  

Deferred tax assets:

    

Net operating loss carry forwards

   $ 33,741      $ 40,843   

Research and development credit

     5,277        5,468   

Start-up costs and trademark

     1,592        1,232   

Depreciation

     299        90   

Temporary differences

     1,478        821   
  

 

 

   

 

 

 

Gross Deferred tax assets

     42,387        48,454   

Less: valuation allowance

     (42,387     (48,454
  

 

 

   

 

 

 

Net deferred tax assets

   $ —       $ —     
  

 

 

   

 

 

 

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2011 and 2012 is as follows:

 

     Year ended
December 31,
 
     2011     2012  

Statutory tax rate

     34.00     34.00 %

State taxes, net of federal benefits

     6.60     3.98 %

Stock-based compensation

     (1.36 )%      (1.18 )%

Credits

     3.29     —   %

True-ups

     (0.59 )%      (2.79 )%

Other

     (0.13 )%      (0.63 )%

Valuation allowance

     (41.81 )%     (33.38 )%

Effective tax rate

     —       —   %

The Company also had federal and state net operating loss carryforwards of approximately $84,661,000 and $84,939,000, respectively, at December 31, 2011, and approximately $102,551,000 and $102,500,000, respectively, at December 31, 2012. The federal and state net operating loss carryforwards are available to reduce future taxable income, if any. If not utilized, the federal and state operating loss carryforwards will begin to expire in various amounts beginning 2023 and 2013, respectively.

The Company also had federal and state research and development credit carryforwards of approximately $3,631,000 and $2,494,000, respectively, at December 31, 2011, and approximately $3,631,000 and $2,784,000, respectively, at December 31, 2012. The federal research and development credit will begin to expire in 2025. State research and development credit can be carried forward indefinitely.

Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of the net operating loss before utilization.

Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The net valuation allowance increased by $8,724,000 and $6,067,000 during the years ended December 31, 2011 and 2012, respectively.

Accounting Standards Codification Topic 740-10 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the consolidated financial statements. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. ASC 740-10 requires that the Company record an unrecognized tax benefit in its consolidated financial statements based on a two-step analysis. The first step requires determining whether positions are more likely to be sustained upon audit based on the technical merits of the positions. The second step requires measurement of the ultimate liabilities that might result from those positions based on cumulative probabilities of the possible outcomes of settlement with applicable taxing authorities upon audit. No liabilities related to uncertain tax positions are recorded in the consolidated financial statements. The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although there have been no such assessments historically. In the event the Company receives an assessment for interest and/or penalties, it would be classified in the consolidated financial statements as income tax expense. As of December 31, 2012, all tax years in the United States remain open due to the taxing authorities’ ability to adjust operating loss carry forwards. The Company does not expect any material changes to the unrecognized tax benefits reported above during the next twelve months.

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

The Company has recorded no reserves or unrecognized tax benefits for tax positions taken. Since a full valuation allowance has been provided against the Company’s deferred tax assets, the effect of any unrecognized tax benefits would simply be to reduce the gross amount of the deferred tax asset and the corresponding valuation allowance.

12. Employee Benefit Plan

In 2003, the Company adopted a 401(k) plan for its employees whereby eligible employees may contribute up to 100% of their compensation, on a pretax basis, subject to the maximum amount permitted by the Internal Revenue Code. In December 2010, the Company approved a plan to provide matching contributions equal to 50% of employees’ contributions, up to 6% of annual earnings, starting in January 2011. Company contributions were $229,000, $196,000, $145,000 and $104,000 for the years ended December 31, 2011 and 2012, and the nine months ended September 30, 2012 (unaudited) and 2013 (unaudited), respectively.

13. Related-Party Transactions

In 2010, the Company entered into the 2010 Wellcome Funding Agreement with the Trust, one of the Company’s preferred stockholders. As of December 31, 2012, the Company had received $5,594,000 under the 2010 Wellcome Funding Agreement, and recorded the amount as a related-party convertible loan payable. The loan was convertible, at the holder’s option, into the Company’s next round of preferred stock. In March 2013, the outstanding balance of the 2010 Wellcome Funding Agreement, $5,594,000, was converted into Series D convertible preferred stock at a conversion price that represented a 20% discount to the issue price. Refer to Note 8, “Borrowings.”

In November 2012, the Company entered into the 2012 Bridge Loan Agreement with certain existing investors. The Company received $2,687,000 under the 2012 Bridge Loan Agreement. Refer to Note 8, “Borrowings.”

14. Restructuring Charges

In July 2012, the Company initiated a reduction in workforce resulting in an aggregate restructuring charge of approximately $592,000, consisting of severance and benefit payments for terminated employees, of which $367,000 and $225,000 were included as part of research and development and general and administrative expenses, respectively, in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012. Cash payments related to employee severance were all made by March 31, 2013.

 

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Achaogen, Inc.

Notes to Consolidated Financial Statements (continued)

 

For the nine months ended September 30, 2013 (unaudited), as a result of the Company ceasing to use certain areas of its leased property, additional restructuring charges of $319,000 were recorded relating to the impairment of certain leasehold improvements of $194,000 and the recognition of the remaining lease obligation on the subleased ceased-used property of $125,000 in general and administrative expenses. The Company expects to pay accrued facility charges of $274,000, net of cash received from the Company’s subtenant, through March 2014. The following table summarizes the accrual balances and utilization by cost type for the restructuring plan (in thousands):

 

     Employee
severance and
related benefits
    Facilities related
and other costs
 

Beginning at January 1, 2012

   $ —       $ —     

Charges during the period

     592        —     

Cash payments during the period

     (541     —     
  

 

 

   

 

 

 

Balance at December 31, 2012

     51        —     

Charges during the period (unaudited)

     —          319   

Cash payments during the period (unaudited)

     (51     —     

Non-cash settlement (unaudited)

     —          (182
  

 

 

   

 

 

 

Balance at September 30, 2013 (unaudited)

   $ —        $ 137   
  

 

 

   

 

 

 

15. Subsequent Events

In November 2013, under the terms of the March 2013 stock purchase agreement, the Company closed the second tranche of its Series D convertible preferred stock financing, whereby it issued 9,174,314 additional shares of Series D convertible preferred stock at $1.09 per share for gross proceeds of approximately $10,000,000.

 

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LOGO

 

 


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of common stock being registered. All amounts are estimates except for the SEC registration fee, the FINRA filing fee and The NASDAQ Global Market listing fee.

 

Item

   Amount  

SEC Registration Fee

   $ 9,628   

FINRA Filing Fee

     11,713   

The NASDAQ Global Market Listing Fee

     *   

Printing and Engraving Expenses

     *   

Legal Fees and Expenses

     *   

Premium Paid on Director and Officer Insurance Policy

     *   

Accounting Fees and Expenses

     *   

Blue Sky, Qualification Fees and Expenses

     *   

Transfer Agent Fees and Expenses

     *   

Miscellaneous Expenses

     *   
  

 

 

 

Total

   $ *   
  

 

 

 

 

* To be completed by amendment.

Item 14. Indemnification of Directors and Officers

As permitted by Section 102 of the General Corporation Law of the State of Delaware, we have adopted provisions in our amended and restated certificate of incorporation and bylaws that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

 

   

any breach of the director’s duty of loyalty to us or our stockholders;

 

   

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

 

   

any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or

 

   

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

These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our amended and restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

As permitted by Section 145 of the General Corporation Law of the State of Delaware, our amended and restated bylaws provide that:

 

   

we will indemnify our directors and officers, and may indemnify our employees and agents, to the fullest extent permitted by the General Corporation Law of the State of Delaware, subject to limited exceptions;

 

   

we will advance expenses to our directors and officers, and may advance expenses to our employees or agents, in connection with a legal proceeding to the fullest extent permitted by the General Corporation Law of the State of Delaware, subject to limited exceptions; and

 

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the rights provided in our amended and restated bylaws are not exclusive.

Our amended and restated certificate of incorporation, to be attached as Exhibit 3.2 hereto, and our amended and restated bylaws, to be attached as Exhibit 3.4 hereto, provide for the indemnification provisions described above and elsewhere herein. We intend to enter into separate indemnification agreements with our directors and officers which may be broader than the specific indemnification provisions contained in the General Corporation Law of the State of Delaware. These indemnification agreements generally require us, among other things, to indemnify our officers and directors against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct. These indemnification agreements also generally require us to advance any expenses incurred by the directors or officers as a result of any proceeding against them as to which they could be indemnified. In addition, we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act .

The form of Underwriting Agreement, to be attached as Exhibit 1.1 hereto, provides for indemnification by the underwriters of us and our officers who sign this Registration Statement and directors for specified liabilities, including matters arising under the Securities Act.

Item 15. Recent Sales of Unregistered Securities

The following list sets forth information as of January 23, 2014 as to all securities we have sold since January 1, 2011, which were not registered under the Securities Act. The following share numbers and per share amounts have not been adjusted for the reverse stock split of common stock and convertible preferred stock to be effected before the completion of this offering or the conversion of our convertible preferred stock into common stock to be effected immediately prior to the completion of this offering.

1. We sold an aggregate of 879,019 shares of common stock to employees, directors and consultants for cash consideration in the aggregate amount of $0.3 million upon the exercise of stock options and stock awards.

2. We granted stock options and stock awards to employees, directors and consultants under our Amended and Restated 2003 Stock Plan covering an aggregate of 14,759,100 shares of common stock, at a weighted-average cash exercise price of $0.58 per share. Of these, options covering an aggregate of 2,899,136 shares were cancelled without being exercised.

3. In January 2014, we sold 10,000 shares of common stock to an accredited investor for cash consideration of $1,400 upon the exercise of a warrant to purchase common stock.

4. In November 2012, we sold an aggregate of $2.7 million principal amount of 2012 Bridge Notes to 13 accredited investors for cash consideration.

5. In March, May and November 2013, we sold an aggregate of 23,018,354 shares of our Series D convertible preferred stock at a price of $1.09 per share for gross proceeds of $25.1 million, composed of cash proceeds of $22.4 million and the conversion of $2.7 million in principal and accrued interest from the 2012 Bridge Notes, to 16 accredited investors.

6. In March 2013, we also sold an aggregate of 6,414,790 shares of our Series D convertible preferred stock upon the conversion of $5.6 million principal amount of indebtedness at a conversion price equal to $0.872 per share to one accredited investor.

We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (1) and (2) above under Section 4(2) of the Securities Act in that such sales and issuances did not involve a public offering, or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

 

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We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transaction described in paragraphs (3) through (6) above under Section 4(2) of the Securities Act and Regulation D promulgated thereunder, as transactions by an issuer not involving any public offering, or under Section 3(a)(9) of the Securities Act. The purchasers of the securities in these transactions represented that they were accredited investors and that they were acquiring the securities for investment only and not with a view toward the public sale or distribution thereof. Such purchasers received written disclosures that the securities had not been registered under the Securities Act of 1933, as amended, and that any resale must be made pursuant to a registration statement or an available exemption from registration. All purchasers either received adequate financial statement or non-financial statement information about the Registrant or had adequate access, through their relationship with the Registrant, to financial statement or non-financial statement information about the Registrant. The sale of these securities was made without general solicitation or advertising.

Item 16. Exhibits and Financial Statement Schedules

 

(a) Exhibits

See the Exhibit Index attached to this Registration Statement, which is incorporated by reference herein.

 

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act 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 Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

1. 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.

2. 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.

 

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in South San Francisco, California, on January 24, 2014.

 

ACHAOGEN, INC.

By:

  /s/ Kenneth J. Hillan
 

Kenneth J. Hillan, M.B., Ch.B.

President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Kenneth J. Hillan and Dennis Hom, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Registration Statement, including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature   

Title

  Date  
/s/ Kenneth J. Hillan    President, Chief Executive Officer, Chief Medical Officer and Director ( Principal Executive Officer )     January 24, 2014   
Kenneth J. Hillan, M.B., Ch.B.     
    
/s/ Dennis Hom   

Vice President, Finance and Corporate Development ( Principal

Financial and Accounting Officer )

    January 24, 2014   
Dennis Hom     
    
/s/ Bryan E. Roberts    Chairman of the Board of Directors     January 24, 2014   
Bryan E. Roberts, Ph.D.     
/s/ John C. Doyle    Director     January 24, 2014   
John C. Doyle     
/s/ Scott M. Rocklage    Director     January 24, 2014   
Scott M. Rocklage, Ph.D.     
/s/ Camille D. Samuels    Director     January 24, 2014   
Camille D. Samuels     
/s/ John W. Smither    Director     January 24, 2014   
John W. Smither     
/s/ Christopher T. Walsh    Director     January 24, 2014   
Christopher T. Walsh, Ph.D.     

 

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EXHIBIT INDEX

 

Exhibit
Number

  

Description

  1.1*    Form of Underwriting Agreement.
  3.1(A)    Amended and Restated Certificate of Incorporation.
  3.1(B)    Certificate of Amendment to Amended and Restated Certificate of Incorporation, filed April 12, 2013.
  3.2*    Form of Amended and Restated Certificate of Incorporation, to be in effect upon completion of this offering.
  3.3    Bylaws.
  3.4*    Form of Amended and Restated Bylaws, to be in effect upon completion of the offering.
  4.1*    Form of Common Stock Certificate.
  4.2   

Warrant to purchase shares of Series A convertible preferred stock issued to Gold Hill Venture Lending 03, L.P. on March 16, 2005.

  4.3    Warrant to purchase shares of Series A convertible preferred stock issued to Silicon Valley Bank on March 16, 2005.
  4.4    Warrant to purchase shares of Series C convertible preferred stock issued to Oxford Finance LLC on November 1, 2011.
  4.5    Warrant to purchase shares of Series C convertible preferred stock issued to Silicon Valley Bank on November 1, 2011.
  4.6    Warrant to purchase shares of Series C convertible preferred stock issued to Oxford Finance LLC on April 30, 2012 (Term A Loan (2)).
  4.7    Warrant to purchase shares of Series C convertible preferred stock issued to Oxford Finance LLC on April 30, 2012 (Term B Loan).
  5.1*    Opinion of Latham & Watkins LLP.
10.1(A)#    Amended and Restated 2003 Stock Plan, as amended.
10.1(B)#    Form of Stock Option Agreement under 2003 Stock Plan.
10.2(A)#*    2014 Equity Incentive Award Plan.
10.2(B)#*    Form of Stock Option Agreement under 2014 Equity Incentive Award Plan.
10.3#*    Form of Indemnification Agreement between the registrant and its directors and officers.
10.4(A)†    Exclusive Patent License Agreement, dated as of December 1, 2006, by and between the registrant and the University of Washington.
10.4(B)†    Amendment No. 1, effective March 1, 2009, to that certain Exclusive Patent License Agreement, dated December 1, 2006, by and between the registrant and the University of Washington.
10.4(C)†    Amendment No. 2, effective January 5, 2011, to that certain Exclusive Patent License Agreement, dated December 1, 2006, by and between the registrant and the University of Washington.
10.5(A)†    License Agreement, dated January 25, 2006, by and between the registrant and Isis Pharmaceuticals, Inc.
10.5(B)†    Letter Agreement, dated January 25, 2006, by and between the registrant and Isis Pharmaceuticals, Inc.
10.6†    Development Services Agreement, dated August 19, 2013, by and between the registrant and ARK Diagnostics, Inc.


Table of Contents

Exhibit
Number

  

Description

10.7(A)†    Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(B)    Modification 0001, dated February 24, 2011, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(C)†    Modification 0003, dated August 18, 2011, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(D)†    Modification 0004, dated July 16, 2012, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(E)†    Modification 0006, dated September 20, 2012, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(F)†    Modification 0007, dated January 23, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(G)†    Modification 0008, dated February 28, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(H)†    Modification 0009, dated April 22, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(I)†    Modification 0010, dated August 14, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(J)†    Modification 0011, dated August 30, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(K)†    Modification 0012, dated November 5, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.7(L)†    Modification 0013, dated December 17, 2013, to Contract Award issued by the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services, dated August 30, 2010.
10.8    Loan and Security Agreement, dated November 1, 2011, by and among the registrant, Oxford Finance LLC and Silicon Valley Bank.
10.9(A)    Amended and Restated Lease Agreement, dated December 29, 2010, by and between the registrant and ARE-San Francisco No. 17, LLC.
10.9(B)    Letter Agreement, dated January 4, 2011, by and between the registrant and ARE-San Francisco No. 17, LLC.
10.9(C)    Letter Agreement, dated June 15, 2011, by and between the registrant and ARE-San Francisco No. 17, LLC.


Table of Contents

Exhibit
Number

  

Description

10.9(D)    First Amendment, dated April 1, 2013, to that certain Amended and Restated Lease Agreement, dated December 29, 2010, by and between the registrant and ARE-San Francisco No. 17, LLC.
10.9(E)    Second Amendment, dated June 28, 2013, to that certain Amended and Restated Lease Agreement, dated as of December 29, 2010, by and between the registrant and ARE-San Francisco No. 17, LLC.
10.10#    Offer Letter, dated January 24, 2011, by and between the registrant and Kenneth J. Hillan.
10.11#    Offer Letter, dated May 2, 2011, by and between the registrant and Becki Filice.
10.12#    Offer Letter, dated July 27, 2011, by and between the registrant and Christine Murray.
10.13#    Offer Letter, dated December 29, 2012, by and between the registrant and Dennis Hom.
10.14#    Change in Control Plan.
10.15   

Third Amended and Restated Investors’ Rights Agreement, dated March 6, 2013, by and among the registrant and certain stockholders.

23.1    Consent of independent registered public accounting firm.
23.2*    Consent of Latham & Watkins LLP (included in Exhibit 5.1).
24.1    Power of Attorney. Reference is made to the signature page to the Registration Statement.

 

*   To be filed by amendment.
#   Indicates management contract or compensatory plan.
  Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been filed separately with the SEC.

Exhibit 3.1(A)

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

ACHAOGEN, INC.

Achaogen, Inc., a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), certifies that:

A. The name of the Corporation is Achaogen, Inc. The Corporation was originally incorporated under the name “VVII NewCo 2003, Inc.” The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on November 26, 2002. An Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 5, 2010. Amendments to the Amended and Restated Certificate of Incorporation were filed with the Secretary of State of the State of Delaware on June 30, 2011 and November 20, 2012.

B. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and restates, integrates and further amends the provisions of the Corporation’s Certificate of Incorporation.

C. The text of the Certificate of Incorporation is amended and restated in its entirety to read as set forth in EXHIBIT A attached hereto.

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Kenneth J. Hillan, a duly authorized officer of the Corporation, on March 5, 2013.

 

/s/ Kenneth J. Hillan

Kenneth J. Hillan
President and Chief Executive Officer


EXHIBIT A

ARTICLE I

The name of the Corporation is Achaogen, Inc.

ARTICLE II

The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE III

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name of the registered agent at such address is The Corporation Trust Company.

ARTICLE IV

1. The total number of shares of stock that the Corporation shall have authority to issue is Two Hundred Ninety-Five Million Two Hundred Two Thousand Nine Hundred Ten (295,202,910), consisting of One Hundred Sixty Three Million (163,000,000) shares of Common Stock, $0.001 par value per share, and One Hundred Thirty-Two Million Two Hundred Two Thousand Nine Hundred Ten (132,202,910) shares of Preferred Stock, $0.001 par value per share. The first series of Preferred Stock shall be designated “ Series A Preferred Stock ” and shall consist of Twelve Million Three Hundred Eighty-Six Thousand Seventy-One (12,386,071) shares. The second series of Preferred Stock shall be designated “ Series B Preferred Stock ” and shall consist of Fourteen Million Two Hundred Sixty-Six Thousand Eight Hundred Thirty-Nine (14,266,839) shares. The third series of Preferred Stock shall be designated “ Series C Preferred Stock ” and shall consist of Fifty-Two Million Fifty-Five Hundred Thousand (52,550,000) shares. The fourth series of Preferred Stock shall be designated “ Series D Preferred Stock ” and shall consist of Fifty Three Million (53,000,000) shares.

ARTICLE V

The terms and provisions of the Common Stock and Preferred Stock are as follows:

1. Definitions . For purposes of this ARTICLE V, the following definitions shall apply:

(a) “ Affiliate ” shall mean, with respect to any holder of shares of Preferred Stock, any person, entity or firm which, directly or indirectly, controls, is controlled by or is under common control with such holder, including, without limitation, any entity of which the holder is a partner or member, any partner, officer, director, member or employee of such holder and any venture capital fund now or hereafter existing of which the holder is a partner or member which is controlled by or under common control with one or more general partners of such holder or shares the same management company with such holder.

 

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(b) “ Bridge Notes ” shall mean those convertible promissory notes issued pursuant to that certain Note Purchase Agreement, dated November 20, 2012, by and between the Corporation and the persons and entities listed on the schedule of investors attached thereto.

(c) “ Committed Second Closing Shares ” shall mean the number of Second Closing Shares committed to be purchased by a holder of Series D Preferred Stock and set forth opposite such holder’s name under the column titled “Shares of Series D Preferred Stock Committed to Purchase in Second Closing” on Exhibit A-2 attached to the Series D Purchase Agreement.

(d) “ Conversion Price ” shall mean $1.22 per share for the Series A Preferred Stock, $1.43 per share for the Series B Preferred Stock, $1.09 per share for the Series C Preferred Stock and $1.09 per share for the Series D Preferred Stock (each subject to adjustment from time to time for Recapitalizations and as otherwise set forth elsewhere herein).

(e) “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Common Stock.

(f) “ Corporation ” shall mean Achaogen, Inc. a corporation organized and existing under the laws of the State of Delaware.

(g) “ Distribution ” shall mean the transfer of cash or other property whether by way of dividend or otherwise, other than dividends on Common Stock payable in Common Stock, or the purchase or redemption of shares of the Corporation for cash or property other than: (i) repurchases at cost of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements providing for the right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right, and (iii) any other repurchase or redemption of capital stock of the Corporation approved by the holders of the Common and Preferred Stock of the Corporation voting as separate classes.

(h) “ Dividend Rate ” shall mean an annual rate of $0.112 per share for the Series A Preferred Stock, $0.152 per share for the Series B Preferred Stock, $0.0872 per share for the Series C Preferred Stock and $0.0872 per share for the Series D Preferred Stock (each subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(i) “ Eligible Transferee ” shall have the meaning given such term in the Series D Purchase Agreement.

(j) “ Excluded Holder ” shall mean any holder of Preferred Stock as of the Filings Date that, together with its Affiliates, holds less than 1,400,000 shares of Preferred Stock, on an absolute basis (not on an as-converted-to-Common-Stock basis), as of the Filing Date.

(k) “ Filing Date ” shall mean the date of filing this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.

 

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(l) “ First Closing ” shall have the meaning given such term in the Series D Purchase Agreement.

(m) “ First Closing Conversion Portion ” shall mean the number shares of Preferred Stock determined by multiplying the number of shares of each series of Preferred Stock held by such First Closing Non-Participating Investor as of 12:00 a.m. Pacific Daylight Time on April 16, 2013 by the quotient of (x) the result of (A) such investor’s Pro Rata Share minus (B) the aggregate dollar amount of shares either purchased by such First Closing Non-Participating Investor (by itself or through one or more of its Affiliates) in the First Closing or any Supplemental Closing or irrevocably committed to be purchased by such First Closing Non-Participating Investor (by itself or through one or more of its Affiliates) in the Second Closing, divided by (y) such investor’s Pro Rata Share.

(n) “ First Closing Date ” shall have the meaning given such term in the Series D Purchase Agreement.

(o) “ Liquidation Preference ” shall mean $1.40 per share for the Series A Preferred Stock, $1.90 per share for the Series B Preferred Stock, $1.09 per share for the Series C Preferred Stock and $1.09 per share for Series D Preferred Stock (each subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(p) “ Mandatory Conversions ” shall mean the conversions that may occur pursuant to Section 4(c).

(q) “ Options ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities; provided , however , that the term “Option” as used herein shall not include the right and commitment by the parties to the Series D Purchase Agreement to purchase shares of Series D Preferred Stock in the Second Closing.

(r) “ Original Issue Price ” shall mean $1.40 per share for the Series A Preferred Stock, $1.90 per share for the Series B Preferred Stock, $1.09 per share for the Series C Preferred Stock and $1.09 per share for the Series D Preferred Stock (each subject to adjustment from time to time for Recapitalizations as set forth elsewhere herein).

(s) “ Preferred Stock ” shall mean the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

(t) “ Pro Rata Share ” shall be determined by multiplying $25,000,000.00 by the quotient of (x) the number of shares of Preferred Stock (other than Series D Preferred Stock) held by such holder as of 11:59 p.m. Pacific Daylight Time on April 15, 2013, on an as-converted-to-Common-Stock basis, divided by (y) the aggregate number of shares of Preferred Stock (other than Series D Preferred Stock) held by all stockholders (other than Excluded Holders) as of 11:59 p.m. Pacific Daylight Time on April 15, 2013, on an as-converted-to-Common-Stock basis.

(u) “ Recapitalization ” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event.

 

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(v) “ Second Closing Conversion Portion ” shall mean the number shares of Preferred Stock determined by multiplying the number of shares of each series of Preferred Stock (other than Series D Preferred Stock) held by such Second Closing Non-Participating Investor as of 11:59 p.m. Pacific Daylight Time on April 15, 2013 by the quotient of (x) the result of (A) such investor’s Pro Rata Share minus (B) the aggregate dollar amount of shares purchased by such Second Closing Non-Participating Investor in the First Closing, any Supplemental Closing and the Second Closing, divided by (y) such investor’s Pro Rata Share.

(w) “ Second Closing Date ” shall have the meaning given such term in the Series D Purchase Agreement.

(x) “ Second Closing Shares ” shall have the meaning given such term in the Series D Purchase Agreement.

(y) “ Series D Conversion Portion ” shall mean the number shares of Series D Preferred Stock purchased by such Second Closing Non-Participating Investor in the First Closing and any Supplemental Closing multiplied by the quotient of (x) the result of (A) the Committed Second Closing Shares minus (B) the number of Second Closing Shares purchased by such Second Closing Non-Participating Investor in the Second Closing, divided by (y) the Committed Second Closing Shares.

(z) “ Series D Purchase Agreement ” shall mean that certain Series D Preferred Stock Purchase Agreement, dated on or about the Filing Date, by and among the Corporation and the parties named therein, as such may be amended from time to time.

(aa) “ Subsequent Closing ” shall have the meaning given such term in the Series D Purchase Agreement.

(bb) “ Supplemental Closing ” shall have the meaning given such term in the Series D Purchase Agreement.

2. Dividends .

(a) Preferred Stock . In any calendar year, the holders of outstanding shares of Preferred Stock shall be entitled to receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, at the Dividend Rate specified for such shares of Preferred Stock payable in preference and priority to any declaration or payment of any Distribution on Common Stock of the Corporation in such calendar year. No Distributions shall be made with respect to the Common Stock until all declared dividends on the Preferred Stock have been paid or set aside for payment to the Preferred Stock holders. Payment of any dividends to the holders of the Preferred Stock shall be on a pro rata, pari passu basis in proportion to the Dividend Rates for each series of Preferred Stock. The right to receive dividends on shares of Preferred Stock shall not be cumulative, and no right to such dividends shall accrue to holders of Preferred Stock by reason of the fact that dividends on said shares are not declared or paid in any calendar year.

(b) Additional Dividends . After the payment or setting aside for payment of the dividends described in Section 2(a), any additional dividends (other than dividends on

 

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Common Stock payable solely in Common Stock) declared or paid in any fiscal year shall be declared or paid among the holders of the Preferred Stock and Common Stock then outstanding in proportion to the greatest whole number of shares of Common Stock which would be held by each such holder if all shares of Preferred Stock were converted at the then-effective Conversion Rate (as defined in Section 4 hereof).

(c) Non-Cash Distributions . Whenever a Distribution provided for in this Section 2 shall be payable in property other than cash, the value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board of Directors. 1

3. Liquidation Rights .

(a) Liquidation Preference . In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Preferred Stock shall be entitled to receive out of the funds and assets legally available therefore, prior and in preference to any Distribution of any of the assets of the Corporation to the holders of the Common Stock by reason of their ownership of such stock, an amount per share for each share of Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share of Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Preferred Stock. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the holders of the Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in this Section 3(a), then the entire assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section 3(a).

(b) Remaining Assets . After the payment or setting aside for payment to the holders of Preferred Stock of the full amounts specified in Section 3(a) above, the entire remaining assets of the Corporation legally available for distribution shall be distributed pro rata to holders of the Common Stock of the Corporation in proportion to the number of shares of Common Stock held by them.

(c) Shares not Treated as Both Preferred Stock and Common Stock in any Distribution . Notwithstanding Sections 3(a) and 3(b) above, solely for purposes of determining the amount that each holder of shares of Preferred Stock is entitled to receive with respect to a liquidation, dissolution or winding up of the Corporation, the holder of each share of each series of Preferred Stock shall be treated as if such holder had converted such holder’s shares of such series into shares of Common Stock immediately prior to such liquidation, dissolution or winding up of the Corporation if, as a result of an actual conversion of any series of Preferred Stock (inducing taking into account the operation of this Section 3(c) with respect to all series of Preferred Stock), each holder of such series would receive (with respect to the shares of such series), in the aggregate, an amount greater than the amount that would be distributed to holders

 

1  

Note to Draft: Removed paragraph is no longer relevant due to changes in the California Corporations Code.

 

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of such series (with respect to the shares of such series) if such holders had not converted such series of Preferred Stock into shares of Common Stock. If holders of any series are treated as if they had converted shares of Preferred Stock into Common Stock pursuant to this Section 3(c), then such holders shall not be entitled to receive any distribution pursuant to Section 3(a) that would otherwise be made to holders of such series of Preferred Stock.

(d) Reorganization . For purposes of this Section 3, a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned by, or to include, (a) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions to which the Corporation is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Corporation outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Corporation held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such transaction or series of transactions; (b) a sale, lease, exclusive license or other conveyance of all or substantially all of the assets of the Corporation; or (c) any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.

(e) Valuation of Non-Cash Consideration . If any assets of the Corporation distributed to stockholders in connection with any liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors, except that , unless otherwise provided for in the definitive agreements pertaining to any Corporate Transaction, any publicly-traded securities to be distributed to stockholders in a liquidation, dissolution, or winding up of the Corporation shall be valued as follows:

(i) If the securities are then traded on a national securities exchange or The NASDAQ Stock Market (or a similar national quotation system), then the value of the securities shall be deemed to be the average of the closing prices of the securities on such exchange or system over the ten (10) trading day period ending five (5) trading days prior to the Distribution;

(ii) if the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of the closing bid prices of the securities over the ten (10) trading day period ending five (5) trading days prior to the Distribution.

For the purposes of this Section 3(e), “ trading day ” shall mean any day which the exchange or system on which the securities to be distributed are traded is open and “ closing prices ” or “ closing bid prices ” shall be deemed to be: (i) for securities traded primarily on the New York Stock Exchange, the American Stock Exchange or The NASDAQ Stock Market, the last reported trade price or sale price, as the case may be, at 4:00 p.m., New York time, on that day and (ii) for securities listed or traded on other exchanges, markets and systems, the market price as of the end of the regular hours trading period that is generally accepted as such for such

 

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exchange, market or system. If, after the Filing Date, the benchmark times generally accepted in the securities industry for determining the market price of a stock as of a given trading day shall change from those set forth above, the fair market value shall be determined as of such other generally accepted benchmark times.

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

(a) Right to Convert . Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share at the office of the Corporation or any transfer agent for the Preferred Stock, into that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Original Issue Price for the relevant series by the Conversion Price for such series. (The number of shares of Common Stock into which each share of Preferred Stock of a series may be converted is hereinafter referred to as the “ Conversion Rate ” for each such series.) Upon any decrease or increase in the Conversion Price for any series of Preferred Stock, as described in this Section 4, the Conversion Rate for such series shall be appropriately increased or decreased.

(b) Automatic Conversion . Each share of Preferred Stock shall automatically be converted into fully-paid, non-assessable shares of Common Stock at the then effective Conversion Rate for such share (i) immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “ Securities Act ”), covering the offer and sale of the Corporation’s Common Stock, provided , however , that the fully diluted valuation of the Corporation is not less than $200,000,000 and the aggregate gross proceeds to the Corporation (before deduction of underwriter’s commissions and expenses) are not less than $40,000,000, or (ii) upon the receipt by the Corporation of a written request for such conversion from the holders of a majority of the Preferred Stock then outstanding, or, if later, the effective date for conversion specified in such request (each of the events referred to in (i) and (ii) are referred to herein as an “ Automatic Conversion Event ”).

(c) Special Mandatory Conversion .

(i) In the event that a holder of Preferred Stock (other than an Excluded Holder) as of 12:00 a.m. Pacific Daylight Time on April 16, 2013 (a “ First Closing Obligee ”) has not, prior to April 16, 2013, by itself or through one or more of its Affiliates (subject to Section 4(c)(vii) below), purchased in the First Closing or a Supplemental Closing and, by execution of the Series D Purchase Agreement, irrevocably committed to purchase in the Second Closing (taken together with the First Closing and any Supplemental Closings, the “ Mandatory Financing ”), an aggregate amount in the Mandatory Financing at least equal to such holder’s Pro Rata Share, then the First Closing Conversion Portion of each series of Preferred Stock (other than Series D Preferred Stock) held by such holder (a “ First Closing Non-Participating Investor ”) shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10) times the applicable Conversion Price of such series of Preferred Stock. The amount of principal and interest of any Bridge Note converted by a holder into Series D Preferred Stock at the First Closing shall be deemed to have been purchased by such holder for the purpose of the foregoing calculation. Upon conversion pursuant to this Section 4(c)(i), the shares of Preferred Stock so converted shall be cancelled and not subject to reissuance.

 

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(ii) In the event that a holder or an Eligible Transferee commits in the Series D Preferred Stock Purchase Agreement to purchase Second Closing Shares in the Second Closing (a “ Second Closing Obligee ”) but does not, by itself or through one or more of its Affiliates (subject to Section 4(c)(vii) below), purchase at the Second Closing (if such occurs) at least the number of Second Closing Shares set forth opposite such Second Closing Obligee’s name in the column titled “Shares of Series D Preferred Stock Committed to Purchase in Second Closing” on Exhibit A-2 attached to the Series D Purchase Agreement, then (i) the Second Closing Conversion Portion of each series of Preferred Stock (other than Series D Preferred Stock) held by such Second Closing Obligee (a “ Second Closing Non-Participating Investor ”) shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10) times the applicable Conversion Price of such series of Preferred Stock, and (ii) the Series D Conversion Portion of the Series D Preferred Stock held by such Second Closing Non-Participating Investor and originally issued in the First Closing and any Supplemental Closing shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10) times the Conversion Price of the Series D Preferred Stock. Upon conversion pursuant to this Section 4(c)(ii), the shares of Preferred Stock so converted shall be cancelled and not subject to reissuance. Shares of Preferred Stock that are held by a Second Closing Obligee as of 11:59 p.m. Pacific Daylight Time on April 15, 2013, including any shares of Series D Preferred Stock purchased by such Second Closing Obligee in the First Closing or any Supplemental Closing, will remain subject to conversion under this provision through the date of the Second Closing, even if such shares are transferred to another holder prior to the Second Closing, and will be converted on the terms provided in the forgoing sentence as if such shares of Preferred Stock were still held by such Second Closing Obligee.

(iii) For the avoidance of doubt and notwithstanding the Mandatory Conversions, the Conversion Prices of the shares of Preferred Stock not converted pursuant to Sections 4(c)(i)-(ii) shall not be affected by the Mandatory Conversions.

(iv) The conversions that may occur pursuant to Sections 4(c)(i) shall be effective as of 12:00 a.m. Pacific Daylight Time on April 16, 2013 and the conversions that may occur pursuant to Section 4(c)(ii) shall be effective immediately following the Second Closing, in each case, whether or not the certificates evidencing 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 conversions unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent, 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.

(v) On the date of the occurrence of any Mandatory Conversion, each holder whose shares are subject to conversion shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of Preferred Stock shall not have been surrendered at the office of the Corporation,

 

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that notice from the Corporation shall not have been received by any holder of record of shares of Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

(vi) In the event that (A) a holder of Preferred Stock converts any Preferred Stock into Common Stock pursuant to Section 4(a) any time during the period beginning ninety (90) days prior to the First Closing Date and ending on the Second Closing Date (the shares of Preferred Stock so converted, the “ Early Converted Preferred ”), and (B) the Early Converted Preferred would otherwise have been converted pursuant to Sections 4(c)(i) or (ii) if such holder had not exercised its conversion rights under Section 4(a), such holder’s Preferred Stock (including its Early Converted Preferred) shall be deemed to have been converted to Common Stock at ten (10) times the applicable Conversion Price of such series of Preferred Stock to the extent that such Preferred Stock would have been converted pursuant to Sections 4(c)(i) and (ii) had such holder not exercised its conversion rights under Section 4(c).

(vii) The ability of one or more Affiliates to satisfy a holder’s Pro Rata Share for purposes of Section 4(c)(i) or Second Closing obligation for purposes of Section 4(c)(ii) is conditioned on each such Affiliate’s own satisfaction in full of such Affiliate’s own Pro Rata Share or Second Closing obligation, if any. No amounts invested by a holder or any Affiliate of a holder may be counted more than once so as to satisfy the Pro Rata Share or Second Closing obligations of more than one holder.

(d) Mechanics of Conversion . No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock as determined by the Board of Directors. For such purpose, all shares of Preferred Stock held by each holder of Preferred Stock shall be aggregated, and any resulting fractional share of Common Stock shall be paid in cash. Before any holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock, and to receive certificates therefor, such holder shall either (A) surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock or (B) notify the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written notice to the Corporation at such office that such holder elects to convert the same; provided , however , that on the date of an Automatic Conversion Event, 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 further , however , that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. On the date of the occurrence of an Automatic Conversion Event, each holder of record of shares of Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon such

 

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conversion, notwithstanding that the certificates representing such shares of Preferred Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have been received by any holder of record of shares of Preferred Stock, or that the certificates evidencing such shares of Common Stock shall not then be actually delivered to such holder.

(e) Adjustments to Conversion Price for Diluting Issues .

(i) Special Definition . For purposes of this Section 4(e), “ Additional Shares of Common ” shall mean all shares of Common Stock issued (or, pursuant to Section 4(e)(iii), deemed to be issued) by the Corporation after the filing of this Amended and Restated Certificate of Incorporation, other than issuances or deemed issuances of:

(1) shares of Common Stock issued or issuable to officers, directors and employees of, or consultants to, the Corporation pursuant to stock grants, option plans, purchase plans or other employee stock incentive programs or arrangements approved by the Board of Directors, or upon exercise of options or warrants granted to such parties pursuant to any such plan or arrangement;

(2) shares of Common Stock issued upon the exercise or conversion of Options or Convertible Securities outstanding as of the Filing Date, except for any shares of Common Stock issuable upon conversion of the Series D Preferred Stock that is issuable upon conversion the Bridge Notes;

(3) shares of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to Sections 4(f), 4(g) or 4(h) hereof;

(4) shares of Common Stock issued in a registered public offering under the Securities Act provided that the fully diluted valuation of the Corporation is not less than $200,000,000 and the aggregate gross proceeds to the Corporation (before deduction of underwriter’s commissions and expenses) are not less than $40,000,000;

(5) shares of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board of Directors;

(6) shares of Common Stock issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or commercial leasing transaction approved by the Board of Directors;

(7) shares of Common Stock issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors;

 

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

(9) shares of Common Stock issued or issuable to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors; and

(10) any other shares of Common Stock issued or issuable if the holders of a majority of the then outstanding shares of Preferred Stock agree in writing that such shares shall not constitute Additional Shares of Common Stock.

(ii) No Adjustment of Conversion Price . No adjustment in the Conversion Price of a particular series of Preferred Stock shall be made in respect of the issuance of Additional Shares of Common unless the consideration per share (as determined pursuant to Section 4(e)(v)) for an Additional Share of Common issued or deemed to be issued by the Corporation is less than the Conversion Price in effect on the date of, and immediately prior to such issue, for the Series D Preferred Stock.

(iii) Deemed Issue of Additional Shares of Common . In the event the Corporation at any time or from time to time after the Filing Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities, the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options and the conversion or exchange of the underlying securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that in any such case in which shares are deemed to be issued:

(1) no further adjustment in the Conversion Price of any series of Preferred Stock shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible Securities;

(2) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Corporation or in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof (other than a change pursuant a Mandatory Conversion or the anti-dilution provisions of such Options or Convertible Securities such as this Section 4(e) or pursuant to Recapitalization provisions of such Options or Convertible Securities such as Sections 4(f), 4(g) and 4(h) hereof), the Conversion Price of each series of Preferred Stock and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto);

 

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(3) no readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount above the Conversion Price that would have resulted from any other issuances of Additional Shares of Common and any other adjustments provided for herein between the original adjustment date and such readjustment date;

(4) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price of each series of Preferred Stock computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

(A) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of such exercised Options plus the consideration actually received by the Corporation upon such exercise or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and

(B) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common deemed to have been then issued was the consideration actually received by the Corporation for the issue of such exercised Options, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section 4(e)(v)) upon the issue of the Convertible Securities with respect to which such Options were actually exercised; and

(5) if such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this Section 4(e)(iii) as of the actual date of their issuance.

(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common

(1) Adjustment of Conversion Price of Series D Preferred Stock Upon Issuance of Additional Shares of Common .

(A) In the event this Corporation shall issue Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to Section 4(e)(iii)) after the Filing Date without consideration or for consideration per share less than the then existing Conversion Price for the Series D Preferred Stock, then, the Conversion

 

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Price of the Series D Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (i) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of shares which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and (ii) the denominator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of such Additional Shares of Common so issued.

(B) Notwithstanding Section 4(e)(iv)(1)(A), if the Corporation shall at any time issue any Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to Section 4(e)(iii)) in a Subsequent Closing under the Series D Purchase Agreement for consideration per share (such price, the “ Subsequent Closing Price ”) less than the then existing Conversion Price of the Series D Preferred Stock, then, in lieu of the adjustments provided for in Section 4(e)(iv)(1)(A), the Conversion Price of the Series D Preferred Stock shall be reduced, concurrently with such issue to the Subsequent Closing Price.

(2) Adjustments to the Conversion Price of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock .

(A) In the event this Corporation shall issue Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to Section 4(e)(iii)) after the Filing Date without consideration or for consideration per share less than the then existing Conversion Price for the Series C Preferred Stock (a “ Dilutive Issuance ”), then, the Conversion Price of the Series C Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (i) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of shares which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and (ii) the denominator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue plus (B) the number of such Additional Shares of Common so issued. Immediately after the Conversion Price for the Series C Preferred Stock has been adjusted as a result of each Dilutive Issuance pursuant to this Section 4(d)(iv) above, the Conversion Prices for the Series A Preferred Stock and Series B Preferred Stock shall each respectively be adjusted to a price equal to the then-effective Conversion Price for the Series A Preferred Stock and Series B Preferred Stock, as applicable, multiplied by a fraction, the numerator of which shall be the Conversion Price for the Series C Preferred Stock immediately following the adjustment set forth in this Section 4(e)(iv) for the Dilutive Issuance and the denominator of which shall be the Conversion Price of the Series C Preferred Stock immediately prior to the adjustment set forth in this Section 4(e)(iv) for the Dilutive Issuance. For purposes of illustration only, if the Conversion Price for the Series C Preferred Stock after a Dilutive Issuance is adjusted to $0.8175, from the initial Conversion Price of the Series C Preferred Stock of $1.09, then the Conversion Prices for the Series A Preferred Stock and the Conversion Price for the Series B Preferred Stock would be adjusted to $0.91239 and $1.0656225, respectively, in connection with such Dilutive Issuance, representing an adjustment factor of 0.75 from the current Conversion Price of each such series.

 

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(B) Notwithstanding Section 4(e)(iv)(2)(A), in the event of a Subsequent Closing as a result of which the Conversion Price of the Series D Preferred Stock is adjusted pursuant to Section 4(e)(iv)(1)(B) (a “ Subsequent Closing Adjustment ”), the Conversion Price of the Series C Preferred Stock shall be reduced, concurrently with such Subsequent Closing Adjustment, to a price (calculated to the nearest cent) determined by multiplying such Conversion Price by a fraction, (i) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such Subsequent Closing plus (B) the number of shares which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common issued in such Subsequent Closing would purchase at such Conversion Price, and (ii) the denominator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such Subsequent Closing plus (B) the number of such Additional Shares of Common issued in such Subsequent Closing, plus (C) the Series D Adjustment Additional Shares with respect to such Subsequent Closing Adjustment. The “ Series D Adjustment Additional Shares ” with respect to a Subsequent Closing Adjustment shall be equal to the product of (i) the aggregate number of shares of Series D Preferred Stock issued in the First Closing, any Supplemental Closings and the Second Closing (if such has occurred) that are outstanding at the time of the Subsequent Closing and (ii) the result of (a) the Conversion Rate applicable to the Series D Preferred Stock immediately following such Subsequent Closing Adjustment, minus (ii) the Conversion Rate applicable to the Series D Preferred Stock immediately prior to such Subsequent Closing Adjustment. Immediately after the Conversion Price for the Series C Preferred Stock has been adjusted as a result of a Subsequent Closing Adjustment pursuant to this Section 4(e)(iv)(2)(B), the Conversion Prices for the Series A Preferred Stock and Series B Preferred Stock shall each respectively be adjusted to a price equal to the then-effective Conversion Price for the Series A Preferred Stock and Series B Preferred Stock, as applicable, multiplied by a fraction, the numerator of which shall be the Conversion Price for the Series C Preferred Stock immediately following the adjustment set forth in this Section 4(e)(iv)(2)(B) and the denominator of which shall be the Conversion Price of the Series C Preferred Stock immediately prior to the adjustment set forth in this Section 4(e)(iv)(2)(B). The adjustments provided by this Section 4(e)(iv)(2)(B) shall be in lieu of any adjustments that would be provided by Section 4(e)(iv)(2)(A) with respect to such Subsequent Closing.

(3) Notwithstanding Sections 4(e)(iv)(1)-(2), the Conversion Price shall not be reduced at such time if the amount of such reduction would be less than $0.01, but any such amount shall be carried forward, and a reduction will be made with respect to such amount at the time of, and together with, any subsequent reduction which, together with such amount and any other amounts so carried forward, equal $0.01 or more in the aggregate. For the purposes of this Section 4(e)(iv)(3), all shares of Common Stock issuable upon conversion of all outstanding shares of Preferred Stock and the exercise and/or conversion of any other outstanding Convertible Securities and all outstanding Options shall be deemed to be outstanding.

(v) Determination of Consideration . For purposes of this Section 4(e), the consideration received by the Corporation for the issue (or deemed issue) of any Additional Shares of Common shall be computed as follows:

(1) Cash and Property . Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with such issuance;

 

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(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and

(C) in the event Additional Shares of Common are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and (b) above, as reasonably determined in good faith by the Board of Directors.

(2) Options and Convertible Securities . The consideration per share received by the Corporation for Additional Shares of Common deemed to have been issued pursuant to Section 4(e)(iii) shall be determined by dividing

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

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

(f) Adjustments for Subdivisions or Combinations of Common Stock . In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price of each series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(g) Adjustments for Subdivisions or Combinations of Preferred Stock . In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such subdivision shall,

 

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concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Preferred Stock, the Dividend Rate, Original Issue Price and Liquidation Preference of the affected series of Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased.

(h) Adjustments for Reclassification, Exchange and Substitution . Subject to Section 3 above, if the Common Stock issuable upon conversion of the Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive each holder of such Preferred Stock shall have the right thereafter to convert such shares of Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of shares of Common Stock deliverable upon conversion of such series of Preferred Stock immediately before that change would have been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with respect to such other shares.

(i) No Impairment . The Corporation will not through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Preferred Stock against impairment. Notwithstanding the foregoing, nothing in this Section 4(h) shall prohibit the Corporation from amending its Certificate of Incorporation with the requisite consent of its stockholders and the board of directors.

(j) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (1) such adjustments and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of Preferred Stock.

(k) Waiver of Adjustment of Conversion Price . Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion Price of any series of Preferred Stock may be waived by the consent or vote of the holders of the majority of the outstanding shares of such series either before or after the issuance causing the adjustment.

 

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(l) Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of 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 then outstanding shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

5. Voting .

(a) Restricted Class Voting . Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together and not as separate classes.

(b) No Series Voting . Other than as provided herein or required by law, there shall be no series voting.

(c) Preferred Stock . Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which the shares of Preferred Stock held by such holder could be converted as of the record date. The holders of shares of the Preferred Stock shall be entitled to vote on all matters on which the Common Stock shall be entitled to vote. Holders of Preferred Stock shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted), shall be disregarded.

(d) Election of Directors . The holders representing a majority of the outstanding Series A Preferred Stock, voting as a separate class, shall be entitled to elect two (2) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. The holders of representing a majority of the outstanding Series B Preferred Stock , voting as a separate class, shall be entitled to elect one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. The holders of representing a majority of the outstanding Series C Preferred Stock, voting as a separate class, shall be entitled to elect one (1) member of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. The holders Common Stock, voting as a separate class, shall be entitled to elect two (2) members of the Corporation’s Board of Directors at each meeting or pursuant to each consent of the Corporation’s stockholders for the election of directors. Any additional members of the Corporation’s Board of Directors shall be elected by the holders of Common Stock and Preferred Stock, voting together as a single class. If a vacancy on the Board of Directors is to be filled by the Board of Directors, only directors elected by the same class or classes of stockholders as those who would be entitled to vote to fill such vacancy shall vote to fill such vacancy.

 

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(e) Adjustment in Authorized Common Stock . 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 an affirmative vote of the holders of a majority of the stock of the Corporation.

(f) Common Stock . Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.

(g) California Section 2115 . If and only for so long as Section 2115 of the California General Corporation Law purports to make Section 708 subdivisions (a), (b) and (c) of the California General Corporation Law applicable to the Corporation, the Corporation’s stockholders shall have the right to cumulate their votes in connection with the election of directors as provided by Section 708 subdivisions (a), (b) and (c) of the California General Corporation Law.

6. Protective Provisions .

(a) Preferred Stock . For so long as at least 1,500,000 shares (as adjusted for Recapitalizations) of the Preferred Stock shall be issued and outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent as provided by law) of the holders of at least a majority of the outstanding shares of the Preferred Stock voting together as a single class on an as-converted-to-Common-Stock basis:

(i) amend, alter, waive or repeal any provision of the Certificate of Incorporation or bylaws of the Corporation;

(ii) take any action if such action would alter or change the rights, preferences or privileges of the Preferred Stock (by reclassification, merger, consolidation or otherwise) in a mariner that adversely affects the Preferred Stock; provided , however , that any action that would alter or change the rights, preferences or privileges of a series of Preferred Stock (by reclassification, merger, consolidation or otherwise) in a manner that adversely affects such series of Preferred Stock shall require the approval (by vote or written consent as provided by law) of at least a majority of the outstanding shares of such series of Preferred Stock voting as a separate class; provided further , however , that authorization or creation of any new class or series of shares having powers, preferences, or privileges senior to or on parity with any series of Preferred Stock then outstanding shall not be deemed an action adverse to such series of Preferred Stock;

(iii) increase or decrease (other than for decreases resulting from conversion of the Preferred Stock) the authorized number of shares of any class of stock or any series thereof;

(iv) authorize or create (by reclassification, merger or otherwise) any new class or series of shares having rights, preferences or privileges senior to or on a parity with any series of Preferred Stock;

 

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(v) enter into any transaction or series of related transactions that is, or deemed to be, a liquidation, dissolution or winding up of the Corporation pursuant to Section 3(d) above;

(vi) take any action resulting in the repurchase or redemption of shares of Common Stock or Preferred Stock of the Corporation, except for (i) repurchases at cost of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements providing for the right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right, and (iii) any other repurchase or redemption of capital stock of the Corporation approved by the holders of the Common Stock and Preferred Stock of the Corporation voting together as separate classes;

(vii) declare or pay any Distribution with respect to the Common Stock of the Corporation; or

(viii) take any action that the Corporation knows will result in the taxation of the holders of Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended.

(b) Series D Preferred Stock . For so long as at least 10,000,000 shares (as adjusted for Recapitalizations) of Series D Preferred Stock shall be issued and outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent as provided by law) of the holders of at least a majority of the outstanding shares of Series D Preferred Stock voting together as a single class on an as-converted-to-Common-Stock basis:

(i) increase or decrease (other than for decreases resulting from conversion of Series D Preferred Stock) the authorized number of shares of Series D Preferred Stock; or

(ii) authorize or create (by reclassification, merger or otherwise) any new class or series of shares having a liquidation preference or dividend preference senior to the liquidation preference or dividend preference of the Series D Preferred Stock, as applicable.

7. Reissuance of Preferred Stock . In the event that any shares of Preferred Stock shall be converted pursuant to Section 4 or otherwise repurchased by the Corporation, the shares so converted or repurchased shall be cancelled and shall not be issuable by this Corporation.

8. Notices . Any notice required by the provisions of this ARTICLE V to be given to the holders of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder’s address appearing on the books of the Corporation.

ARTICLE VI

The Corporation is to have perpetual existence.

 

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ARTICLE VII

Elections of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins or unless the Bylaws of the Corporation shall so provide.

ARTICLE VIII

Unless otherwise set forth herein, the number of directors which constitute the Board of Directors of the Corporation may be designated in the Bylaws of the Corporation or by action of the Board of Directors.

ARTICLE IX

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation.

ARTICLE X

1. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director.

2. The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation.

3. Neither any amendment nor repeal of this ARTICLE X, nor the adoption of any provision of this Corporation’s Certificate of Incorporation inconsistent with this ARTICLE X, shall eliminate or reduce the effect of this ARTICLE X, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this ARTICLE X, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

ARTICLE XI

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

*    *    *

 

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Exhibit 3.1(B)

CERTIFICATE OF AMENDMENT TO THE

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

ACHAOGEN, INC.

Achaogen, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ Corporation ”), does hereby certify that:

I. The name of the Corporation is Achaogen, Inc. The original Certificate of Incorporation of the Corporation, filed under the Corporation’s original name VVII NewCo 2003, Inc., was filed with the Secretary of State of the State of Delaware on November 26, 2002.

II. The Corporation filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware on March 5, 2013 (the “ Certificate of Incorporation ”).

III. This amendment of the Certificate of Incorporation was duly adopted by this Corporation’s Board of Directors in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware, and the Corporation’s stockholders have given their written consent in accordance with Section 228 of the General Corporation Law of the State of Delaware.

IV. ARTICLE V, Section 1(m) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(m) “ First Closing Conversion Portion ” shall mean the number shares of Preferred Stock determined by multiplying the number of shares of each series of Preferred Stock held by such First Closing Non-Participating Investor as of 12:00 a.m. Pacific Daylight Time on May 2, 2013 by the quotient of (x) the result of (A) such investor’s Pro Rata Share minus (B) the aggregate dollar amount of shares either purchased by such First Closing Non-Participating Investor (by itself or through one or more of its Affiliates) in the First Closing or any Supplemental Closing or irrevocably committed to be purchased by such First Closing Non-Participating Investor (by itself or through one or more of its Affiliates) in the Second Closing, divided by (y) such investor’s Pro Rata Share.”

V. ARTICLE V, Section 1(t) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(t) “ Pro Rata Share ” shall be determined by multiplying $25,000,000.00 by the quotient of (x) the number of shares of Preferred Stock (other than Series D Preferred Stock) held by such holder as of 11:59 p.m. Pacific Daylight Time on May 1, 2013, on an as-converted-to-Common-Stock basis, divided by (y) the aggregate number of shares of Preferred Stock (other than Series D Preferred Stock) held by all stockholders (other than Excluded Holders) as of 11:59 p.m. Pacific Daylight Time on May 1, 2013, on an as-converted-to-Common-Stock basis.”

VI. ARTICLE V, Section 1(v) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(v) “ Second Closing Conversion Portion ” shall mean the number shares of Preferred Stock determined by multiplying the number of


shares of each series of Preferred Stock (other than Series D Preferred Stock) held by such Second Closing Non-Participating Investor as of 11:59 p.m. Pacific Daylight Time on May 1, 2013 by the quotient of (x) the result of (A) such investor’s Pro Rata Share minus (B) the aggregate dollar amount of shares purchased by such Second Closing Non-Participating Investor in the First Closing, any Supplemental Closing and the Second Closing, divided by (y) such investor’s Pro Rata Share.”

VII. ARTICLE V, Section 4(c)(i) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(i) In the event that a holder of Preferred Stock (other than an Excluded Holder) as of 12:00 a.m. Pacific Daylight Time on May 2, 2013 (a “ First Closing Obligee ”) has not, prior to May 2, 2013, by itself or through one or more of its Affiliates (subject to Section 4(c)(vii) below), purchased in the First Closing or a Supplemental Closing and, by execution of the Series D Purchase Agreement, irrevocably committed to purchase in the Second Closing (taken together with the First Closing and any Supplemental Closings, the “ Mandatory Financing ”), an aggregate amount in the Mandatory Financing at least equal to such holder’s Pro Rata Share, then the First Closing Conversion Portion of each series of Preferred Stock (other than Series D Preferred Stock) held by such holder (a “ First Closing Non-Participating Investor ”) shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10) times the applicable Conversion Price of such series of Preferred Stock. The amount of principal and interest of any Bridge Note converted by a holder into Series D Preferred Stock at the First Closing shall be deemed to have been purchased by such holder for the purpose of the foregoing calculation. Upon conversion pursuant to this Section 4(c)(i), the shares of Preferred Stock so converted shall be cancelled and not subject to reissuance.”

VIII. ARTICLE V, Section 4(c)(ii) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(ii) In the event that a holder or an Eligible Transferee commits in the Series D Preferred Stock Purchase Agreement to purchase Second Closing Shares in the Second Closing (a “ Second Closing Obligee ”) but does not, by itself or through one or more of its Affiliates (subject to Section 4(c)(vii) below), purchase at the Second Closing (if such occurs) at least the number of Second Closing Shares set forth opposite such Second Closing Obligee’s name in the column titled “Shares of Series D Preferred Stock Committed to Purchase in Second Closing” on Exhibit A-2 attached to the Series D Purchase Agreement, then (i) the Second Closing Conversion Portion of each series of Preferred Stock (other than Series D Preferred Stock) held by such Second Closing Obligee (a “ Second Closing Non-Participating Investor ”) shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10) times the applicable Conversion Price of such series of Preferred Stock, and (ii) the Series D Conversion Portion of the Series D Preferred Stock held by such Second Closing Non-Participating Investor and originally issued in the First Closing and any Supplemental Closing shall automatically, and without further action on the part of such holder, be converted into Common Stock at ten (10)


times the Conversion Price of the Series D Preferred Stock. Upon conversion pursuant to this Section 4(c)(ii), the shares of Preferred Stock so converted shall be cancelled and not subject to reissuance. Shares of Preferred Stock that are held by a Second Closing Obligee as of 11:59 p.m. Pacific Daylight Time on May 1, 2013, including any shares of Series D Preferred Stock purchased by such Second Closing Obligee in the First Closing or any Supplemental Closing, will remain subject to conversion under this provision through the date of the Second Closing, even if such shares are transferred to another holder prior to the Second Closing, and will be converted on the terms provided in the forgoing sentence as if such shares of Preferred Stock were still held by such Second Closing Obligee.”

IX. ARTICLE V, Section 4(c)(iv) of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:

“(iv) The conversions that may occur pursuant to Sections 4(c)(i) shall be effective as of 12:00 a.m. Pacific Daylight Time on May 2, 2013 and the conversions that may occur pursuant to Section 4(c)(ii) shall be effective immediately following the Second Closing, in each case, whether or not the certificates evidencing 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 conversions unless either the certificates evidencing such shares of Preferred Stock are delivered to the Corporation or its transfer agent, 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.”

X. All other provisions of the Certificate of Incorporation shall remain in full force and effect.

(Signature Page Follows)


IN WITNESS WHEREOF , Achaogen, Inc. has caused this Certificate of Amendment to the Amended and Restated Certificate of Incorporation to be signed by its duly authorized officer on this 12th day of April, 2013.

 

/s/ Kenneth J. Hillan

Kenneth J. Hillan
President & Chief Executive Officer

Exhibit 3.3

BYLAWS OF

ACHAOGEN, INC.

(formerly known as VVII NEWCO 2003, INC.)

(Initially adopted on November 26, 2002)


TABLE OF CONTENTS

 

         Page  

ARTICLE I — CORPORATE OFFICES

     1   

1.1

 

REGISTERED OFFICE.

     1   

1.2

 

OTHER OFFICES.

     1   

ARTICLE II — MEETINGS OF STOCKHOLDERS

     1   

2.1

 

PLACE OF MEETINGS.

     1   

2.2

 

ANNUAL MEETING.

     1   

2.3

 

SPECIAL MEETING.

     1   

2.4

 

NOTICE OF STOCKHOLDERS’ MEETINGS.

     2   

2.5

 

MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

     2   

2.6

 

QUORUM.

     2   

2.7

 

ADJOURNED MEETING; NOTICE.

     3   

2.8

 

CONDUCT OF BUSINESS.

     3   

2.9

 

VOTING.

     3   

2.10

 

STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

     3   

2.11

 

RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

     4   

2.12

 

PROXIES.

     4   

2.13

 

LIST OF STOCKHOLDERS ENTITLED TO VOTE.

     5   

ARTICLE III — DIRECTORS

     5   

3.1

 

POWERS.

     5   

3.2

 

NUMBER OF DIRECTORS.

     5   

3.3

 

ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

     5   

3.4

 

RESIGNATION AND VACANCIES.

     6   

3.5

 

PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

     6   

3.6

 

REGULAR MEETINGS.

     7   

3.7

 

SPECIAL MEETINGS; NOTICE.

     7   

3.8

 

QUORUM.

     7   

3.9

 

BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

     8   

3.10

 

FEES AND COMPENSATION OF DIRECTORS.

     8   

3.11

 

APPROVAL OF LOANS TO OFFICERS.

     8   

3.12

 

REMOVAL OF DIRECTORS.

     8   

ARTICLE IV — COMMITTEES

     8   

4.1

 

COMMITTEES OF DIRECTORS.

     8   

4.2

 

COMMITTEE MINUTES.

     9   

4.3

 

MEETINGS AND ACTION OF COMMITTEES.

     9   


ARTICLE V — OFFICERS

     10   

5.1

 

OFFICERS.

     10   

5.2

 

APPOINTMENT OF OFFICERS.

     10   

5.3

 

SUBORDINATE OFFICERS.

     10   

5.4

 

REMOVAL AND RESIGNATION OF OFFICERS.

     10   

5.5

 

VACANCIES IN OFFICES.

     10   

5.6

 

CHAIRPERSON OF THE BOARD.

     10   

5.7

 

CHIEF EXECUTIVE OFFICER.

     11   

5.8

 

PRESIDENT.

     11   

5.9

 

VICE PRESIDENTS.

     11   

5.10

 

SECRETARY.

     11   

5.11

 

CHIEF FINANCIAL OFFICER.

     12   

5.12

 

ASSISTANT SECRETARY.

     12   

5.13

 

ASSISTANT TREASURER.

     13   

5.14

 

REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

     13   

5.15

 

AUTHORITY AND DUTIES OF OFFICERS.

     13   

ARTICLE VI — RECORDS AND REPORTS

     13   

6.1

 

MAINTENANCE AND INSPECTION OF RECORDS.

     13   

6.2

 

INSPECTION BY DIRECTORS.

     14   

ARTICLE VII — GENERAL MATTERS

     14   

7.1

 

CHECKS.

     14   

7.2

 

EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

     14   

7.3

 

STOCK CERTIFICATES; PARTLY PAID SHARES.

     14   

7.4

 

SPECIAL DESIGNATION ON CERTIFICATES.

     15   

7.5

 

LOST CERTIFICATES.

     15   

7.6

 

CONSTRUCTION; DEFINITIONS.

     15   

7.7

 

DIVIDENDS.

     15   

7.8

 

FISCAL YEAR.

     16   

7.9

 

SEAL.

     16   

7.10

 

TRANSFER OF STOCK.

     16   

7.11

 

STOCK TRANSFER AGREEMENTS.

     16   

7.12

 

REGISTERED STOCKHOLDERS.

     16   

7.13

 

WAIVER OF NOTICE.

     16   

ARTICLE VIII — NOTICE BY ELECTRONIC TRANSMISSION

     17   

8.1

 

NOTICE BY ELECTRONIC TRANSMISSION.

     17   

8.2

 

DEFINITION OF ELECTRONIC TRANSMISSION.

     18   

8.3

 

INAPPLICABILITY.

     18   

ARTICLE IX — INDEMNIFICATION

     18   

9.1

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     18   

 

2


9.2

 

INDEMNIFICATION OF OTHERS

     18   

9.3

 

PREPAYMENT OF EXPENSES

     19   

9.4

 

DETERMINATION; CLAIM

     19   

9.5

 

NON-EXCLUSIVITY OF RIGHTS

     19   

9.6

 

INSURANCE

     19   

9.7

 

OTHER INDEMNIFICATION

     19   

9.8

 

AMENDMENT OR REPEAL

     20   

ARTICLE X — AMENDMENTS

     20   

 

3


BYLAWS OF VVII NEWCO 2003, INC.

 

 

ARTICLE I — CORPORATE OFFICES

1.1 REGISTERED OFFICE.

The registered office of VVII NewCo 2003, Inc. shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.

1.2 OTHER OFFICES.

The corporation’s Board of Directors (the “ Board ”) may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II — MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the “ DGCL ”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the corporation’s principal executive office.

2.2 ANNUAL MEETING.

The annual meeting of stockholders shall be held each year. The Board shall designate the date and time of the annual meeting. In the absence of such designation the annual meeting of stockholders shall be held on the second Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding business day. At the annual meeting, directors shall be elected and any other proper business may be transacted.

2.3 SPECIAL MEETING.

A special meeting of the stockholders may be called at any time by the Board, chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer) or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

If any person(s) other than the Board calls a special meeting, the request shall:

(i) be in writing;


(ii) specify the time of such meeting and the general nature of the business proposed to be transacted; and

(iii) be delivered personally or sent by registered mail or by facsimile transmission to the chairperson of the Board, the chief executive officer, the president (in the absence of a chief executive officer) or the secretary of the corporation.

The officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting. No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

2.4 NOTICE OF STOCKHOLDERS’ MEETINGS.

All notices of meetings of stockholders shall be sent or otherwise given in accordance with either Section 2.5 or Section 8.1 of these bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Notice of any meeting of stockholders shall be given:

(i) if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the corporation’s records; or

(ii) if electronically transmitted as provided in Section 8.1 of these bylaws.

An affidavit of the secretary or an assistant secretary of the corporation or of the transfer agent or any other agent of the corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.6 QUORUM.

The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

 

2


2.7 ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place if any thereof, and the means of remote communications if any by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the continuation of the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.8 CONDUCT OF BUSINESS.

The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.

2.9 VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Unless otherwise provided in the certificate of incorporation, any action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed 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.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the corporation as provided in

 

3


Section 228 of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other such action.

If the Board does not so fix a record date:

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed.

(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.

2.12 PROXIES.

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.

 

4


2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 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. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal executive office. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

ARTICLE III — DIRECTORS

3.1 POWERS.

Subject to the provisions of the DGCL and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

3.2 NUMBER OF DIRECTORS.

The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one member. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation or these bylaws may prescribe other qualifications for directors. Each director, including a director elected to fill a vacancy, shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.

 

5


All elections of directors shall be by written ballot, unless otherwise provided in the certificate of incorporation; if authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must be either set forth or be submitted with information from which it can be determined that the electronic transmission authorized by the stockholder or proxy holder.

3.4 RESIGNATION AND VACANCIES.

Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

Unless otherwise provided in the certificate of incorporation or these bylaws:

(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the DGCL.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the DGCL as far as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

 

6


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

3.6 REGULAR MEETINGS.

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

3.7 SPECIAL MEETINGS; NOTICE.

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or any two directors.

Notice of the time and place of special meetings shall be:

 

  (i) delivered personally by hand, by courier or by telephone;

 

  (ii) sent by United States first-class mail, postage prepaid;

 

  (iii) sent by facsimile; or

 

  (iv) sent by electronic mail,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, as the case may be, as shown on the corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by United States mail, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held at the corporation’s principal executive office) nor the purpose of the meeting.

3.8 QUORUM.

At all meetings of the Board, a majority of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

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A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

3.9 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing 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. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.10 FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

3.11 APPROVAL OF LOANS TO OFFICERS.

The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the Board, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the corporation.

3.12 REMOVAL OF DIRECTORS.

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

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

ARTICLE IV — COMMITTEES

4.1 COMMITTEES OF DIRECTORS.

The Board 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. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or

 

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not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board 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 that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation,

4.2 COMMITTEE MINUTES.

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

4.3 MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i) Section 3.5 (place of meetings and meetings by telephone);

(ii) Section 3.6 (regular meetings);

(iii) Section 3.7 (special meetings and notice);

(iv) Section 3.8 (quorum);

(v) Section 7.13 (waiver of notice); and

(vi) Section 3.9 (action without a meeting)

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However :

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board; and

(iii) notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

 

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ARTICLE V — OFFICERS

5.1 OFFICERS.

The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.

5.2 APPOINTMENT OF OFFICERS.

The Board shall appoint the officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

5.3 SUBORDINATE OFFICERS.

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

5.5 VACANCIES IN OFFICES.

Any vacancy occurring in any office of the corporation shall be filled by the Board or as provided in Section 5.2.

5.6 CHAIRPERSON OF THE BOARD.

The chairperson of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these bylaws. If there is no

 

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chief executive officer or president, then the chairperson of the Board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these bylaws.

5.7 CHIEF EXECUTIVE OFFICER.

Subject to such supervisory powers, if any, as the Board may give to the chairperson of the Board, the chief executive officer, if any, shall, subject to the control of the Board, have general supervision, direction, and control of the business and affairs of the corporation and shall report directly to the Board. All other officers, officials, employees and agents shall report directly or indirectly to the chief executive officer. The chief executive officer shall see that all orders and resolutions of the Board are carried into effect. The chief executive officer shall serve as chairperson of and preside at all meetings of the stockholders. In the absence of a chairperson of the Board, the chief executive officer shall preside at all meetings of the Board.

5.8 PRESIDENT.

In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer. When acting as the chief executive officer, the president shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the Board, these bylaws, the chief executive officer or the chairperson of the Board.

5.9 VICE PRESIDENTS.

In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the Board or, if not ranked, a vice president designated by the Board, shall perform all the duties of the president. When acting as the president, the appropriate vice president shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board, these bylaws, the chairperson of the Board, the chief executive officer or, in the absence of a chief executive officer, the president.

5.10 SECRETARY.

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show

(i) the time and place of each meeting;

(ii) whether regular or special (and, if special, how authorized and the notice given);

(iii) the names of those present at directors’ meetings or committee meetings;

(iv) the number of shares present or represented at stockholders’ meetings;

 

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(v) and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register showing;

(i) the names of all stockholders and their addresses;

(ii) the number and classes of shares held by each;

(iii) the number and date of certificates evidencing such shares; and

(iv) the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these bylaws.

5.11 CHIEF FINANCIAL OFFICER.

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as the Board may designate. The chief financial officer shall disburse the funds of the corporation as may be ordered by the Board, shall render to the chief executive officer or, in the absence of a chief executive officer, the president and directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board or these bylaws.

The chief financial officer shall be the treasurer of the corporation.

5.12 ASSISTANT SECRETARY.

The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or Board (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of the secretary’s inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the Board or these bylaws.

 

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5.13 ASSISTANT TREASURER.

The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or Board (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of the chief financial officer’s inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the Board or these bylaws.

5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

The chairperson of the Board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.15 AUTHORITY AND DUTIES OF OFFICERS.

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board or the stockholders.

ARTICLE VI — RECORDS AND REPORTS

6.1 MAINTENANCE AND INSPECTION OF RECORDS.

The corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal executive office.

 

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6.2 INSPECTION BY DIRECTORS.

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

ARTICLE VII — GENERAL MATTERS

7.1 CHECKS.

From time to time, the Board shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

7.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

7.3 STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of the corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairperson or vice-chairperson of the Board, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

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The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

7.4 SPECIAL DESIGNATION ON CERTIFICATES.

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

7.5 LOST CERTIFICATES.

Except as provided in this Section 7.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.6 CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

7.7 DIVIDENDS.

The Board, subject to any restrictions contained in either (i) the DGCL, or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

 

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The Board may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

7.8 FISCAL YEAR.

The fiscal year of the corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.9 SEAL.

The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.10 TRANSFER OF STOCK.

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

7.11 STOCK TRANSFER AGREEMENTS.

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

7.12 REGISTERED STOCKHOLDERS.

The corporation:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

(ii) shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(iii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.13 WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a

 

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waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII — NOTICE BY ELECTRONIC TRANSMISSION

8.1 NOTICE BY ELECTRONIC TRANSMISSION.

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if:

(i) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent; and

(ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent, or other person responsible for the giving of notice.

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

(iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iv) if by any other form of electronic transmission, when directed to the stockholder.

 

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An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

8.2 DEFINITION OF ELECTRONIC TRANSMISSION.

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

8.3 INAPPLICABILITY.

Notice by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.

ARTICLE IX — INDEMNIFICATION

9.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ Proceeding ”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such action, suit, or proceeding. The corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the corporation.

9.2 INDEMNIFICATION OF OTHERS

The corporation shall have the power to indemnify and hold harmless, to the extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such action, suit, or proceeding.

 

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9.3 PREPAYMENT OF EXPENSES

The corporation shall pay the expenses incurred by any officer or director of the corporation, and may pay the expenses incurred by any employee or agent of the corporation, in defending any proceeding in advance of its final disposition; provided , however , that the payment of expenses incurred by a person in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article 9 or otherwise.

9.4 DETERMINATION; CLAIM

If a claim for indemnification or payment of expenses under this Article 9 is not paid in full within sixty days after a written claim therefor has been received by the corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

9.5 NON-EXCLUSIVITY OF RIGHTS

The rights conferred on any person by this Article 9 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

9.6 INSURANCE

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.

9.7 OTHER INDEMNIFICATION

The corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

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9.8 AMENDMENT OR REPEAL

Any repeal or modification of the foregoing provisions of this Article 9 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.”

ARTICLE X — AMENDMENTS

These bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

 

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Exhibit 4.2

WARRANT TO PURCHASE STOCK

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: Achaogen, Inc., a Delaware corporation

Number of Shares: As set forth below

Class of Stock: Series A Convertible Preferred Stock, $0.001 par value per share

Warrant Price: $1.40 per share, subject to adjustment

Issue Date: March 16, 2005

Expiration Date: March 16, 2015

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good and valuable consideration, GOLD HILL VENTURE LENDING 03, L.P. (“Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the Series A Convertible Preferred Stock, $0.001 par value per share (the “Class”) of Achaogen, Inc., a Delaware corporation (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. This Warrant is issued in connection with that certain Loan and Security Agreement of even date herewith among the Company, Silicon Valley Bank and Gold Hill Venture Lending 03, L.P. (the “Loan Agreement”).

A. Number of Shares . This Warrant shall initially be exercisable for 16,072 shares of the Class (the “Initial Shares”). Upon the making by the Lenders (as defined in the Loan Agreement) of the Advance (as defined in the Loan Agreement), this Warrant shall automatically become exercisable for such number of additional shares of the Class (the “Additional Shares”) as shall equal (a) (i) 0.01929, multiplied by (ii) the total aggregate principal amount of such Advance, divided by (b) the then-effective Warrant Price. As used herein, “Shares” means the Initial Shares plus the Additional Shares, if any.

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 form 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, exclusive 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.

 

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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 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 a sale of all or substantially all of the Company’s assets to a third party that is not an Affiliate (as defined below) of the Company (a “Third Party Asset Sale”), 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 unless (i) the Company does not distribute the consideration from such Third Party Asset Sale to its stockholders, and (ii) the Company continues as a going concern following the closing of any such Third Party 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.

(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.

(D) Notwithstanding the foregoing provisions of this Section 1.6.2, in the event that the acquiror in an Acquisition does not agree to assume this Warrant at and as of the closing thereof, this Warrant, to the extent not exercised or converted on or prior to such closing, shall terminate and be of no further force or effect as of immediately following such closing if all of the following conditions are met: (i) the acquiror is subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, (ii) the class of stock or other security of the acquiror that would be received by Holder in connection with such Acquisition were Holder to exercise or convert this Warrant on or prior to the closing thereof is listed for trading on a national securities exchange or approved for quotation on an automated inter-dealer quotation system, (iii) the value (determined as of the closing of such Acquisition in accordance with the definitive agreements therefor) of the acquiror stock and/or other securities that would be received by Holder in respect of each Share were Holder to exercise or convert this Warrant on or prior to the closing of such Acquisition is equal to or greater than three (3) times the then-effective Warrant Price, and (iv) Holder would be able to publicly resell all of the acquiror stock and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant on or prior to the

 

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closing of such Acquisition during the three (3) month period immediately following the closing thereof pursuant to an effective registration statement under the covering such acquiror stock and/or other securities or pursuant to the provisions of Rule 144 under the Act.

(E) As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly twenty-five percent (25%) 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 or partners, as applicable.

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 Articles or Certificate (as applicable) of Incorporation. 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 Articles or Certificate of Incorporation as

 

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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 Articles or Certificate (as applicable) 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 Articles or Certificate (as applicable) 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; provided , however that nothing in this Warrant (including this Section 2.4) shall prohibit the Company from taking any corporate action (including an amendment of its Articles or Certificate (as applicable) of Incorporation or a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action) if the Company receives the approval of its Board of Directors and/or stockholders to the extent required by the Company’s Articles or Certificate (as applicable) of Incorporation and the Delaware General Corporation Law.

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.

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 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.

(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.

 

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(c) The Capitalization Table dated March 16, 2005 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 subscription pro rata to all holders of the outstanding shares of the same class of the Company’s capital stock as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of any of its stock; or (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; 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; and (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).

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Company’s Investor Rights Agreement dated August 16, 2004 (as the same may be amended from time to time) among the Company and the other parties named therein. The provisions set forth in the Company’s Investors’ Right 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.

 

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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 under 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 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO SILICON VALLEY BANK DATED AS OF MARCH 16, 2005, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,

 

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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 any affiliate of Holder that is an “accredited investor” as defined in Regulation D promulgated under the Act.

5.4 Transfer Procedure . Subject to the provisions of Article 5.3 and upon providing Company with written notice, 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, (i) 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, (ii) Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable), and (iii) the transferee(s) will agree to be bound by the terms and conditions of this Warrant, including, without limitation, the market standoff agreement in Article 5.11 below. 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:

Gold Hill Venture Lending 03, L.P.

Attn: Mr. Robert Helm

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Facsimile: 408-654-6256

 

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Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

Achaogen, Inc.

Attn: Chief Financial Office

7000 Sierra Point Parkway

South San Francisco, CA 94080

Telephone:

Facsimile:

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.

5.11 Market Stand-Off Agreement . The Holder and any transferee thereof hereby agrees that the Holder or transferee shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any common stock (or other securities) of the Company held by the Holder or transferee (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of the Company’s initial public offering (or such shorter period as permitted by the underwriters), provided that all officers and directors of the Company are bound by and have entered into similar agreements. The obligations described in this Section 5.11 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and stamp the certificates

 

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representing the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) with a legend describing the foregoing restriction until the end of such one hundred eighty (180) day period. Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 5.11.

 

“COMPANY”
ACHAOGEN, INC.
By:   /s/ J. Kevin Judice
Title:   President and CEO

 

“HOLDER”
GOLD HILL VENTURE LENDING 03, L.P.
By:   Gold Hill Venture Lending 03, LLC, its general partner
By:   /s/ Tim Waterson
Name:   Tim Waterson
  (Print)
Title:   Partner

 

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APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase              shares of the Common/Series                      Preferred [strike one] Stock of                      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):      

 

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Exhibit 4.3

WARRANT TO PURCHASE STOCK

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: Achaogen, Inc., a Delaware corporation

Number of Shares: As set forth below

Class of Stock: Series A Convertible Preferred Stock, $0.001 par value per share

Warrant Price: $1.40 per share, subject to adjustment

Issue Date: March 16, 2005

Expiration Date: March 16, 2015

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 Series A Convertible Preferred Stock, $0.001 par value per share (the “Class”) of Achaogen, Inc., a Delaware corporation (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. This Warrant is issued in connection with that certain Loan and Security Agreement of even date herewith among the Company, Silicon Valley Bank and Gold Hill Venture Lending 03, L.P. (the “Loan Agreement”).

A. Number of Shares . This Warrant shall initially be exercisable for 8,928 shares of the Class (the “Initial Shares”). Upon the making by the Lenders (as defined in the Loan Agreement) of the Advance (as defined in the Loan Agreement), this Warrant shall automatically become exercisable for such number of additional shares of the Class (the “Additional Shares”) as shall equal (a) (i) 0.01071, multiplied by (ii) the total aggregate principal amount of such Advance, divided by (b) the then-effective Warrant Price. As used herein, “Shares” means the Initial Shares plus the Additional Shares, if any.

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 form 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, exclusive 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.

 

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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 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 a sale of all or substantially all of the Company’s assets to a third party that is not an Affiliate (as defined below) of the Company (a “Third Party Asset Sale”), 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 unless (i) the Company does not distribute the consideration from such Third Party Asset Sale to its stockholders, and (ii) the Company continues as a going concern following the closing of any such Third Party 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.

(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.

(D) Notwithstanding the foregoing provisions of this Section 1.6.2, in the event that the acquiror in an Acquisition does not agree to assume this Warrant at and as of the closing thereof, this Warrant, to the extent not exercised or converted on or prior to such closing, shall terminate and be of no further force or effect as of immediately following such closing if all of the following conditions are met: (i) the acquiror is subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, (ii) the class of stock or other security of the acquiror that would be received by Holder in connection with such Acquisition were Holder to exercise or convert this Warrant on or prior to the closing thereof is listed for trading on a national securities exchange or approved for quotation on an automated inter-dealer quotation system, (iii) the value (determined as of the closing of such Acquisition in accordance with the definitive agreements therefor) of the acquiror stock and/or other securities that would be received by Holder in respect of each Share were Holder to exercise or convert this Warrant on or prior to the closing of such Acquisition is equal to or greater than three (3) times the then-effective Warrant Price, and (iv) Holder would be able to publicly resell all of the acquiror stock and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant on or prior to the

 

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closing of such Acquisition during the three (3) month period immediately following the closing thereof pursuant to an effective registration statement under the covering such acquiror stock and/or other securities or pursuant to the provisions of Rule 144 under the Act.

(E) As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly twenty-five percent (25%) 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 or partners, as applicable.

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 Articles or Certificate (as applicable) of Incorporation. 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 Articles or Certificate of Incorporation as

 

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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 Articles or Certificate (as applicable) 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 Articles or Certificate (as applicable) 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; provided , however that nothing in this Warrant (including this Section 2.4) shall prohibit the Company from taking any corporate action (including an amendment of its Articles or Certificate (as applicable) of Incorporation or a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action) if the Company receives the approval of its Board of Directors and/or stockholders to the extent required by the Company’s Articles or Certificate (as applicable) of Incorporation and the Delaware General Corporation Law.

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.

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 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.

(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.

 

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(c) The Capitalization Table dated March 16, 2005 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 subscription pro rata to all holders of the outstanding shares of the same class of the Company’s capital stock as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of any of its stock; or (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; 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; and (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).

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Company’s Investor Rights Agreement dated August 16, 2004 (as the same may be amended from time to time) among the Company and the other parties named therein. The provisions set forth in the Company’s Investors’ Right 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.

 

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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 under 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 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO SILICON VALLEY BANK DATED AS OF MARCH 16, 2005, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,

 

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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 any affiliate of Holder that is an “accredited investor” as defined in Regulation D promulgated under the Act.

5.4 Transfer Procedure . Subject to the provisions of Article 5.3 and upon providing Company with written notice, 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, (i) 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, (ii) Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable), and (iii) the transferee(s) will agree to be bound by the terms and conditions of this Warrant, including, without limitation, the market standoff agreement in Article 5.11 below. 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:

Silicon Valley Bancshares

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405

 

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Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

Achaogen, Inc.

Attn: Chief Financial Office

7000 Sierra Point Parkway

South San Francisco, CA 94080

Telephone:

Facsimile:

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.

5.11 Market Stand-Off Agreement . The Holder and any transferee thereof hereby agrees that the Holder or transferee shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any common stock (or other securities) of the Company held by the Holder or transferee (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of the Company’s initial public offering (or such shorter period as permitted by the underwriters), provided that all officers and directors of the Company are bound by and have entered into similar agreements. The obligations described in this Section 5.11 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration

 

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relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and stamp the certificates representing the Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) with a legend describing the foregoing restriction until the end of such one hundred eighty (180) day period. Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 5.11.

 

“COMPANY”
ACHAOGEN, INC.
By:   /s/ J. Kevin Judice
Title:   President and CEO

 

“HOLDER”
SILICON VALLEY BANK
By:   /s/ Peter Scott
Name:   Peter Scott
  (Print)
Title:   SRM

 

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APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase              shares of the Common/Series              Preferred [strike one] Stock of              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):    

 

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APPENDIX 2

ASSIGNMENT

For value received, Silicon Valley Bank hereby sells, assigns and transfers unto

 

Name:    Silicon Valley Bancshares
Address:    3003 Tasman Drive (HA-200)
   Santa Clara, CA 95054
  
Tax ID:    91-1962278

that certain Warrant to Purchase Stock issued by Achaogen, Inc. (the “Company”), on [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, Silicon Valley Bancshares makes each of the representations and warranties set forth in Article 4 of the Warrant as of the date hereof and agrees to be bound by the terms and conditions of the Warrant, including, without limitation, the market standoff agreement set forth in Article 5.11 thereof.

 

SILICON VALLEY BANCSHARES
By:    
Name:    
Title:    

 

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Exhibit 4.4

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:    ACHAOGEN, INC., a Delaware corporation
Number of Shares:    64,220 (Subject to Section 1.7)
Class of Stock:    Series C Preferred (Subject to Section 1.7)
Warrant Price:    $1.09 per share (Subject to Section 1.7)
Issue Date:    November 1, 2011
Expiration Date:    The 10th anniversary of the Issue Date, except as provided herein Credit Facility: This Warrant is issued in connection with the Loan and Security Agreement dated as of November 1, 2011 among Oxford Finance LLC (“Oxford”), as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank (“Bank”), and the Company (as amended from time to time, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Loan Agreement OXFORD FINANCE LLC (“Oxford;” together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of 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 the original of this Warrant (unless the same has been lost or destroyed, in which case an affidavit to that effect, including standard indemnities) together with 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 form 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 of 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 “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 this Warrant together with 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 on 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, exclusive license other than in the ordinary course of business, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, merger or sale of outstanding capital stock of the Company where the holders of the Company’s voting securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity or, if applicable, its parent entity, after the transaction.

1.6.2 Treatment of Warrant at Acquisition .

 

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(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 to be received by the holders of the same series or class as the Shares is cash (excluding any equity awards made to any such holders in connection with an employment relationship with the Company or its successor), 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 immediately prior to 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 reasonably require regarding the treatment of this Warrant 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 (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 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.

(C) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition of the Company by a publicly traded acquiror in which the consideration to be received by holders of the same class or series as the Shares for such Acquisition is publicly traded securities (or a combination of publicly traded securities and 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 immediately prior to the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing, which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(D) Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) 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.

As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly ten percent (10%) 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.

 

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1.7 Adjustment to Class of Shares; Warrant Price; Adjustments Cumulative .

1.7.1 Reserved .

1.7.2 Adjustment to Class of Shares; Warrant Price . In the event of an equity financing after the Issue Date the gross proceeds of which equal at least One Million Dollars ($1,000,000) (the “Next Round”), if the price per share (the “Next Round Price”) of Company’s preferred stock (the “Next Round Stock”) is less than the Warrant Price, Holder shall have the right, in Holder’s sole discretion, to elect to treat this Warrant as (and this Warrant shall be deemed automatically upon such election to be) exercisable for Shares of the Next Round Stock at the Next Round Price (with the number of such shares subject of this Warrant automatically adjusted to equal (i) the aggregate Number of Shares for which this Warrant is then exercisable (as adjusted hereunder, but before giving effect to this Section 1.7.2) multiplied by (ii) the quotient of (x) the Warrant Price divided by (y) the Next Round Price). The Shares for which this Warrant is exercisable upon such election, if at all, shall bear the same rights, preferences, and privileges of such Next Round Stock. Company shall provide Holder no less than ten (10) days’ written notice prior to any sale of Next Round Stock.

1.7.3 Adjustments Cumulative . Any adjustment to the Number of Shares and/or Warrant Price made as a result of this Article 1.7 shall be in addition to any adjustment(s) to be made in accordance with Article 2 hereof.

1.8 Voting Agreement . As to any Shares Holder receives upon any exercise or conversion of this Warrant, Holder agrees to be bound by the Third Amended and Restated Voting Agreement, dated as of April 6, 2010, by and among the Company and the persons and entities listed on Exhibits A and B thereto, as amended from time to time.

ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on the outstanding shares of the same class or series as 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 outstanding shares of the same class or series as the Shares, by reclassification or otherwise, into a greater number of shares, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the same class or series as the 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

 

4


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 Amended and Restated Certificate of Incorporation (as amended, the “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 class or series as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder).

2.4 No Impairment . The Company shall not, by amendment of its Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, except and to the extent waived or consented to in writing by Holder, or as otherwise specifically permitted under the terms hereof, 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. The foregoing notwithstanding, the Company shall not be deemed to have impaired Holder’s rights if it amends its Certificate of Incorporation with the requisite consent of the holders of the Company’s preferred stock or such holders waive their rights thereunder, and such amendments or waivers do not affect the Shares in a manner materially and adversely different from the effect that such amendments or waivers have generally on the rights, preferences, privileges or restrictions of the other shares of the same series of stock (without taking into account the particular circumstances of the Holder).

 

5


2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of this 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, class or series, and/or number of shares, 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, class or series, and number of Shares in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants and covenants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the same class or series as the Shares were last issued in an arms-length transaction in which at least $500,000 of such shares were sold.

(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 summary capitalization table attached hereto as Schedule 1 is 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 subscription or sale pro rata to the holders of the outstanding shares of the same class or series as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of the outstanding shares of the same class or series as the Shares; (d) to effect an Acquisition 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 shares of the same class and series as the Shares will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) 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 shares of the same class and series as the Shares will be entitled to exchange their shares for the securities or other property

 

6


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. Company will also provide information requested by Holder that is reasonably necessary to enable the Holder to comply with the Holder’s accounting or reporting requirements.

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Second Amended and Restated Investor Rights Agreement, dated April 6, 2010, by and among the Company and the persons and entities listed on Exhibit A thereto, as such is amended from time to time (the “Investor Rights Agreement”). The provisions set forth in the Investor Rights 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 does not affect the Shares in a manner that is materially and adversely different than the effect that such amendment, modification, or waiver has generally on the rights, preferences, privileges or restrictions of the other shares of the same series or class as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder). Holder agrees that the Shares shall be subject to the restrictions on transfer as set forth in Section 2.8 of the Investor Rights Agreement and the market stand-off agreement in Section 2.10 of the Investor Rights Agreement.

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 is being, 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 is aware of the Company’s business affairs and financial condition as of the Issue Date and 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

 

7


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 under 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 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 earlier to occur of (a) Expiration Date or (b) upon an Acquisition with respect to which a request has been duly made by the Company in accordance with Section 1.6.2(A) or Section 1.6.2(C).

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 SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT FOR AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO OXFORD FINANCE LLC DATED AS OF NOVEMBER 1, 2011 MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS 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.

 

8


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 any “affiliate” (as such term is defined in Regulation D promulgated under the Act) of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of an exemption to registration under Rule 144, including without limitation, 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 . After receipt by Holder of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “Oxford Affiliate”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate 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, the Oxford Affiliate(s) 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) and any such transferee agrees to be bound by the terms of this Warrant. The Company may refuse to transfer this Warrant or the Shares to any person or entity who directly competes with the Company, as determined by the Company in its good faith business judgment, unless, in either case, the stock of the Company is publicly traded. Any transferee shall take this Warrant subject to all provisions and restrictions contained herein.

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:

Oxford Finance LLC

133 N. Fairfax Street

Alexandria, VA 22314

Attn: Tim A. Lex, Chief Operating Officer

Telephone: (703) 519-4900

Facsimile: (703) 519-5225

 

9


Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

ACHAOGEN, INC.

7000 Shoreline Ct., Suite 371

S. San Francisco, California 94080

Attn: Chief Operating Officer

Telephone: (650) 260-3133

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 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.

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 Warrant 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.

[Balance of Page Intentionally Left Blank]

 

10


“COMPANY”

 

ACHAOGEN, INC.

By:   /s/ John C. Doyle, Jr.
Name:  

John C. Doyle, Jr.

(Print)

Title:   Chief Operating Officer

 

“HOLDER”

 

OXFORD FINANCE LLC

By:   /s/ T.A. Lex
Name:  

T.A. Lex

(Print)

Title:   COO

 

11


SCHEDULE 1

CAPITALIZATION TABLE

 

12


Report Generated as of: 10/25/2011 6:26:41 PM PST

ACHAOGEN, INC.

Fully Diluted Capitalization Table Summary

As of 10/25/2011

 

     CSE Shares*      Total Fully Diluted
Shares
 

COMMON STOCK (Authorized: 105,000,000)

     

Issued and Outstanding

     3,502,545         3,502,545   

PREFERRED STOCK (Authorized: 79,202,910)

     

SERIES A Preferred Stock (Authorized: 12,386,071)

     14,098,357      

SERIES B Preferred Stock (Authorized: 14,266,839)

     18,933,562      

SERIES C Preferred Stock (Authorized: 52,550,000)

     51,791,215         84,823,134   

WARRANTS

     

COMMON Stock

     10,000      

SERIES A Preferred Stock

     114,754         124,754   

2003 Stock Plan (Reserved: 15,893,957)

     

Shares Issuable Under Plan:

     

Options and SPRs Issued and Outstanding

     11,657,029      

Options and SPRs Committed for Issuance

     0      

Shares Remaining for Issuance Under Plan

     1,722,752         13,379,781   

Reserved in Plan

     15,893,957      

less: Options Exercised

     2,516,051      

less: SPRs Exercised

     0      

add: Repurchases

     1,875      
     13,379,781      

Total shares issued and outstanding, including shares committed for issuance and employee reserves, assuming conversion of all convertible securities and exercise of all outstanding options**

        101,830,214   

Footnotes :

CSE Shares * Common Stock Equivalent (CSE) shares reflects the Common Stock issuable for the security type (option, stock, warrant, CPN) after the appropriate conversion ratio is applied to each individual outstanding security for the applicable security type, using standard rounding.

 

**

These capitalization figures do not take into account the Company’s outstanding loan from The Wellcome Trust, which is convertible into shares of a separate class of the Company’s preferred stock at the time of the Company’s next preferred financing round, such separate class

 

13


  of preferred stock to have the same rights as the preferred stock sold in that round (or, under certain circumstances, Common Stock), at a discount of 20% from the price per share in the round. The current outstanding principal of the loan is $3,148,324, and this may increase to $5,593,697 if the Company achieves specified milestones.

Fully-Diluted Ownership

 

     Number of Shares      Percent%  

Common Stock

     3,502,545         3.44

SERIES A Preferred Stock

     14,098,357         13.84

SERIES B Preferred Stock

     18,933,562         18.59

SERIES C Preferred Stock

     51,791,215         50.86

COMMON Stock Warrants

     10,000         0.01

SERIES A Preferred Stock Warrants

     114,754         0.11

Options and SPRs issued and outstanding under plan—2003 Stock Plan

     11,657,029         11.45

Committed for Issuance—2003 Stock Plan

     0         0.00

Unissued Reserve—2003 Stock Plan

     1,722,752         1.69

TOTAL

     101,830,214         100

 

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APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase                      shares of the Common/Series                      Preferred [strike one] Stock of ACHAOGEN, INC. 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):    

 

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APPENDIX 2

ASSIGNMENT

For value received, Oxford Finance LLC hereby sells, assigns and transfers unto

  Name:  

[OXFORD TRANSFEREE]

  Address:    
     
  Tax ID:    
   

that certain Warrant to Purchase Stock issued by ACHAOGEN, INC. (the “Company”), on November 1, 2011 (the “Warrant”) together with all rights, title and interest therein.

 

OXFORD FINANCE LLC
By:    
Name:    
Title:    

Date:                                 

By its execution below, and for the benefit of the Company, OXFORD TRANSFEREE makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

OXFORD TRANSFEREE
By:    
Name:    
Title:    

 

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Exhibit 4.5

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:    ACHAOGEN, INC., a Delaware corporation
Number of Shares:    45,872 (Subject to Section 1.7)
Class of Stock:    Series C Preferred (Subject to Section 1.7)
Warrant Price:    $1.09 per share (Subject to Section 1.7)
Issue Date:    November 1, 2011
Expiration Date:    The 10th anniversary of the Issue Date, except as provided herein
Credit Facility:    This Warrant is issued in connection with the Loan and Security Agreement dated as of November 1, 2011 among Oxford Finance LLC (“Oxford”), as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank (“Bank”), and the Company (as amended from time to time, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Loan Agreement SILICON VALLEY BANK (“Bank;” together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of 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 the original of this Warrant (unless the same has been lost or destroyed, in which case an affidavit to that effect, including standard indemnities) together with 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 form 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 of 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 “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 this Warrant together with 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 on 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, exclusive license other than in the ordinary course of business, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, merger or sale of outstanding capital stock of the Company where the holders of the Company’s voting securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity or, if applicable, its parent entity, after the transaction.

1.6.2 Treatment of Warrant at Acquisition .

 

2


(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 to be received by the holders of the same series or class as the Shares is cash (excluding any equity awards made to any such holders in connection with an employment relationship with the Company or its successor), 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 immediately prior to 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 reasonably require regarding the treatment of this Warrant 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 (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 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.

(C) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition of the Company by a publicly traded acquiror in which the consideration to be received by holders of the same class or series as the Shares for such Acquisition is publicly traded securities (or a combination of publicly traded securities and 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 immediately prior to the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing, which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

(D) Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) 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.

As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly ten percent (10%) 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.

 

3


1.7 Adjustment to Number of Shares; Class of Shares; Warrant Price; Adjustments Cumulative .

1.7.1 Adjustment to Number of Shares . The Number of Shares for which this Warrant is exercisable shall automatically be increased, concurrently with the making of the Term A Loan (2) and the Term B Loan, if any, under and as defined in the Loan Agreement, and without further action by Holder or the Company, by an amount equal to (i) three percent (3.00%) of the amount of each such Term Loan advanced by Holder, divided by (ii) either the Warrant Price or, if Holder has previously elected (or then elects) to treat this Warrant as exercisable for Next Round Stock (as defined in Section 1.7.2) pursuant to Section 1.7.2 hereof, the Next Round Price (as defined in Section 1.7.2).

1.7.2 Adjustment to Class of Shares; Warrant Price . In the event of an equity financing after the Issue Date the gross proceeds of which equal at least One Million Dollars ($1,000,000) (the “Next Round”), if the price per share (the “Next Round Price”) of Company’s preferred stock (the “Next Round Stock”) is less than the Warrant Price, Holder shall have the right, in Holder’s sole discretion, to elect to treat this Warrant as (and this Warrant shall be deemed automatically upon such election to be) exercisable for Shares of the Next Round Stock at the Next Round Price (with the number of such shares subject of this Warrant automatically adjusted to equal (i) the aggregate Number of Shares for which this Warrant is then exercisable (as adjusted hereunder, but before giving effect to this Section 1.7.2) multiplied by (ii) the quotient of (x) the Warrant Price divided by (y) the Next Round Price). The Shares for which this Warrant is exercisable upon such election, if at all, shall bear the same rights, preferences, and privileges of such Next Round Stock. Company shall provide Holder no less than ten (10) days’ written notice prior to any sale of Next Round Stock.

1.7.3 Adjustments Cumulative . Any adjustment to the Number of Shares and/or Warrant Price made as a result of this Article 1.7 shall be in addition to any adjustment(s) to be made in accordance with Article 2 hereof.

1.8 Voting Agreement . As to any Shares Holder receives upon any exercise or conversion of this Warrant, Holder agrees to be bound by the Third Amended and Restated Voting Agreement, dated as of April 6, 2010, by and among the Company and the persons and entities listed on Exhibits A and B thereto, as amended from time to time.

ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on the outstanding shares of the same class or series as 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 outstanding shares of the same class or series as the Shares, by reclassification or otherwise, into a greater number of shares, the number of shares purchasable

 

4


hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the same class or series as the 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 Amended and Restated Certificate of Incorporation (as amended, the “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 class or series as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder).

2.4 No Impairment . The Company shall not, by amendment of its Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, except and to the extent waived or consented to in writing by Holder, or as otherwise specifically permitted under the terms hereof, 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. The foregoing notwithstanding, the Company shall not be deemed to have impaired Holder’s rights if

 

5


it amends its Certificate of Incorporation with the requisite consent of the holders of the Company’s preferred stock or such holders waive their rights thereunder, and such amendments or waivers do not affect the Shares in a manner materially and adversely different from the effect that such amendments or waivers have generally on the rights, preferences, privileges or restrictions of the other shares of the same series of stock (without taking into account the particular circumstances of the Holder).

2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of this 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, class or series, and/or number of shares, 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, class or series, and number of Shares in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants and covenants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the same class or series as the Shares were last issued in an arms-length transaction in which at least $500,000 of such shares were sold.

(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 summary capitalization table attached hereto as Schedule 1 is 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 subscription or sale pro rata to the holders of the outstanding shares of the same class or series as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of the outstanding shares of the same class or series as the Shares; (d) to effect an Acquisition 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

 

6


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 shares of the same class and series as the Shares will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) 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 shares of the same class and series as the Shares will be entitled to exchange their shares for the 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. Company will also provide information requested by Holder that is reasonably necessary to enable the Holder to comply with the Holder’s accounting or reporting requirements.

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Second Amended and Restated Investor Rights Agreement, dated April 6, 2010, by and among the Company and the persons and entities listed on Exhibit A thereto, as such is amended from time to time (the “Investor Rights Agreement”). The provisions set forth in the Investor Rights 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 does not affect the Shares in a manner that is materially and adversely different than the effect that such amendment, modification, or waiver has generally on the rights, preferences, privileges or restrictions of the other shares of the same series or class as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder). Holder agrees that the Shares shall be subject to the restrictions on transfer as set forth in Section 2.8 of the Investor Rights Agreement and the market stand-off agreement in Section 2.10 of the Investor Rights Agreement.

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 is being, 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 is aware of the Company’s business affairs and financial condition as of the Issue Date and 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.

 

7


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 under 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 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 earlier to occur of (a) Expiration Date or (b) upon an Acquisition with respect to which a request has been duly made by the Company in accordance with Section 1.6.2(A) or Section 1.6.2(C).

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 SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT FOR AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO SILICON VALLEY BANK DATED AS OF NOVEMBER 1, 2011 MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR

 

8


HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS 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 any “affiliate” (as such term is defined in Regulation D promulgated under the Act) including but not limited to SVB Financial Group (formerly Silicon Valley Bancshares), or any other affiliate of Bank, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of an exemption to registration under Rule 144, including without limitation, 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 . After receipt by Holder of the executed Warrant, Bank will transfer all of this Warrant to Holder’s parent company, SVB Financial Group, by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the 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) and any such transferee agrees to be bound by the terms of this Warrant. The Company may refuse to transfer this Warrant or the Shares to any person or entity who directly competes with the Company, as determined by the Company in its good faith business judgment, unless, in either case, the stock of the Company is publicly traded. Any transferee shall take this Warrant subject to all provisions and restrictions contained herein.

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

 

9


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:

ACHAOGEN, INC.

7000 Shoreline Ct., Suite 371

S. San Francisco, California 94080

Attn: Chief Operating Officer

Telephone: (650) 260-3133

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 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.

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 Warrant 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.

[Balance of Page Intentionally Left Blank ]

 

10


“COMPANY”
ACHAOGEN, INC.
By:  

/s/ John C. Doyle, Jr.

Name: John C. Doyle, Jr.
            (Print)
Title:   Chief Operating Officer
“HOLDER”
SILICON VALLEY BANK
By:  

/s/ James Taylor

Name: James Taylor
            (Print)
Title:   Relationship Manager

 

11


SCHEDULE 1

CAPITALIZATION TABLE

 

12


Report Generated as of: 10/25/2011 6:26:41 PM PST

ACHAOGEN, INC.

Fully Diluted Capitalization Table Summary

As of 10/25/2011

 

     CSE Shares*      Total Fully Diluted
Shares
 

COMMON STOCK (Authorized: 105,000,000)

     

Issued and Outstanding

     3,502,545         3,502,545   

PREFERRED STOCK (Authorized: 79,202,910)

     

SERIES A Preferred Stock (Authorized: 12,386,071)

     14,098,357      

SERIES B Preferred Stock (Authorized: 14,266,839)

     18,933,562      

SERIES C Preferred Stock (Authorized: 52,550,000)

     51,791,215         84,823,134   

WARRANTS

     

COMMON Stock

     10,000      

SERIES A Preferred Stock

     114,754         124,754   

2003 Stock Plan (Reserved: 15,893,957)

     

Shares Issuable Under Plan:

     

Options and SPRs Issued and Outstanding

     11,657,029      

Options and SPRs Committed for Issuance

     0      

Shares Remaining for Issuance Under Plan

     1,722,752         13,379,781   

Reserved in Plan

     15,893,957      

less: Options Exercised

     2,516,051      

less: SPRs Exercised

     0      

add: Repurchases

     1,875      
     13,379,781      

Total shares issued and outstanding, including shares committed for issuance and employee reserves, assuming conversion of all convertible securities and exercise of all outstanding options**

        101,830,214   

Footnotes :

CSE Shares * Common Stock Equivalent (CSE) shares reflects the Common Stock issuable for the security type (option, stock, warrant, CPN) after the appropriate conversion ratio is applied to each individual outstanding security for the applicable security type, using standard rounding.

 

** These capitalization figures do not take into account the Company’s outstanding loan from The Wellcome Trust, which is convertible into shares of a separate class of the Company’s preferred stock at the time of the Company’s next preferred financing round, such separate class of preferred stock to have the same rights as the preferred stock sold in that round (or, under certain circumstances, Common Stock), at a discount of 20% from the price per share in the round. The current outstanding principal of the loan is $3,148,324, and this may increase to $5,593,697 if the Company achieves specified milestones.

 

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Fully-Diluted Ownership

 

     Number of Shares      Percent%  

Common Stock

     3,502,545         3.44

SERIES A Preferred Stock

     14,098,357         13.84

SERIES B Preferred Stock

     18,933,562         18.59

SERIES C Preferred Stock

     51,791,215         50.86

COMMON Stock Warrants

     10,000         0.01

SERIES A Preferred Stock Warrants

     114,754         0.11

Options and SPRs issued and outstanding under plan—2003 Stock Plan

     11,657,029         11.45

Committed for Issuance—2003 Stock Plan

     0         0.00

Unissued Reserve—2003 Stock Plan

     1,722,752         1.69

TOTAL

     101,830,214         100

 

14


APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase              shares of the Common/Series              Preferred [strike one] Stock of ACHAOGEN, INC. pursuant to the terms of the attached Warrant, and tenders payment of the purchase price of the shares in full.

[or]

2. 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.]

3. Please issue a certificate or certificates representing the shares in the name specified below:

 

  

 

  
   Holders Name   
  

 

  
  

 

  
   (Address)   

4. 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):  

 

 

15


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 ACHAOGEN, INC. (the “Company”), on November 1, 2011 (the “Warrant”) together with all rights, title and interest therein.

 

SILICON VALLEY BANK
By:  

 

Name:  

 

Title:  

 

 

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 and agrees to all other provisions of the Warrant as of the date hereof.

 

SVB FINANCIAL
By:  

 

Name:  

 

Title:  

 

 

16

Exhibit 4.6

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 – Term A Loan (2)

 

Company:    ACHAOGEN, INC., a Delaware corporation
Number of Shares:    64,220 (Subject to Section 1.7)
Class of Stock:    Series C Preferred (Subject to Section 1.7)
Warrant Price:    $1.09 per share (Subject to Section 1.7)
Issue Date:    April 30, 2012
Expiration Date:    November 1, 2021, except as provided herein
Credit Facility:    This Warrant is issued in connection with the Loan and Security Agreement dated as of November 1, 2011 among Oxford Finance LLC (“Oxford”), as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank (“Bank”), and the Company (as amended from time to time, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Loan Agreement OXFORD FINANCE LLC (“Oxford;” together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of 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 the original of this Warrant (unless the same has been lost or destroyed, in which case an affidavit to that effect, including standard indemnities) together with 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 form 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 of 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 “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 this Warrant together with 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 on 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, exclusive license other than in the ordinary course of business, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, merger or sale of outstanding capital stock of the Company where the holders of the Company’s voting securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity or, if applicable, its parent 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 to be received by the holders of the same series or class as the Shares is cash (excluding any equity awards made to any such holders in connection with an employment relationship with the Company or its successor), 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 immediately prior to 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

 

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information as the Holder may reasonably require regarding the treatment of this Warrant 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 (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 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.

C) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition of the Company by a publicly traded acquiror in which the consideration to be received by holders of the same class or series as the Shares for such Acquisition is publicly traded securities (or a combination of publicly traded securities and 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 immediately prior to the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing, which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

D) Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) 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.

As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly ten percent (10%) 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.

1.7 Adjustment to Class of Shares; Warrant Price; Adjustments Cumulative .

1.7.1 Reserved .

1.7.2 Adjustment to Class of Shares; Warrant Price . In the event of an equity financing after the Issue Date the gross proceeds of which equal at least One Million Dollars ($1,000,000) (the “Next Round”), if the price per share (the “Next Round Price”) of Company’s preferred stock (the “Next Round Stock”) is less than the Warrant Price, Holder shall have the right, in Holder’s sole discretion, to elect to treat this Warrant as (and this Warrant shall be deemed automatically upon such election to be) exercisable for Shares of the Next Round Stock at the Next Round Price (with the number of such shares subject of this Warrant automatically adjusted to equal (i) the aggregate Number of Shares for which this Warrant is

 

3


then exercisable (as adjusted hereunder, but before giving effect to this Section 1.7.2) multiplied by (ii) the quotient of (x) the Warrant Price divided by (y) the Next Round Price). The Shares for which this Warrant is exercisable upon such election, if at all, shall bear the same rights, preferences, and privileges of such Next Round Stock. Company shall provide Holder no less than ten (10) days’ written notice prior to any sale of Next Round Stock.

1.7.3 Adjustments Cumulative . Any adjustment to the Number of Shares and/or Warrant Price made as a result of this Article 1.7 shall be in addition to any adjustment(s) to be made in accordance with Article 2 hereof.

1.8 Voting Agreement . As to any Shares Holder receives upon any exercise or conversion of this Warrant, Holder agrees to be bound by the Third Amended and Restated Voting Agreement, dated as of April 6, 2010, by and among the Company and the persons and entities listed on Exhibits A and B thereto, as amended from time to time.

ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on the outstanding shares of the same class or series as 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 outstanding shares of the same class or series as the Shares, by reclassification or otherwise, into a greater number of shares, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the same class or series as the 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 Amended and Restated Certificate of Incorporation (as amended, the “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.

 

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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 class or series as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder).

2.4 No Impairment . The Company shall not, by amendment of its Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, except and to the extent waived or consented to in writing by Holder, or as otherwise specifically permitted under the terms hereof, 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. The foregoing notwithstanding, the Company shall not be deemed to have impaired Holder’s rights if it amends its Certificate of Incorporation with the requisite consent of the holders of the Company’s preferred stock or such holders waive their rights thereunder, and such amendments or waivers do not affect the Shares in a manner materially and adversely different from the effect that such amendments or waivers have generally on the rights, preferences, privileges or restrictions of the other shares of the same series of stock (without taking into account the particular circumstances of the Holder).

2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of this 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, class or series, and/or number of shares, 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, class or series, and number of Shares in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants and covenants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the same class or series as the Shares were last issued in an arms-length transaction in which at least $500,000 of such shares were sold.

 

5


(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 summary capitalization table attached hereto as Schedule 1 is true and complete as of November 1, 2011.

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 subscription or sale pro rata to the holders of the outstanding shares of the same class or series as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of the outstanding shares of the same class or series as the Shares; (d) to effect an Acquisition 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 shares of the same class and series as the Shares will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) 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 shares of the same class and series as the Shares will be entitled to exchange their shares for the 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. Company will also provide information requested by Holder that is reasonably necessary to enable the Holder to comply with the Holder’s accounting or reporting requirements.

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Second Amended and Restated Investor Rights Agreement, dated April 6, 2010, by and among the Company and the persons and entities listed on Exhibit A thereto, as such is amended from time to time (the “Investor Rights Agreement”). The provisions set forth in the Investor Rights 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 does not affect the Shares in a manner that is materially and adversely different than the effect that such amendment, modification, or waiver has generally on the rights, preferences, privileges or restrictions of the other shares of the same series or class as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder). Holder agrees that the Shares shall be subject to the restrictions on transfer as set forth in Section 2.8 of the Investor Rights Agreement and the market stand-off agreement in Section 2.10 of the Investor Rights Agreement.

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.

 

6


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 is being, 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 is aware of the Company’s business affairs and financial condition as of the Issue Date and 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 under 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 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 earlier to occur of (a) Expiration Date or (b) upon an Acquisition with respect to which a request has been duly made by the Company in accordance with Section 1.6.2(A) or Section 1.6.2(C).

 

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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 SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT FOR AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO OXFORD FINANCE LLC DATED AS OF APRIL 30, 2012 MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS 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 any “affiliate” (as such term is defined in Regulation D promulgated under the Act) of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of an exemption to registration under Rule 144, including without limitation, 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 . After receipt by Holder of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “Oxford Affiliate”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate 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, the Oxford Affiliate(s) 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) and any such transferee agrees to be bound by the terms of this Warrant. The Company may refuse to transfer this Warrant or the Shares to any person or entity who directly competes with the Company, as determined by the Company in its good faith business judgment, unless, in either case, the stock of the Company is publicly traded. Any transferee shall take this Warrant subject to all provisions and restrictions contained herein.

 

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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:

Oxford Finance LLC

133 N. Fairfax Street

Alexandria, VA 22314

Attn: Legal Department

Telephone: (703) 519-4900

Facsimile: (703) 519-5225

Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

ACHAOGEN, INC.

7000 Shoreline Ct., Suite 371

S. San Francisco, California 94080

Attn: Chief Operating Officer

Telephone: (650) 260-3133

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 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.

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 Warrant 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.

[ Balance of Page Intentionally Left Blank ]

 

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“COMPANY”
ACHAOGEN, INC.
By:  

/s/ John C. Doyle

Name:  

John C. Doyle. Jr.

  (Print)
Title:   Chief Operating Officer
“HOLDER”
OXFORD FINANCE LLC
By:  

/s/ Mark Davis

Name:  

Mark Davis

  (Print)
Title:  

Vice President - Finance, Secretary &  Treasurer

Oxford Finance LLC

Warrant (Term A Loan (2))


SCHEDULE 1

CAPITALIZATION TABLE


APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase                  shares of the Common/Series                  Preferred [strike one] Stock of ACHAOGEN, INC. 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, Oxford Finance LLC hereby sells, assigns and transfers unto

 

Name:   [OXFORD TRANSFEREE]
Address:  

 

Tax ID:  

 

that certain Warrant to Purchase Stock issued by ACHAOGEN, INC. (the “Company”), on April 30, 2012 (the “Warrant”) together with all rights, title and interest therein.

 

OXFORD FINANCE LLC
By:  

 

Name:  

 

Title:  

 

 

Date:  

 

By its execution below, and for the benefit of the Company, OXFORD TRANSFEREE makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

OXFORD TRANSFEREE
By:  

 

Name:  

 

Title:  

 

Exhibit 4.7

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 – Term B Loan

 

Company:    ACHAOGEN, INC., a Delaware corporation
Number of Shares:    64,220 (Subject to Section 1.7)
Class of Stock:    Series C Preferred (Subject to Section 1.7)
Warrant Price:    $1.09 per share (Subject to Section 1.7)
Issue Date:    April 30, 2012
Expiration Date:    November 1, 2021, except as provided herein
Credit Facility:    This Warrant is issued in connection with the Loan and Security Agreement dated as of November 1, 2011 among Oxford Finance LLC (“Oxford”), as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank (“Bank”), and the Company (as amended from time to time, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, including without limitation the mutual promises contained in the Loan Agreement OXFORD FINANCE LLC (“Oxford;” together with any registered holder from time to time of this Warrant or any holder of the shares issuable or issued upon exercise of this Warrant, “Holder”) is entitled to purchase the number of fully paid and nonassessable shares of the class of securities (the “Shares”) of 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 the original of this Warrant (unless the same has been lost or destroyed, in which case an affidavit to that effect, including standard indemnities) together with 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 form 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 of 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 “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 this Warrant together with 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 on 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, exclusive license other than in the ordinary course of business, or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, merger or sale of outstanding capital stock of the Company where the holders of the Company’s voting securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity or, if applicable, its parent 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 to be received by the holders of the same series or class as the Shares is cash (excluding any equity awards made to any such holders in connection with an employment relationship with the Company or its successor), 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 immediately prior to 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

 

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information as the Holder may reasonably require regarding the treatment of this Warrant 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 (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 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.

C) Upon the written request of the Company, Holder agrees that, in the event of an Acquisition of the Company by a publicly traded acquiror in which the consideration to be received by holders of the same class or series as the Shares for such Acquisition is publicly traded securities (or a combination of publicly traded securities and 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 immediately prior to the consummation of such Acquisition. The Company shall provide the Holder with written notice of its request relating to the foregoing, which is to be delivered to Holder not less than ten (10) days prior to the closing of the proposed Acquisition.

D) Upon the closing of any Acquisition other than those particularly described in subsections (A), (B) and (C) 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.

As used herein “ Affiliate ” shall mean any person or entity that owns or controls directly or indirectly ten percent (10%) 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.

1.7 Adjustment to Class of Shares; Warrant Price; Adjustments Cumulative .

1.7.1 Reserved .

1.7.2 Adjustment to Class of Shares; Warrant Price . In the event of an equity financing after the Issue Date the gross proceeds of which equal at least One Million Dollars ($1,000,000) (the “Next Round”), if the price per share (the “Next Round Price”) of Company’s preferred stock (the “Next Round Stock”) is less than the Warrant Price, Holder shall have the right, in Holder’s sole discretion, to elect to treat this Warrant as (and this Warrant shall be deemed automatically upon such election to be) exercisable for Shares of the Next Round Stock at the Next Round Price (with the number of such shares subject of this Warrant automatically adjusted to equal (i) the aggregate Number of Shares for which this Warrant is

 

3


then exercisable (as adjusted hereunder, but before giving effect to this Section 1.7.2) multiplied by (ii) the quotient of (x) the Warrant Price divided by (y) the Next Round Price). The Shares for which this Warrant is exercisable upon such election, if at all, shall bear the same rights, preferences, and privileges of such Next Round Stock. Company shall provide Holder no less than ten (10) days’ written notice prior to any sale of Next Round Stock.

1.7.3 Adjustments Cumulative . Any adjustment to the Number of Shares and/or Warrant Price made as a result of this Article 1.7 shall be in addition to any adjustment(s) to be made in accordance with Article 2 hereof.

1.8 Voting Agreement . As to any Shares Holder receives upon any exercise or conversion of this Warrant, Holder agrees to be bound by the Third Amended and Restated Voting Agreement, dated as of April 6, 2010, by and among the Company and the persons and entities listed on Exhibits A and B thereto, as amended from time to time.

ARTICLE 2. ADJUSTMENTS TO THE SHARES .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend on the outstanding shares of the same class or series as 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 outstanding shares of the same class or series as the Shares, by reclassification or otherwise, into a greater number of shares, the number of shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the same class or series as the 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 Amended and Restated Certificate of Incorporation (as amended, the “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.

 

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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 class or series as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder).

2.4 No Impairment . The Company shall not, by amendment of its Certificate (as applicable) of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, except and to the extent waived or consented to in writing by Holder, or as otherwise specifically permitted under the terms hereof, 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. The foregoing notwithstanding, the Company shall not be deemed to have impaired Holder’s rights if it amends its Certificate of Incorporation with the requisite consent of the holders of the Company’s preferred stock or such holders waive their rights thereunder, and such amendments or waivers do not affect the Shares in a manner materially and adversely different from the effect that such amendments or waivers have generally on the rights, preferences, privileges or restrictions of the other shares of the same series of stock (without taking into account the particular circumstances of the Holder).

2.5 Fractional Shares . No fractional Shares shall be issuable upon exercise or conversion of this 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, class or series, and/or number of shares, 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, class or series, and number of Shares in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants and covenants to the Holder as follows:

(a) The initial Warrant Price referenced on the first page of this Warrant is not greater than the price per share at which shares of the same class or series as the Shares were last issued in an arms-length transaction in which at least $500,000 of such shares were sold.

 

5


(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 summary capitalization table attached hereto as Schedule 1 is true and complete as of November 1, 2011.

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 subscription or sale pro rata to the holders of the outstanding shares of the same class or series as the Shares any additional shares of any class or series of the Company’s stock; (c) to effect any reclassification or recapitalization of the outstanding shares of the same class or series as the Shares; (d) to effect an Acquisition 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 shares of the same class and series as the Shares will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) 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 shares of the same class and series as the Shares will be entitled to exchange their shares for the 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. Company will also provide information requested by Holder that is reasonably necessary to enable the Holder to comply with the Holder’s accounting or reporting requirements.

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 certain incidental, or “Piggyback,” registration rights pursuant to and as set forth in the Second Amended and Restated Investor Rights Agreement, dated April 6, 2010, by and among the Company and the persons and entities listed on Exhibit A thereto, as such is amended from time to time (the “Investor Rights Agreement”). The provisions set forth in the Investor Rights 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 does not affect the Shares in a manner that is materially and adversely different than the effect that such amendment, modification, or waiver has generally on the rights, preferences, privileges or restrictions of the other shares of the same series or class as the Shares granted to the Holder (without taking into account the particular circumstances of the Holder). Holder agrees that the Shares shall be subject to the restrictions on transfer as set forth in Section 2.8 of the Investor Rights Agreement and the market stand-off agreement in Section 2.10 of the Investor Rights Agreement.

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.

 

6


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 is being, 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 is aware of the Company’s business affairs and financial condition as of the Issue Date and 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 under 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 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 earlier to occur of (a) Expiration Date or (b) upon an Acquisition with respect to which a request has been duly made by the Company in accordance with Section 1.6.2(A) or Section 1.6.2(C).

 

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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 SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT FOR AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE COMPANY TO OXFORD FINANCE LLC DATED AS OF APRIL 30, 2012 MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS 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 any “affiliate” (as such term is defined in Regulation D promulgated under the Act) of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of an exemption to registration under Rule 144, including without limitation, 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 . After receipt by Holder of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “Oxford Affiliate”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate 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, the Oxford Affiliate(s) 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) and any such transferee agrees to be bound by the terms of this Warrant. The Company may refuse to transfer this Warrant or the Shares to any person or entity who directly competes with the Company, as determined by the Company in its good faith business judgment, unless, in either case, the stock of the Company is publicly traded. Any transferee shall take this Warrant subject to all provisions and restrictions contained herein.

 

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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:

Oxford Finance LLC

133 N. Fairfax Street

Alexandria, VA 22314

Attn: Legal Department

Telephone: (703) 519-4900

Facsimile: (703) 519-5225

Notice to the Company shall be addressed as follows until the Holder receives notice of a change in address:

ACHAOGEN, INC.

7000 Shoreline Ct., Suite 371

S. San Francisco, California 94080

Attn: Chief Operating Officer

Telephone: (650) 260-3133

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 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.

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 Warrant 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.

[ Balance of Page Intentionally Left Blank ]

 

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“COMPANY”
ACHAOGEN, INC.
By:  

/s/ John C. Doyle

Name:  

John C. Doyle. Jr.

  (Print)
Title:   Chief Operating Officer
“HOLDER”
OXFORD FINANCE LLC
By:  

/s/ Mark Davis

Name:  

Mark Davis

  (Print)
Title:  

Vice President - Finance, Secretary &  Treasurer

Oxford Finance LLC

Warrant (Term B Loan)


SCHEDULE 1

CAPITALIZATION TABLE


APPENDIX 1

NOTICE OF EXERCISE

1. Holder elects to purchase                  shares of the Common/Series                  Preferred [strike one] Stock of ACHAOGEN, INC. 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, Oxford Finance LLC hereby sells, assigns and transfers unto

 

Name:   [OXFORD TRANSFEREE]
Address:  

 

Tax ID:  

 

that certain Warrant to Purchase Stock issued by ACHAOGEN, INC. (the “Company”), on April 30, 2012 (the “Warrant”) together with all rights, title and interest therein.

 

OXFORD FINANCE LLC
By:  

 

Name:  

 

Title:  

 

 

Date:  

 

By its execution below, and for the benefit of the Company, OXFORD TRANSFEREE makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.

 

OXFORD TRANSFEREE
By:  

 

Name:  

 

Title:  

 

Exhibit 10.1(A)

ACHAOGEN, INC.

AMENDED AND RESTATED 2003 STOCK PLAN

(as adopted by the Board on April 4, 2013)

1. Purposes of the Plan . The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan.

2. Definitions . As used herein, the following definitions shall apply:

(a) “ Administrator ” means the Board or any of its Committees as shall be administering the Plan in accordance with Section 4 hereof.

(b) “ Applicable Laws ” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options or Stock Purchase Rights are granted under the Plan.

(c) “ Board ” means the Board of Directors of the Company.

(d) “ Change in Control ” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(iii) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

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


(f) “ Committee ” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.

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

(h) “ Company ” means Achaogen, Inc., a Delaware corporation.

(i) “ Consultant ” means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services to such entity; provided, however, that a grant of an Option or Stock Purchase Right to such person shall comply with Applicable Laws.

(j) “ Director ” means a member of the Board.

(k) “ Disability ” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(l) “ Employee ” means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.

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

(n) “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.

(o) “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

(p) “ Nonstatutory Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

(q) “ Option ” means a stock option granted pursuant to the Plan.

 

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(r) “ Option Agreement ” means a written or electronic agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(s) “ Optioned Stock ” means the Common Stock subject to an Option or a Stock Purchase Right.

(t) “ Optionee ” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.

(u) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(v) “ Plan ” means this Amended and Restated 2003 Stock Plan.

(w) “ Restricted Stock ” means Shares issued pursuant to a Stock Purchase Right or Shares of restricted stock issued pursuant to an Option.

(x) “ Restricted Stock Purchase Agreement ” means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to Shares purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the notice of grant.

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

(z) “ Service Provider ” means an Employee, Director or Consultant.

(aa) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 12 below.

(bb) “ Stock Purchase Right ” means a right to purchase Common Stock pursuant to Section 11 below.

(cc) “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan . Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be subject to option and sold under the Plan is 20,193,957 Shares. In no event shall the number of Shares issued pursuant to Incentive Stock Options exceed 20,193,957 Shares. The Shares may be authorized but unissued, or reacquired Common Stock.

If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, the unpurchased Shares that were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.

 

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4. Administration of the Plan .

(a) Administrator . The Plan shall be administered by the Board or a Committee appointed by the Board, which Committee shall be constituted to comply with Applicable Laws.

(b) Powers of the Administrator . Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, the Administrator shall have the authority in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and Stock Purchase Rights may from time to time be granted hereunder;

(iii) to determine the number of Shares to be covered by each such award granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;

(vii) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Optionees to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; and

(viii) to construe and interpret the terms of the Plan and Options granted pursuant to the Plan.

 

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(c) Effect of Administrator’s Decision . All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees.

5. Eligibility . Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Limitations .

(a) Incentive Stock Option Limit . Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

(b) At-Will Employment . Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall it interfere in any way with his or her right or the Company’s right to terminate such relationship at any time, with or without cause, and with or without notice.

7. Term of Plan . Subject to shareholder approval in accordance with Section 19, the Plan shall become effective upon its adoption by the Board. Unless sooner terminated under Section 15, it shall continue in effect for a term of ten (10) years from the later of (i) the effective date of the Plan, or (ii) the earlier of the most recent board or shareholder approval of an increase in the number of Shares reserved for issuance under the Plan.

8. Term of Option . The term of each Option shall be stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration .

(a) Exercise Price . The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

 

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(B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option

(A) granted to a Service Provider who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(B) granted to any other Service Provider, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

(b) Forms of Consideration . The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of, without limitation, (1) cash, (2) check, (3) promissory note, (4) other Shares, provided Shares acquired directly from the Company (x) have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

10. Exercise of Option .

(a) Procedure for Exercise; Rights as a Shareholder . Any Option granted hereunder shall be exercisable according to the terms hereof at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. An Option may not be exercised for a fraction of a Share. Except in the case of Options granted to officers, Directors and Consultants, Options shall become exercisable at a rate of no less than 20% per year over five (5) years from the date the Options are granted.

An Option shall be deemed exercised when the Company receives (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by

 

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the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as a Service Provider . If an Optionee ceases to be a Service Provider, such Optionee may exercise his or her Option within thirty (30) days of termination, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of the Option as set forth in the Option Agreement). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee . If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within six (6) months of termination, or such longer period of time as specified in the Option Agreement, to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee . If an Optionee dies while a Service Provider, the Option may be exercised within six (6) months following Optionee’s death, or such longer period of time as specified in the Option Agreement, to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee’s designated beneficiary, provided such beneficiary has been designated prior to Optionee’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee’s estate or by the person(s) to whom the Option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

 

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(e) Leaves of Absence .

(i) Unless the Administrator provides otherwise, vesting of Options granted hereunder to officers and Directors shall be suspended during any unpaid leave of absence.

(ii) A Service Provider shall not cease to be an Employee in the case of (A) any leave of absence approved by the Company or (B) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor.

(iii) For purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave, any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.

11. Stock Purchase Rights .

(a) Rights to Purchase . Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer. The terms of the offer shall comply in all respects with Section 260.140.42 of Title 10 of the California Code of Regulations. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

(b) Repurchase Option . Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable within 90 days of the voluntary or involuntary termination of the purchaser’s service with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.

(c) Other Provisions . The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.

(d) Rights as a Shareholder . Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.

 

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12. Limited Transferability of Options and Stock Purchase Rights . Unless determined otherwise by the Administrator, Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or the laws of descent and distribution, and may be exercised during the lifetime of the Optionee, only by the Optionee. If the Administrator in its sole discretion makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right may only be transferred (i) by will, (ii) by the laws of descent and distribution, or (iii) to family members (within the meaning of Rule 701 of the Securities Act) through gifts or domestic relations orders, as permitted by Rule 701 of the Securities Act.

13. Adjustments; Dissolution or Liquidation; Merger or Change in Control .

(a) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Option or Stock Purchase Right; provided, however, that the Administrator shall make such adjustments to the extent required by Section 25102(o) of the California Corporations Code.

(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Change in Control . In the event of a merger of the Company with or into another corporation, or a Change in Control, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation in a merger or Change in Control refuses to assume or substitute for the Option or Stock Purchase Right, then the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or Change in Control, the Administrator shall notify the Optionee in writing or electronically that this Option or Stock Purchase Right shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or Change in Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or other securities or property) received in the merger or

 

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Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of common stock in the merger or Change in Control.

14. Time of Granting Options and Stock Purchase Rights . The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such later date as is determined by the Administrator. Notice of the determination shall be given to each Service Provider to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan .

(a) Amendment and Termination . The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval . The Board shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination . No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.

16. Conditions Upon Issuance of Shares .

(a) Legal Compliance . Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations . As a condition to the exercise of an Option, the Administrator may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

17. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s

 

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counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

18. Reservation of Shares . The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

19. Shareholder Approval . The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws.

20. Information to Optionees . The Company shall provide to each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. 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.

 

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Exhibit 10.1(B)

ACHAOGEN, INC.

2003 STOCK PLAN

STOCK OPTION AGREEMENT — EARLY EXERCISE

Unless otherwise defined herein, the terms defined in the 2003 Stock Plan shall have the same defined meanings in this Stock Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

 

Name:    «Name»
Address:    «Address»

The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

 

Grant Number      «GrantNo»
Date of Grant      «GrantDate»
Vesting Commencement Date      «VCD»
Exercise Price per Share      $«ExerPrice»
Total Number of Shares Granted      «TotalGranted»
Total Exercise Price      $«TotalPrice»
Type of Options (ISO/NSO)      «Type»
Term/Expiration Date:      «ExpDate»

Vesting Schedule:

This Option shall be exercisable in whole or in part, according to the following vesting schedule:

Twenty-five percent (25%) of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter on the same day of the month as the Vesting Commencement Date, subject to Optionee continuing to be a Service Provider through each such date.

Termination Period:

This Option shall be exercisable for three months after Optionee ceases to be a Service Provider. Upon Optionee’s death or Disability, this Option shall be exercisable for one year after Optionee ceases to be Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.


II. AGREEMENT

1. Grant of Option . The Administrator of the Company hereby grants to the Optionee named in the Notice of Grant in Part I of this Agreement (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”).

2. Exercise of Option . This Option shall be exercisable during its term in accordance with the provisions of Section 10 of the Plan as follows:

(a) Right to Exercise .

(i) Subject to subsections 2(a)(ii) and 2(a)(iii) below, this Option shall be exercisable cumulatively according to the vesting schedule set forth in the Notice of Grant. Alternatively, at the election of the Optionee, this Option may be exercised in whole or in part at any time as to Shares that have not yet vested. Vested Shares shall not be subject to the Company’s repurchase right (as set forth in the Restricted Stock Purchase Agreement, attached hereto as Exhibit C-1 ).

(ii) As a condition to exercising this Option for unvested Shares, the Optionee shall execute the Restricted Stock Purchase Agreement.

(iii) This Option may not be exercised for a fraction of a Share.

(b) Method of Exercise . This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.

3. Optionee’s Representations . In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B .

 

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4. Lock-Up Period . Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (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 any registration statement of the Company filed under the Securities Act.

Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which 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, Optionee 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 this Section shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a 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 said one hundred eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section.

5. Method of Payment . Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

(a) cash;

(b) check;

(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or

(d) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee, and not subject to a substantial risk of forfeiture, for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

 

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6. Restrictions on Exercise . This Option may not be exercised until such time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.

7. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

8. Term of Option . This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.

9. Tax Obligations .

(a) Withholding Taxes . Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.

(b) Notice of Disqualifying Disposition of ISO Shares . If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, and (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

10. Entire Agreement; Governing Law . The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This Agreement is governed by the internal substantive laws but not the choice of law rules of California.

11. No Guarantee of Continued Service . OPTIONEE AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE 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 ENGAGEMENT

 

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AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

 

Signature:     
     ACHAOGEN, INC.

 

«Name»

    

 

     Signature
Residence Address:     

 

 

     Title

 

 

    

 

5


EXHIBIT A

2003 STOCK PLAN

EXERCISE NOTICE

Achaogen, Inc.

c/o Versant Ventures

3000 Sand Hill Road

Bldg 4, Suite 210

Menlo Park, CA 94025

Attention:                     

1. Exercise of Option . Effective as of today,             ,             the undersigned (“Optionee”) hereby elects to exercise Optionee’s option (the “Option”) to purchase             shares of the Common Stock (the “Shares”) of Achaogen, Inc. (the “Company”) under and pursuant to the 2003 Stock Plan (the “Plan”) and the Stock Option Agreement dated             ,             (the “Option Agreement”).

2. Delivery of Payment . Optionee herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.

3. Representations of Optionee . Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

4. Rights as Shareholder . Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.

5. Company’s Right of First Refusal . Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”).

(a) Notice of Proposed Transfer . The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).


(b) Exercise of Right of First Refusal . At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.

(c) Purchase Price . The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

(d) Payment . Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.

(e) Holder’s Right to Transfer . If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.

(f) Exception for Certain Family Transfers . Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.

(g) Termination of Right of First Refusal . The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.

6. Tax Consultation . Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

 

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7. Restrictive Legends and Stop-Transfer Orders .

(a) Legends . Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal 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 OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE COMPANY.

(b) Stop-Transfer Notices . Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

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8. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

9. Interpretation . Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.

10. Governing Law; Severability . This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of California.

11. Entire Agreement . The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Restricted Stock Purchase Agreement, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee.

 

Submitted by:      Accepted by:
     ACHAOGEN, INC.

 

«Name»

    
    

 

Signature

Residence Address:     

 

    

 

Title

 

    

 

4


EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

 

OPTIONEE            :      «Name»
COMPANY    :      ACHAOGEN, INC.
SECURITY    :      COMMON STOCK
AMOUNT    :     
DATE    :     

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:

(a) Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

(b) Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with any legend required under applicable state securities laws.

(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain


of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.

In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.

(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.

 

Signature of Optionee:

 

Date:  

 

 

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EXHIBIT C-1

ACHAOGEN, INC.

2003 STOCK PLAN

RESTRICTED STOCK PURCHASE AGREEMENT

THIS AGREEMENT is made between                     (the “Purchaser”) and Achaogen, Inc. (the “Company”) or its assignees of rights hereunder as of                     ,             .

Unless otherwise defined herein, the terms defined in the 2003 Stock Plan shall have the same defined meanings in this Agreement.

RECITALS

A. Pursuant to the exercise of the option (grant number             ) granted to Purchaser under the Plan and pursuant to the Option Agreement dated             ,             by and between the Company and Purchaser with respect to such grant (the “Option”), which Plan and Option Agreement are hereby incorporated by reference, Purchaser has elected to purchase             of those shares of Common Stock which have not become vested under the vesting schedule set forth in the Option Agreement (“Unvested Shares”). The Unvested Shares and the shares subject to the Option Agreement, which have become vested are sometimes collectively referred to herein as the “Shares.”

B. As required by the Option Agreement, as a condition to Purchaser’s election to exercise the option, Purchaser must execute this Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option.

1. Repurchase Option .

(a) If Purchaser’s status as a Service Provider is terminated for any reason, including for death and Disability, the Company shall have the right and option for ninety (90) days from such date to purchase from Purchaser, or Purchaser’s personal representative, as the case may be, all of the Purchaser’s Unvested Shares as of the date of such termination at the price paid by the Purchaser for such Shares (the “Repurchase Option”).

(b) Upon the occurrence of such termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be) with a copy to the escrow agent described in Section 2 below, a notice in writing indicating the Company’s intention to exercise the Repurchase Option AND, at the Company’s option, (i) by delivering to the Purchaser (or the Purchaser’s transferee or legal representative) a check in the amount of the aggregate repurchase price, or (ii) by the Company canceling an amount of the Purchaser’s indebtedness to the Company equal to the aggregate repurchase price, or (iii) by a combination of (i) and (ii) so that the combined payment and cancellation of indebtedness equals such aggregate repurchase price. Upon delivery of such notice and payment of the aggregate repurchase price in any of the ways described above, the Company shall become the legal and beneficial owner of the Unvested Shares being repurchased and the rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unvested Shares being repurchased by the Company.


(c) Whenever the Company shall have the right to repurchase Unvested Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company’s Repurchase Option under this Agreement and purchase all or a part of such Unvested Shares.

(d) If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.

(e) The Repurchase Option shall terminate in accordance with the vesting schedule contained in Purchaser’s Option Agreement.

2. Transferability of the Shares; Escrow .

(a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.

(b) To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the Secretary, or any other person designated by the Company as escrow agent (the “Escrow Agent”), as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the Escrow Agent, the share certificates representing the Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-2 . The Unvested Shares and stock assignment shall be held by the Escrow Agent in escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-3 hereto, until the Company exercises its Repurchase Option, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. Upon vesting of the Unvested Shares, the Escrow Agent shall promptly deliver to the Purchaser the certificate or certificates representing such Shares in the Escrow Agent’s possession belonging to the Purchaser, and the Escrow Agent shall be discharged of all further obligations hereunder; provided, however, that the Escrow Agent shall nevertheless retain such certificate or certificates as Escrow Agent if so required pursuant to other restrictions imposed pursuant to this Agreement.

(c) The Company nor the Escrow Agent shall be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.

 

2


(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.

3. Ownership, Voting Rights, Duties . This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.

4. Legends . The share certificate evidencing the Shares issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable federal and state securities laws):

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

5. Adjustment for Stock Split . All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares, which may be made by the Company pursuant to Section 13 of the Plan after the date of this Agreement.

6. Notices . Notices required hereunder shall be given in person or by registered mail to the address of Purchaser shown on the records of the Company, and to the Company at their respective principal executive offices.

7. Survival of Terms . This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

8. Section 83(b) Election . Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of an Option for Unvested Shares, an election (the “Election”) may be filed by the Purchaser with the Internal Revenue Service, within thirty (30) days of the purchase of the exercised Shares, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the exercised Shares and their Fair Market Value on the date of purchase. In the case of a Nonstatutory Stock Option, this will result in a recognition of taxable income to the Purchaser on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the Option is exercised over the purchase price for the exercised Shares. Absent such an Election, taxable income will be measured and recognized by Purchaser at the time or times on which the Company’s Repurchase Option lapses. In the case of an Incentive Stock Option, such an Election will result in a recognition of income to the Purchaser for alternative minimum tax purposes on the date of exercise, measured by the excess, if any, of the Fair Market Value of the exercised Shares, at the time the option is exercised, over the purchase price for the exercised Shares. Absent such an Election, alternative minimum taxable income will be measured and recognized by Purchaser at the time or times on which the Company’s Repurchase Option lapses.

 

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Purchaser is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) of the Code. A form of Election under Section 83(b) is attached hereto as Exhibit C-4 for reference.

PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.

9. Representations . Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

10. Governing Law . This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of California.

Purchaser represents that he has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.

IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.

 

   ACHAOGEN, INC.

 

«Name»

  
  

 

Signature

Residence Address:   

 

  

 

Title

 

4


EXHIBIT C-2

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED I,             , hereby sell, assign and transfer unto Achaogen, Inc.             (            ) shares of the Common Stock of Achaogen, Inc. standing in my name of the books of said corporation represented by Certificate No.             herewith and do hereby irrevocably constitute and appoint             to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Achaogen, Inc. and the undersigned dated             ,             (the “Agreement”).

 

Dated: __________, ____    Signature:                                                                                                         

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its “repurchase option,” as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser.


EXHIBIT C-3

JOINT ESCROW INSTRUCTIONS

                     ,             

Achaogen, Inc.

c/o Versant Ventures

3000 Sand Hill Road

Bldg. 4, Suite 210

Menlo Park, CA 94025

Attn:                     

Dear                      :

As Escrow Agent for both Achaogen, Inc. (the “Company”), and the undersigned purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (the “Agreement”) between the Company and the undersigned, in accordance with the following instructions:

1. In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the stock assignments, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s repurchase option.

3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.


4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company’s repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company’s repurchase option. Within 120 days after cessation of Purchaser’s continuous employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company’s repurchase option.

5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.

11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.

12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.

 

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13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto.

16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

18. These Joint Escrow Instructions shall be governed by the internal substantive laws, but not the choice of law rules, of California.

 

PURCHASER   
   ACHAOGEN, INC.

 

«Name»

  
  

 

Signature

Residence Address:   

 

  

 

Title

 

  
ESCROW AGENT   

 

Corporate Secretary

  
Dated:                      ,            

 

 

 

 

3


IF YOU WISH TO MAKE A SECTION 83(B)

ELECTION, THE FILING OF SUCH ELECTION IS

YOUR RESPONSIBILITY.

THE FORM FOR MAKING THIS SECTION 83(B)

ELECTION IS ATTACHED TO THIS

AGREEMENT AS EXHIBIT C-4.

YOU MUST FILE THIS FORM WITHIN 30 DAYS

OF PURCHASING THE SHARES.

YOU (AND NOT THE COMPANY OR ANY OF ITS

AGENTS) SHALL BE SOLELY RESPONSIBLE

FOR FILING SUCH FORM WITH THE IRS, EVEN

IF YOU REQUEST THE COMPANY OR ITS

AGENTS TO MAKE THIS FILING ON YOUR

BEHALF AND EVEN IF THE COMPANY OR ITS

AGENTS HAVE PREVIOUSLY MADE THIS

FILING ON YOUR BEHALF.

The election should be filed by mailing a signed election form by certified

mail, return receipt requested to the IRS Service Center where you file your

tax returns. See www.irs.gov.


EXHIBIT C-4

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Sections 55 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income or alternative minimum taxable income, as the case may be, for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below

 

1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

 

NAME:    TAXPAYER:    SPOUSE:
ADDRESS:      
IDENTIFICATION NO.:    TAXPAYER:    SPOUSE:
TAXABLE YEAR:      

 

2. The property with respect to which the election is made is described as follows:             shares (the “Shares”) of the Common Stock of Achaogen, Inc. (the “Company”).

 

3. The date on which the property was transferred is:                     ,             .

 

4. The property is subject to the following restrictions:

The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.

 

5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $            .

 

6. The amount (if any) paid for such property is: $            .

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.


The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

 

Dated: _______________, ____   
  

 

Taxpayer

The undersigned spouse of taxpayer joins in this election.   
Dated: _______________, ____   

 

Spouse of Taxpayer

 

2


 

Form of Stock Option Agreement

 

 

 


ACHAOGEN, INC.

2003 STOCK PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the 2003 Stock Plan (a copy of which is attached hereto as Annex A ) shall have the same defined meanings in this Stock Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

 

Name:    «Name»
Address:    «Address»

The undersigned Optionee has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:

 

Grant Number:    «GrantNo»
Date of Grant:    «GrantDate»
Vesting Commencement Date:    «VCD»
Exercise Price per Share:    $«ExerPrice»
Total Number of Shares Granted:    «TotalGranted»
Total Exercise Price:    $«TotalPrice»
Type of Option: (ISO/NSO)    «Type»
Expiration Date:    «ExpDate»

Vesting Schedule:

This Option shall vest and become exercisable according to the following vesting schedule:

25% of the Shares subject to the Option shall vest on the one (1) year anniversary of the Vesting Commencement Date, and 1/48th of the Option shall vest each month thereafter, subject to Optionee continuing to be a Service Provider on such dates.

Termination Period:

This Option shall be exercisable for three (3) months after Optionee ceases to be a Service Provider. Upon Optionee’s death or Disability, this Option may be exercised for one (1) year after Optionee ceases to be a Service Provider. In no event may Optionee exercise this Option after the Term/Expiration Date as provided above.


II. AGREEMENT

1. Grant of Option . The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”).

2. Exercise of Option .

(a) Right to Exercise . This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.

(b) Method of Exercise . This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares.

3. Optionee’s Representations . In the event the Shares have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B .

4. Lock-Up Period . Optionee hereby agrees that Optionee shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Optionee (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 any registration statement of the Company filed under the Securities Act.

 

2


Optionee agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which 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, Optionee 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 this Section shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a 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 said one hundred eighty (180) day period. Optionee agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section.

5. Method of Payment . Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee:

(a) cash or check;

(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or

(c) surrender of other Shares which, (i) in the case of Shares acquired from the Company, either directly or indirectly, have been owned by the Optionee for more than six (6) months on the date of surrender, and (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

6. Restrictions on Exercise . This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.

7. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee.

8. Term of Option . This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option.

 

3


9. Tax Obligations .

(a) Withholding Taxes . Optionee agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements applicable to the Option exercise. Optionee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise.

(b) Notice of Disqualifying Disposition of ISO Shares . If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee.

10. Entire Agreement; Governing Law . The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws but not the choice of law rules of California.

11. No Guarantee of Continued Service . OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE 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 ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

[Signature Page Follows]

 

4


Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

 

OPTIONEE    ACHAOGEN, INC.

 

«Name»

  

 

By

  

 

Title

 

  

 

  
Residence Address:   

 

5


EXHIBIT A

2003 STOCK PLAN

EXERCISE NOTICE

Achaogen, Inc.

3000 Sand Hill Road

Bldg. 1, Suite 260

Menlo Park, CA 94025

Attention:                     

1. Exercise of Option . Effective as of today,             ,             the undersigned (“Optionee”) hereby elects to exercise Optionee’s option to purchase             shares of the Common Stock (the “Shares”) of Achaogen, Inc. (the “Company”) under and pursuant to the 2003 Stock Plan (the “Plan”) and the Stock Option Agreement dated             ,             (the “Option Agreement”).

2. Delivery of Payment . Purchaser herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.

3. Representations of Optionee . Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.

4. Rights as Stockholder . Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares shall be issued to the Optionee as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.

5. Company’s Right of First Refusal . Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the “Right of First Refusal”).

(a) Notice of Proposed Transfer . The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).


(b) Exercise of Right of First Refusal . At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.

(c) Purchase Price . The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.

(d) Payment . Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.

(e) Holder’s Right to Transfer . If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.

(f) Exception for Certain Family Transfers . Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee’s lifetime or on the Optionee’s death by will or intestacy to the Optionee’s immediate family or a trust for the benefit of the Optionee’s immediate family shall be exempt from the provisions of this Section. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.

(g) Termination of Right of First Refusal . The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change of Control in which the holders of the outstanding voting securities of the Company receive securities of a class registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

 

2


6. Tax Consultation . Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

7. Restrictive Legends and Stop-Transfer Orders .

(a) Legends . Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal 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 OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SECURITIES.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE ISSUER’S SECURITIES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE ISSUER OR THE MANAGING UNDERWRITER.

(b) Stop-Transfer Notices . Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

3


8. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

9. Interpretation . Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Optionee or by the Company forthwith to the Administrator which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.

10. Governing Law; Severability . This Exercise Notice is governed by the internal substantive laws but not the choice of law rules, of California. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Option Agreement will continue in full force and effect.

[Signature Page Follows]

 

4


11. Entire Agreement . The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing signed by the Company and Optionee.

 

Submitted by: «Name»    Accepted by:
OPTIONEE    ACHAOGEN, INC.

 

Signature

  

 

By

  

 

Title

Address :    Address :

 

  

 

 

  

 

 

  
  

 

   Date Received

 

5


EXHIBIT B

INVESTMENT REPRESENTATION STATEMENT

 

OPTIONEE:    «Name»
COMPANY:    ACHAOGEN, INC.
SECURITY:    COMMON STOCK
AMOUNT:   
DATE:   

In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following:

(a) Optionee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

(b) Optionee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee’s investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with any legend required under applicable state securities laws.

(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain


of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable.

In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above.

(d) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event.

 

Signature of Optionee:

 

Date:  

 

 

2


ANNEX A

Exhibit 10.4A

EXCLUSIVE PATENT LICENSE AGREEMENT

BETWEEN

ACHAOGEN

AND

THE UNIVERSITY OF WASHINGTON UW

UW REFERENCE: [***]

UW TECHTRANSFER, INVENTION LICENSING

NEGOTIATED BY ANGELA LOIHL, PH.D., M.B.A.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


TABLE OF CONTENTS

 

1. Definitions

     1   

2. Term

     4   

3. Grant of License

     4   

4. Applications and Patents

     6   

5. Commercialization

     8   

6. Payments, Reimbursements, Reports, and Records

     8   

7. Infringement

     10   

8. Termination

     12   

9. Release, Indemnification, and Insurance

     14   

10. Warranties

     16   

11. Damages

     17   

12. Amendment and Waiver

     18   

13. Assignment

     18   

14. Applicable Law

     18   

15. Confidentiality

     18   

16. Consent and Approvals

     19   

17. Construction

     19   

18. Enforceability

     19   

19. Entire Agreement; No Third-Party Beneficiaries

     19   

20. Language and Currency

     20   

21. Notices

     20   

22. Patent Marking

     20   

23. Publicity

     21   

24. Relationship of Parties

     21   

25. Security Interest

     21   

26. Survival

     21   

27. Dispute Resolution

     21   

Exhibit A

     23   

Annex A of Exhibit A

     29   

Exhibit B

     38   


EXCLUSIVE PATENT LICENSE AGREEMENT

THIS AGREEMENT is dated and effective as of the date of last signature (the “Effective Date”), and is made by and between the University of Washington, a public institution of higher education and an agency of the state of Washington (“University”), and Achaogen, a corporation under the laws of the state of Delaware (“Company”).

Purpose

University researchers have participated in a research program designed to discover and develop antibacterial drugs that work by inhibiting the LpxC target (the “LpxC Program”). University researchers, along with others, have filed Licensed Patents (as defined below) claiming the chemical compounds discovered pursuant to the LpxC Program. Rights to the LpxC Program and the Licensed Patents are co-owned by University and Novartis. Company desires that University grant it a license to University’s rights in the Licensed Patents and University is willing to grant such a license on the terms set forth below.

NOW, THEREFORE , the parties agree that:

1. Definitions. For purposes of interpreting this Agreement, the following terms shall have the meanings ascribed to them below in this article:

1.1. “Affiliate” means any entity which controls, is controlled by, or is under common control of Company. An entity shall be regarded as in control of another entity for purposes of this definition if it owns or controls more than fifty percent (50%) of the shares of the subject entity and is entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority).

1.2. “Confidential Information” means any information or materials (biological, chemical, or otherwise) of the parties not generally known or made available to the public, including any information comprised by those materials, in each case to the extent disclosed by one party to the other party in writing and marked “Confidential” (or disclosed orally and confirmed in writing as confidential within [***] days following such disclosure), and including without limitation, non-public Licensed Technology.

1.3. “Distributor” means any Third Party, other than an Affiliate, to which Company or any of its Sublicensees sells a Licensed Product for resale by such Third Party, and where such Third Party has no other rights other than to resell Licensed Product, and for which resale Company, its Affiliates and Sublicensees receive no further consideration (including but not limited to royalties and/or commissions) beyond the price for the initial sale to such Third Party.

1.4. “Event of Force Majeure” means an unforeseeable act that wholly prevents a party from performing one or more of its material duties under this Agreement and that was outside of the reasonable control of the party. An Event of Force Majeure includes acts of war or of God, insurrection and riot, and labor strikes. An Event of Force Majeure shall not mean a party’s inability to obtain a Third Party’s consent to any act or omission.

 

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1.5. “Fair Market Value” means the average price that the stock in question is publicly trading [***], the [***].

1.6. “Field of Use” means any and all therapeutic or prophylactic applications.

1.7. “Know-How” means technical facts, data, or advice, oral or written (in the form of information contained in patents and patent applications, reports, letters, drawings, specifications, testing procedures, training and operational manuals, bills of materials, photographs and related materials) and/or any tangible material(s) [***], that: (i) were developed [***]; (ii) relates to [***]; (iii) were developed before the Effective Date; (iv) are owned by and in the possession of University; and (v) are not covered by rights to any Third Party that would prevent delivery to Company.

1.8. “Lead Candidate” means a compound that Company, in its sole discretion, intends to promote ahead of other compounds in the preclinical development pathway with a goal of entering clinical development. A Lead Candidate will have at least the following [***].

1.9. “Licensed Patents” means University’s rights in the patent(s) and patent application(s) described in section Al, Tables 1-3, of attached Exhibit A, and any other patent(s) and/or patent application(s) that: (i) are related to [***]; (ii) were filed prior to the date of this Agreement; and (iii) University is now or subsequently named as an assignee. Licensed Patents also include any further related patents issued during the term of this Agreement by the United States Patent and Trademark Office or any like foreign body with respect to a patent application that is part of the Licensed Patents, as well as any continuations, substitutions, extensions (including supplemental protection certificates), registrations, confirmations, renewals and divisions of patents and patent applications within the Licensed Patents. The term “Licensed Patent” also means any reissues or reexaminations of a Licensed Patent.

1.10. “Licensed Product” means any product or good in the Field of Use that is made by, made for, sold, transferred, or otherwise disposed of by Company or Sublicensees during the term of this Agreement and the Post-termination Period where such manufacture, use, or sale is covered by one or more Valid Claims of a Licensed Patent.

1.11. “Licensed Technology” means collectively the inventions claimed in each Licensed Patent and [***].

1.12. “Major Market Country” means the [***].

1.13. “Net Sales” means the gross amount received for sales, leases, and other dispositions of Licensed Products by Company or Sublicensees less (i) all trade, quantity, and cash discounts, including credits provided based on sales of Licensed Products, as well as all refunds and government rebates, in each case to the extent actually granted, (ii) all credits and allowances actually granted due to rejections, returns, billing errors, chargebacks and retroactive price reductions, (iii) packaging, handling fees and prepaid freight, in each case to the extent separately invoiced, and (iv) duties, excise, sale and use taxes, and other governmental charges (including value added taxes) in each case to the extent actually incurred and not reimbursed.

 

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“Net Sales” shall mean gross amount received, provided that all collection of outstanding debt by Company, or on behalf of Company, must be attributed to the specific products for which such debt was incurred such that royalties due can be and are calculated for such products. Gross amount received shall, therefore, include all amounts received through the collection of debts attributed to Licensed Products. Where, in addition to the Licensed Product, other active products or active processes are sold in combination with Licensed Product as a single unit (“Combination Product”), then Net Sales shall be determined by multiplying the gross invoiced amounts for each such Combination Product by a fraction, the numerator of which shall be the established market price for the Licensed Product(s) contained in the Combination Product and the denominator of which shall be the sum of the established market price for the Licensed Product(s) plus the established market price of the other active components contained in the Combination Products. When such separate market prices are not established in any particular country, the parties shall negotiate in good faith to determine a fair and equitable method of calculating Net Sales in that country for the Combination Product in question. In the event Company or a Sublicensee sells, leases, or disposes of a Licensed Product to an Affiliate for use by such Affiliate, the “Net Sales” for that transaction for purposes of this Agreement shall be equal to the price Company or the Sublicensee charges non-Affiliate Third Parties for the Licensed Product, or if Company or the Sublicensee does not offer to sell the Licensed Product to the public, the price charged by Company or the Sublicensee for a product of similar kind, quality, and quantity. Net Sales will not include transfers made between Company and any Sublicensee, including Affiliates, for resale to Third Parties, but shall include such resale to Third Parties. Notwithstanding the foregoing, it is understood and agreed that under no circumstances will Net Sales include amounts received for Licensed Products: (i) used in clinical trials when supplied at a substantially discounted price, (ii) used for research related to the development of Licensed Products where no sale occurs, (iii) supplied as commercial samples without charge, or (iv) supplied as charitable or humanitarian donations when supplied without charge.

1.14. “Novartis Intellectual Property” means Novartis’ rights in the Licensed Patents and the LpxC Program.

1.15. “Payment” means a payment to be made by Company to University specified in section 6.1 of this Agreement and described in section A3 of attached Exhibit A.

1.16. “Performance Milestone” means an act or event specified in section 5.1 of this Agreement and described in section A2 of attached Exhibit A.

1.17. “Post-termination Period” means the [***] period commencing on the date of termination of this Agreement.

1.18. “Regulatory Approval” means receipt of any and all approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any national (e.g., the FDA), supra-national (e.g., the European Commission, the Council of the European Union, or the European Agency for the Evaluation of Medicinal Products), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in any

 

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jurisdiction of the world necessary for the marketing, sale and/or use of a product in a regulatory jurisdiction.

1.19. “Sublicense” means the transfer by Company or Sublicensee to a Third Party of any license, option, or first right to negotiate under the Licensed Patent and/or Licensed Technology, in whole or in part. Sublicense does not include the transfer of rights to enable a Third Party to act as a Distributor.

1.20. “Sublicensee” means a Third Party or Affiliate holding a Sublicense under the Licensed Patent and/or Licensed Technology. Sublicensee does not include a Distributor.

1.21. “Sublicensing Consideration” means any and all consideration, including but not limited to upfront fees, milestone payments, maintenance fees, [***], but excluding [***] For avoidance of doubt, Sublicensing Consideration shall not include (i) proceeds reasonably attributable to [***], and (ii) payments to Company by Sublicensees for the performance of bona fide product development work, research work, clinical studies and regulatory approvals, in each case to the extent such activities are performed pursuant to an express agreement, and such payments are at [***].

1.22. “Territory” means worldwide.

1.23. “Third Party” means any individual or entity other than University and Company.

1.24. “Valid Claim” means (a) a claim in an issued and unexpired patent included in the Licensed Patents that: (i) has not been held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, provided, however, that if the holding of such court or governmental agency is later reversed by a court or governmental agency with overriding authority, the claim shall be reinstated as a Valid Claim, (ii) has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise, (iii) has not been lost through an interference, reexamination or reissue proceeding; or (b) a claim of a pending patent application included in the Licensed Patents that has not been pending for more than [***] years.

2. Term. The term of this Agreement shall commence on the Effective Date and, unless terminated earlier as provided below in Article 8, shall expire on the date on which no Valid Claim in a Licensed Patent is subsisting in any country in the Territory. Following expiration of this Agreement due to expiration of all Licensed Patents (but not for an earlier termination), University agrees that Company’s non-exclusive license under the Know-How shall survive on a fully paid-up basis.

3. Grant of License.

3.1. Company’s Rights .

3.1.1. Subject to the terms and conditions of this Agreement, University hereby grants to Company, and Company hereby accepts, an exclusive license under the

 

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Licensed Patents and Licensed Technology, and a non-exclusive license under the Know-How in each case, to all of University’s rights to (i) make, use, offer to sell or sell, offer to lease or lease, import, or otherwise offer to dispose or dispose of Licensed Products, and (ii) practice any method, process or procedure under the Licensed Patents, Licensed Technology and Know-How; and to have any of the foregoing performed on its behalf by a Third Party, in each of cases (i) and (ii) above to be solely within the Field of Use and in the Territory. For purposes of clarity, no provision of this Agreement shall be construed to grant Company, by implication, estoppel or otherwise, any rights other than the rights expressly granted it in this Agreement to the Licensed Technology, a Licensed Patent, or to any other University-owned technology, patent applications, or patents.

3.1.2. Company and Sublicensees shall have the right, exercisable from time to time during the term of this Agreement, to Sublicense its rights under this Agreement without prior written consent of University provided that:

3.1.2.1. Company shall not enter into such an agreement with any Sublicensee if the terms of such agreement are inconsistent in any respect with the terms of this Agreement, including without limitation, sections 5.3, 6.4, 8.3, 9.5, 10.5, and 11.4 and subsection 8.1.1;

3.1.2.2. Company shall use commercially reasonable efforts to enforce a Sublicense; and

3.1.2.3. Company shall deliver to University a true, correct and complete copy of each agreement granting a Sublicensee a Sublicense within [***] days of its execution.

Any Sublicense made in violation of this subsection shall be void and shall constitute an event of default under subsection 8.1.1 of this Agreement.

3.1.3. Company, without the prior approval of University, may assign [***] under this Agreement to another if the assignment is made as a part of and in connection with (A) the sale, transfer, or exchange by Company of all or substantially all of its assets or business to which this Agreement relates, (B) the sale, transfer, or exchange by the shareholders, partners, or equity owners of Company of a majority interest in Company to a purchaser, or (C) the merger of Company into another corporation or other business entity. Company shall provide University with written notice of the assignment within [***] of the effective date of such assignment. Any assignment made in violation of this subsection shall be void and shall, without further act, cause the immediate termination of this Agreement. Any such assignment or delegation shall not release Company from its obligations under this Agreement accruing prior to such assignment or delegation without the express written consent of University

3.2. University’s Rights . University retains an irrevocable, nonexclusive license to make, have made, and use products, processes, and other subject matter covered by the Licensed Patents or the Licensed Technology for research, instructional, or other academic purpose, but

 

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specifically excluding for the preclinical and clinical development of antibacterial therapeutics. Expressly included within this University reservation of rights is the right (i) to use the Licensed Patents and/or Licensed Technology in sponsored research or collaborative research with any Third Party, (ii) to grant material transfer agreements or Sublicenses to non-profit entities, and (iii) to publish any information included in the Licensed Patents, Licensed Technology, Know-How or any other information that may result from University’s research.

3.3. Transfer of Know-How . Subject to University approval, Company may request transfer of Know-How to be supplied by University through [***]. Such request shall detail specific Know-How requested and purpose of such transfer. Approval will be on a case by case basis.

4. Applications and Patents.

4.1. Cost Reimbursement . Company shall pay, or reimburse University for paying, [***] incurred prior to, on, or after the Effective Date to apply for, prosecute, enforce, and maintain the Licensed Patents as provided in section A3.1 of attached Exhibit A, as well as [***] relating to the Licensed Patents. Within [***] of its receipt of University’s invoice for reimbursable expenses, Company shall deliver to University payment in the amount of such invoice.

4.2. Pre-Agreement Patent Filings . Company has not and does not offer to sell, sell, offer to lease, lease, or import (a) any product or good that infringes (including under the doctrine of equivalents) a claim in any Licensed Patent, or (b) any product or good that is made using a process or machine that infringes (including under the doctrine of equivalents) a claim in a Licensed Patent.

4.3. Patent Application Filings during the Term of this Agreement .

4.3.1. University retains the sole and exclusive right to file or otherwise prosecute Licensed Patents using counsel of its choice, provided that Company may request University choose new counsel should Company become reasonably dissatisfied with current counsel, such change in counsel not to be unreasonably withheld by University. Company shall cooperate with University in the filing and prosecution of the Licensed Patents. Subject to Company paying all related patent expenses, University shall:

4.3.1.1. take all commercially reasonable steps to cause patents and patent applications within Licensed Patents to be diligently prosecuted and maintained;

4.3.1.2. instruct patent counsel to copy Company on all correspondence with domestic and foreign patent authorities regarding the Licensed Patents, and upon request of Company, will take such other reasonable steps as may be necessary to cause such patent counsel to comply with such instructions;

 

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4.3.1.3. provide Company with a copies of all invoices from University’s patent counsel for the filing, prosecution and maintenance of the Licensed Patents, and consult with Company on the prosecution of the Licensed Patents;

4.3.1.4. follow Company’s suggestions and requests regarding patent prosecution to the extent not detrimental to University’s intellectual property rights; and

4.3.1.5. allow Company the right to speak with University’s patent counsel directly, provided University shall be included in all such communication.

4.3.2. In no event shall Company file a patent application with respect to the Licensed Technology where there is an inventor who is obligated to assign their rights in the invention to University.

4.3.3. Company may request that University prosecute Licensed Patents in foreign countries. Company will notify University of its desire to obtain or maintain foreign patents no fewer than [***] days prior to the deadline for any payment, filing or action to be taken in connection therewith. Any such notice concerning a foreign patent filing must be in writing, and must identify the countries in which Company wishes patent protection to be sought. Such notice shall be deemed confirmation of Company’s obligation to pay such costs associated with such patent filings. The absence of such a notice from Company to University will be considered an election by Company not to obtain the particular foreign rights at issue. At its sole expense, University may file, prosecute or maintain patent applications or patents relating to the Licensed Technology at its own expense in any country in which Company has not requested University to file, prosecute or maintain patent applications or patents in accordance with this Article 4 (Applications and Patents) and those applications and resultant patents will not be subject to this Agreement.

4.3.4. No provision of this Agreement limits, conditions, or otherwise affects University’s right to prosecute Licensed Patents in any country.

4.4. Maintenance of Licensed Patents . Subject to Company paying all related patent expenses, University shall take all commercially reasonable steps to cause each Licensed Patent to remain or be valid and subsisting. University shall not abandon any Licensed Patent without Company’s approval when Company is paying the patent expenses.

4.5. Ownership of the Licensed Patents . No provision of this Agreement grants Company any rights, titles, or interests (except for the grant of license in subsection 3.1.1 of this Agreement) in the Licensed Patents, notwithstanding Company’s payment of all or any portion of the patent prosecution, maintenance, and related costs.

 

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5. Commercialization.

5.1. Commercialization and Performance Milestones . Company shall use its commercially reasonable efforts, consistent with sound and reasonable business practices and judgment, to commercialize the Licensed Technology and to manufacture and offer to make and sell Licensed Products as soon as reasonably practicable and to maximize sales thereof. Unless excused by the occurrence of an Event of Force Majeure during the term of this Agreement, Company shall perform, or shall cause to happen or be performed, as the case may be, all the performance milestones described in section A2 of attached Exhibit A. For purposes of clarity, it is understood and agreed that with respect to the diligence obligations set forth in this Agreement, including without limitation the obligations described in this section 5.1 and section A2 of attached Exhibit A, such obligations may be satisfied by Company directly, or by Company’s Sublicensees.

5.2. Commercialization Reports . Within [***] of December 31 st of each year following the Effective Date and continuing until such time as Company’s reporting obligations expire as set forth below, Company shall deliver to University written reports of Company’s and, to the extent it has the right to do so, Sublicensees’ efforts and plans to commercialize the Licensed Technology and to manufacture, offer to sell, or sell Licensed Products, provided that it is understood that Company’s inability to disclose to University any plans of its Sublicensees shall not relieve the Company of its obligations to demonstrate its compliance with its diligence obligations under section 5.1 above. Company shall not be obligated to prepare such commercialization reports during such periods when Company or Sublicensee delivers to University written sales reports according to section 6.4. In relation to each of the commercialization and performance milestones described in section A2 of attached Exhibit A, each commercialization report shall include sufficient information to demonstrate compliance of those milestones and shall set out timeframes and plans for those milestones which have not yet been met.

5.3. Use of Name and Trademarks . Except as provided below in Article 23, no provision of this Agreement grants either party any right or license to use the name or trademarks of the other party, or the names, or identities of Company’s employees, advisors, or directors, or any member of the faculty, staff, or student body of University without the express written approval of the party whose trademark or name is to be used. Notwithstanding the foregoing, Company may use the name University of Washington (i) in discussions with, and disclosures to, investors, potential investors, advisors, partners, potential acquirers and Affiliates of Company, and (ii) disclosures required by securities laws and in other regulatory and administrative filings in the ordinary course of Company’s business, in each case so long as the use of University’s name by Company is limited to statements of fact and is not used in a manner to suggest or imply endorsement by University of Company or any Licensed Product.

6. Payments, Reimbursements, Reports, and Records.

6.1. Payments . Company shall deliver to University the payment or payments specified in section A3 of attached Schedule A. Company shall make such payments by check, wire transfer, or any other mutually agreed-upon and generally accepted method of payment.

 

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All checks to University shall be made payable to “University of Washington” and shall be mailed to the address specified in Article 21 of this Agreement and shall include University agreement number [***]. Upon request, University shall deliver to Company written wire transfer instructions.

6.2. Currency and Checks . All computations and payments made under this Agreement shall be in United States dollars. The exchange rate for the currency into dollars as reported in the Wall Street Journal (Western edition) as the [***] shall be used for determining the dollar value of transactions conducted in non-United States dollar currencies.

6.3. Late Payments . Company agrees to pay a late fee for all amounts owed to University that are overdue by [***] or more. The late fee shall be computed as the [***], compounded monthly, as set forth by The Wall Street Journal (Western edition) on the date on which such payment is due, of the outstanding, unpaid balance. The payment of such a late fee shall not foreclose or limit University from exercising any other rights it may have as a consequence of the lateness of any payment.

6.4. Sales Reports . Within [***] after the last day of each calendar quarter commencing the calendar quarter after Company effects its first commercial sale of a Licensed Product and during the term of this Agreement and the Post-termination Period thereafter, Company shall deliver to University a written sales report (a copy of the form of which is attached as Exhibit B) recounting the number and Net Sales amount (expressed in U.S. dollars) of all sales, leases, or other dispositions of Licensed Products, whether made by Company or a Sublicensee, during such calendar quarter. Company shall deliver such written report to University even if Company is not required hereunder to pay to University a payment for sales, leases, or other dispositions of Licensed Products during the calendar quarter.

6.5. Records Retention and Audit Rights .

6.5.1. Records Retained . Company, at its expense, shall keep and maintain and shall cause each Sublicensee to keep and maintain complete and accurate records of all sales, leases, and other dispositions of Licensed Products during the term of this Agreement and the Post-termination Period. Such records shall be retained for at least [***] following the end of the reporting period to which the records relate.

6.5.2. Auditing Rights . Company agrees to permit, at the request of University and upon reasonable notice, one or more Third Party accountants selected exclusively by University (“Accountants”) and subject to obligations of confidentiality to have access to Company’s records and books of account referred to in section 6.5.1. Accountants’ access shall be during ordinary working hours to audit Company’s records for any payment period ending prior to such request, the correctness of any report or payment made under this Agreement, or to obtain information as to the payments due for any such period in the case of failure of Company to report or make payment pursuant to the terms of this Agreement or to otherwise verify Company’s compliance with its payment obligations hereunder. The frequency of such inspection and audit shall be no more than once per calendar year. Company shall cause each Affiliate Sublicensee (and

 

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shall use reasonable efforts to cause each non-Affiliate Sublicensee that sells, leases, or otherwise disposes of Licensed Products on behalf of Company) to grant University the right to inspect and audit such Sublicensee’s records substantially similar to the rights granted University in this section 6.5. To the extent that Company does not have the right to grant University the right to audit a non-Affiliate Sublicensee’s books and records hereunder, Company shall obtain for itself such right and, at the request of University, Company shall exercise such audit right with respect to such non-Affiliate Sublicensee using auditors reasonably acceptable to University and provide the results of such audit for inspection by University pursuant to this section 6.5, such results to be sufficient for University to confirm the amounts owed to University in connection with such Sublicense.

6.5.3. Scope of Disclosure . Accountants shall not disclose to University any information relating to the business of Company except that which is necessary to inform University of the accuracy or inaccuracy of Company’s reports and payments; compliance or noncompliance by Company with the terms and conditions of this Agreement; and the extent of any inaccuracy or noncompliance.

6.5.4. Accountant Copies . Should Accountants believe there is an inaccuracy in any of Company’s payments or noncompliance by Company with any of such terms and conditions, Accountants shall have the right to make and retain copies (including photocopies) of any pertinent portions of the records and books of account. It is understood and agreed that this section 6.5.4 shall in no way limit Accountants’ obligation to abide by the terms of any confidentiality agreement(s) entered into by Accountant and the parties.

6.5.5. Costs of Audit . In the event that Company’s royalties calculated for any calendar year quarterly period are under-reported by more than [***], the costs of any audit and review initiated by University will be borne by Company; otherwise, University shall bear the costs of any audit initiated by University.

7. Infringement.

7.1. Third-Party Infringement of a Licensed Patent .

7.1.1. Notice of Third Party’s Infringement . In the event a party learns of substantial, credible evidence that a Third Party that is not a joint owner on the patent rights involved is making, using, or selling a product in a Field of Use in the Territory that infringes a Licensed Patent, such party promptly thereafter shall deliver written notice of the possible infringement to the other party, describing in detail the information suggesting infringement of the Licensed Patent.

7.1.2. Legal Action to Enforce a Licensed Patent . Upon the delivery of the notice described in subsection 7.1.1 of this Agreement, Company and University shall discuss the steps and acts they shall take to investigate the matter, to cause the Third Party to cease infringing a Licensed Patent, and to seek compensation for the acts of

 

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infringement and reimbursement for related costs and expenses. Company shall have the first right to respond to, defend, and prosecute in its own name and at its own expense actions or suits relating to Licensed Patents. If necessary to the suit, University agrees to be joined as a party plaintiff; provided that Company shall reimburse University for all reasonable legal fees and costs incident thereto. If Company fails, within [***] of a request by University to take action to stop infringement of the Licensed Patents within the Field of Use, to secure cessation of the infringement, institute suit against the infringer, or to provide to University satisfactory evidence that Company is engaged in bona fide negotiations for the acceptance by infringer of a Sublicense in and to relevant patents in Licensed Patents for the Field of Use, then University may, upon written notice to Company, assume full right and responsibility to secure cessation of the infringement, or institute suit against the infringer. If University in accordance with the terms and conditions of this Agreement chooses to institute suit against an alleged infringer, University may bring such suit in its own name (or, if required by law, in its and Company’s name) and at its own expense, and Company shall, but at University’s expense for Company’s direct associated expenses, fully and promptly cooperate and assist University in connection with any such suit.

7.1.3. Recovery . Any and all license fees, royalties, damages, awards, or settlement proceeds shall first be applied to reimburse the enforcing party’s out-of-pocket expenses and then the non-enforcing party’s out-of-pocket expenses. If Company initiated and prosecuted, or maintained the defense of the action, the amount of any recovery remaining shall be divided [***], except that any payment that constitutes consideration for sale of infringing Licensed Product shall be handled according to the provisions of section 6.1 (Payments) and section A3 of attached Schedule A (Running Royalty Payments), and any payment that constitutes consideration of or the grant of a Sublicense shall be handled according to section A3.10 (Sublicensing Consideration). If University initiated and prosecuted, or maintained the defense of, the action, the amount of any recovery remaining then shall be divided [***]. University shall not have an obligation under this Agreement to commence or maintain such an action.

7.1.4. No Obligation to Institute Action . Neither Company nor University is obligated under this Agreement to institute or prosecute a suit against any alleged infringer of Licensed Patents.

7.2. Patent Validity .

7.2.1. Notice and Investigation of Alleged Infringement . In the event Company receives written notice (or is informed by a Sublicensee or customer that they have received written notice) from a Third Party that any Third Party challenges the validity or enforceability of any of the Licensed Patents, or charging that Company’s (or a Sublicensee’s) practice of Licensed Patents to manufacture, sell, lease, or otherwise dispose of a Licensed Product infringes the patent rights of a Third Party, Company promptly thereafter shall deliver written notice of such notification to University.

 

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7.2.2. Settlement and Defense . As between the parties to this Agreement, Company will be entitled to control the defense in any such action(s) at the expense of Company. In no event shall Company admit, allege or otherwise state in connection with the defense of a suit described in this subsection orally or in any answer, request for admissions, interrogatories, deposition, affidavit, court testimony, court document (including motion papers and briefs), or any other document of whatever type that a Licensed Patent is invalid or that a claim in a Licensed Patent is invalid, unless University has given its prior written consent.

7.3. University Cooperation . In any suit, action or other proceeding in connection with enforcement and/or defense of the Licensed Patents, University agrees to cooperate with Company, including without limitation by executing such necessary documents as Company may reasonably request. Upon the request of and, at the expense of Company, University agrees to use efforts reasonable to University to make available at reasonable times and under appropriate conditions necessary personnel, records, papers, information, samples, specimens and other similar materials in University’s possession.

7.4. University Consent . Under no circumstances shall Company settle any suits or actions in any manner relating to the Licensed Patents without obtaining the prior written consent of University, such consent not to be unreasonably withheld.

7.5. Enforceability of Licensed Patents . Notwithstanding challenge by any party, including Company, any patent or patent application shall be enforceable under this Agreement as long as such patent or patent application is a Licensed Patent.

8. Termination.

8.1. By University .

8.1.1. If Company breaches or fails to perform one or more of its duties under this Agreement, University may deliver to Company a written notice of default. University may terminate this Agreement by delivering to Company a written notice of termination if the default has not been cured in full within sixty (60) days of the delivery to Company of the notice of default (“Cure Period”). If, however, Company disputes in good faith that the claimed breach exists, such Cure Period will not start to run until such dispute has been resolved according to the dispute resolution process of Article 27. Notwithstanding the foregoing, if University agrees that a longer Cure Period is required for Company to cure such breach, University shall consider in good faith an extension to the Cure Period.

8.1.2. University may terminate this Agreement by delivering to Company a written notice of termination at least ten (10) days prior to the date of termination if Company (i) voluntarily files or has filed against it a petition under applicable bankruptcy or insolvency laws that Company fails to have released or dismissed within ninety (90) days after filing; (ii) a receiver or trustee is appointed to take possession, custody or control of all or part of Company’s assets or property, unless such appointment occurs at

 

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the instigation of a Third Party and is dismissed within ninety (90) days; or (iii) makes a general assignment for the benefit of creditors.

8.2. By Company . Company may terminate this Agreement at any time by delivering to University a written notice of termination at least thirty (30) days prior to the effective date of termination.

8.3. Post-termination Period .

8.3.1. Company shall not use, or permit others to use, the Licensed Technology or manufacture or have manufactured Licensed Products after the termination of this Agreement. After the termination of this Agreement under section 8.2, Company may offer to sell and sell, offer to lease and lease, and otherwise offer to dispose of or dispose of Licensed Products in the Territory that were manufactured prior to the termination of this Agreement, subject to the provisions of section 6.1 (Payments) and section A3 of attached Schedule A (Running Royalty Payments). After termination of this Agreement under section 8.1, Company shall not offer to sell or sell, offer to lease or lease, or otherwise offer to dispose of or dispose of a Licensed Product in the Territory.

8.3.2. At any time within[***] following termination of this Agreement, for whatever reason other than expiration, a Sublicensee may notify University that it wishes to enter into a direct license with University in order retain its rights to the Licensed Patents, Licensed Technology and Know-How granted to it under its Sublicense. Following receipt of such notice, University and Sublicensee shall promptly enter into a license agreement (the “New License Agreement”), the terms of which license agreement shall be substantially similar to the terms of the Sublicense granted by Company to such Sublicensee, including but not limited to sublicense scope, sublicense territory, and duration of sublicense grant; provided however , that [***], except that the New License Agreement shall provide for [***]. University further agrees that each Sublicense granted by Company hereunder shall survive during the period commencing on termination of this Agreement and ending on the earlier of (1) the expiration of the [***] as described above if the Sublicensee does not provide notice to University that it wishes to enter into the New License Agreement, or (2) the effective date of the New License Agreement between University and the applicable Sublicensee. Notwithstanding the foregoing, each Sublicensee’s right to enter into the New License Agreement shall be contingent upon:

8.3.2.1. such Sublicensee informing University in writing pursuant to Article 21 (Notices), that it wishes to enter into a direct license with University, within [***] of termination of this Agreement with Company;

8.3.2.2. such Sublicense being in good standing with University and such Sublicense not being the subject matter of a dispute with the University or Company;

 

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8.3.2.3. such Sublicensee being in compliance with its Sublicense agreement in all material respects;

8.3.2.4. such Sublicensee using reasonable efforts to provide documentation requested by University to demonstrate Sublicensee meets compliance requirements as set out in this subsection 8.3.2 within [***] of such request for documentation by University (or such longer period of time as University agrees is reasonable under the circumstances based on the nature and extent of the requested documentation);

8.3.2.5. such Sublicense having been validly entered into pursuant to the terms of section 3.1.2. of this Agreement; and

8.3.2.6. no further obligations being imposed upon University as a result of the Sublicense becoming a direct license.

University may, at its sole discretion, waive any of these requirements. If any condition of this subsection 8.3.2 is not met, then University shall be free to license or not license Licensed Patents and Licensed Technology to such Sublicensee according to its sole discretion.

9. Release, Indemnification, and Insurance.

9.1. Company’s Release . For itself and its employees, Company hereby releases University and its regents, employees, and agents forever from any and all suits, actions, claims, liabilities, demands, damages, losses, or expenses (including reasonable attorneys’ and investigative expenses) relating to or arising out of (i) [***]; or (ii) the [***] under this Agreement.

9.2. Company’s Indemnification . Throughout the term of this Agreement and thereafter, Company shall indemnify, defend, and hold University and its regents, employees, and agents harmless from all suits, actions, claims, liabilities, demands, damages, losses, or expenses (including reasonable attorneys’ and investigative expenses) asserted by Third Parties (collectively, “Claims”), relating to or arising out of the manufacture, use, lease, sale, or other disposition of a Licensed Product, including, without limitation, breach of contract and warranty and products-liability claims relating to a Licensed Product and claims brought by a Sublicensee. Notwithstanding the foregoing, Company shall have no obligation to indemnify University under this section 9.2 with respect to Claims resulting from a breach by University of its warranties under section 10.1 and 10.2 or from the gross negligence or willful misconduct of University and shall have no obligation to defend University against any allegations thereof.

9.3. University’s Indemnification . Subject to the limitations on liability set forth in Article 11 of this Agreement, throughout the term of this Agreement and thereafter, University shall indemnify, defend, and hold Company and its directors, employees, and agents harmless from all Claims relating to or arising out of University’s (i) negligent acts or omissions in connection with its performance of its obligations under this Agreement, or (ii) breach of the express warranties set forth in sections 10.1 and 10.2 of this Agreement. Notwithstanding the

 

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foregoing, University shall have no obligation to indemnify Company under this section 9.3 with respect to Claims resulting from a breach by Company of its warranties under section 10.1 or from the gross negligence or willful misconduct of Company and shall have no obligation to defend Company against any allegations thereof.

9.4. Procedure . An indemnitee that intends to claim indemnification under this Article 9 shall: (i) promptly notify the indemnifying party in writing of any Claim with respect to which the indemnitee intends to claim such indemnification; (ii) give the indemnifying party sole control of the defense and/or settlement thereof, subject to indemnifying party receiving prior written approval from the indemnified party before entering into any settlement that would affect the rights or interests of the indemnified party; and (iii) provide the indemnifying party, at the indemnifying party’s expense, with reasonable assistance and full information with respect to such Claim. Notwithstanding the foregoing, the indemnifying party shall have no obligations for any Claim if the indemnitee makes any admission against interest or settlement regarding such Claim, in the case of the indemnitee being University or their regents, officers, employees, students, or agents, such admission being made by an officer of University, without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld.

9.5. Company’s Insurance .

9.5.1. Throughout the term of this Agreement, or during such period as the parties shall agree in writing, Company shall maintain, and shall cause each Sublicensee who sells Licensed Products to maintain, in full force and effect comprehensive general liability (CGL) insurance, with single claim limits of [***]. Such insurance policy shall include coverage for claims that may be asserted by University against Company under section 9.2 of this Agreement and for claims by a Third Party against Company or University arising out of the purchase or use of a Licensed Product. Such insurance policy shall name University as an additional insured and shall require the insurer to deliver notice to University at the address set forth in Article 21 of this Agreement, at least [***] days prior to the termination of the policy.

9.5.2. Within [***]with respect to Licensed Product(s), Company shall provide to University certificates evidencing the existence and amount of clinical trials liability insurance. Company shall issue irrevocable instructions to its insurance agent and to the issuing insurance company to notify University of any discontinuance or lapse of such insurance not less than [***] prior to the time that any such discontinuance is due to become effective. Company shall provide University a copy of such instructions upon their transmittal to the insurance agent and issuing insurance company. Company shall further provide University, at least annually, proof of continued coverage.

9.5.3. The provisions of subsection 9.5.1 of this Agreement shall not apply if University agrees in writing to accept Company’s or Sublicensee’s self-insurance plan as adequate insurance, which acceptance shall not be unreasonably withheld.

 

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9.6. Sublicensees—Release . Company shall cause each Sublicensee to grant University a release from liabilities substantially similar to the release granted in favor of University in section 9.1 of this Agreement.

10. Warranties.

10.1. Authority . Each party represents and warrants to the other party that it has full corporate power and authority to execute, deliver, and perform this Agreement, and that no other corporate proceedings by such party are necessary to authorize the party’s execution or delivery of this Agreement.

10.2. University Representations and Warranties . After reasonable investigation and inquiry, University represents and warrants:

10.2.1. that it has the right and authority to enter into this Agreement and grant the rights and licenses hereunder;

10.2.2. that, to the best of its knowledge after reasonable investigation, (i) it is either a sole or a joint owner of the Licensed Patents described in section Al, Table 1, of attached Exhibit A, (ii) that [***] of the Licensed Patents and Licensed Technology to University, and (iii) that University has not and will not grant any rights in the Licensed Patents or Licensed Technology to a Third Party that conflict with the rights and licenses granted herein to Company;

10.2.3. that to the best of its knowledge after reasonable investigation, (i) [***] the Licensed Patents to any Third Party, and (ii) there are no claims of Third Parties other than those disclosed to Company through section 1.14 (Novartis Intellectual Property), Al of Exhibit A and section 10.4 (Novartis Intellectual Property Rights) that would call into question the rights of University to grant to Company the rights and licenses contemplated hereunder;

10.2.4. that it has not and will not intentionally divulge to Company what it knows to be proprietary trade secret or Confidential Information of any Third Party regarding the LpxC Program.

10.3. Disclaimers .

10.3.1. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTION 10.1 and 10.2 OF THIS AGREEMENT, UNIVERSITY DISCLAIMS AND EXCLUDES ALL WARRANTIES, EXPRESS AND IMPLIED, CONCERNING THE LICENSED TECHNOLOGY, EACH LICENSED PATENT, EACH PATENT APPLICATION, AND EACH LICENSED PRODUCT, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF NON-INFRINGEMENT AND THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

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10.3.2. University expressly disclaims any warranties concerning and makes no representations:

10.3.2.1. that the Licensed Patent(s) will be approved or will issue;

10.3.2.2. that University will ultimately own any specific claim in a Licensed Patent;

10.3.2.3. concerning the validity or scope of any Licensed Patent;

10.3.2.4. that the manufacture, use, sale, lease or other disposition of a Licensed Product will not infringe a Third Party’s patent or violate its intellectual property rights;

10.3.2.5. that University owns the Licensed Patents described in Section A1, Tables 2-3 of attached Exhibit A, although to the best of University’s knowledge, University believes that it at least co-owns the Licensed Patents described in Section A1, Tables 2-3 of attached Exhibit A.

10.4. Novartis Intellectual Property Rights . Company acknowledges and agrees that University’s rights in Licensed Patents exist both in relation to [***].

10.5. Sublicensees—Warranties . Company shall cause each Sublicensee to give Company a warranty substantially similar to the warranty in favor of University in section 10.1. Company shall also provide notice to each Sublicensee of all University disclaimers and exclusions of warranties under subsections 10.3.1 and 10.3.2 of this Agreement.

11. Damages.

11.1. Remedy Limitation . EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, IN NO EVENT SHALL UNIVERSITY BE LIABLE FOR (A) PERSONAL INJURY OR PROPERTY DAMAGES ARISING IN CONNECTION WITH THE ACTIVITIES CONTEMPLATED IN THIS AGREEMENT OR (B) LOST PROFITS, LOST BUSINESS OPPORTUNITY, INVENTORY LOSS, WORK STOPPAGE, LOST DATA OR ANY OTHER INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OF ANY KIND. THIS LIMITATION OF REMEDIES DOES NOT LIMIT UNIVERSITY’S OBLIGATION TO INDEMNIFY AS PROVIDED UNDER SECTION 9.

11.2. Limitation of Remedies Available to University . EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, IN NO EVENT SHALL COMPANY BE LIABLE FOR UNIVERSITY’S LOST PROFITS, LOST BUSINESS OPPORTUNITY, OR ANY OTHER INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OF ANY KIND. THIS LIMITATION OF REMEDIES DOES NOT LIMIT COMPANY’S OBLIGATION TO INDEMNIFY AS PROVIDED UNDER SECTION 9.

11.3. Damage Cap . IN NO EVENT SHALL UNIVERSITY’S TOTAL LIABILITY FOR THE BREACH OR NONPERFORMANCE OF THIS AGREEMENT EXCEED THE

 

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[***]. THIS LIMITATION SHALL APPLY TO CONTRACT, TORT, AND ANY OTHER CLAIM OF WHATEVER NATURE. THIS LIMITATION OF REMEDIES DOES NOT LIMIT UNIVERSITY’S OBLIGATION TO INDEMNIFY AS PROVIDED UNDER SECTION 9.

11.4. Sublicensees—Damages . Company shall cause each Sublicensee to agree to limitations of remedies and damages substantially similar to the limitations of remedies and damages set forth in sections 11.1 and 11.2 of this Agreement.

12. Amendment and Waiver. This Agreement may be amended from time to time only by a written instrument signed by the parties. No term or provision of this Agreement shall be waived and no breach excused unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. No waiver of a breach shall be deemed to be a waiver of a different or subsequent breach.

13. Assignment. Except as provided in subsections 3.1.2 and 3.1.3 of this Agreement, Company shall not assign or Sublicense its interest or delegate its duties under this Agreement, unless University consents to the assignment, Sublicense, or delegation. Any assignment, Sublicense, or delegation attempted to be made in violation of this article shall be void.

This Agreement shall inure to the benefit of Company and University and their respective permitted Sublicensees and trustees.

14. Applicable Law. The internal laws of the state of Washington shall govern the validity, construction, and enforceability of this Agreement, without giving effect to the conflict of laws principles thereof.

15. Confidentiality.

15.1. Form of transfer . Confidential Information may be conveyed in written, graphic, oral, physical, or electronic form. Confidential Information shall include, without limitation, Licensed Technology as well as Company’s business plan or reports.

15.2. Exceptions . Confidential Information does not include: any information that: is required by law to be disclosed; is or becomes part of the public domain through no fault of recipient; is known to recipient prior to the disclosure by the disclosing party, as evidenced by documentation; is publicly released as authorized under this Agreement by University, its employees or agents; is subsequently obtained by a party from a Third Party who is authorized to have such information; or is independently developed by a party without reliance on any portion of the Confidential Information received from the disclosing party and without any breach of this Agreement as evidenced by documentation.

15.3. No Unauthorized Disclosure of Confidential Information . Beginning on the Effective Date and continuing throughout the term of this Agreement and thereafter for a period of [***] (“Confidentiality Period”), neither party shall use for any purpose or disclose or otherwise make known or available to any Third Party any Confidential Information disclosed to

 

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it by the other party, without the express prior written consent of such other party. Each party shall utilize reasonable procedures to safeguard the Confidential Information disclosed to it by the other party. Notwithstanding the foregoing, Company shall be permitted to disclose University’s Confidential Information under conditions of confidentiality and limited use that are reasonable under the circumstances: (i) to actual or potential investors, lenders, consultants, collaborators, Sublicensees, or development partners, (ii) to its attorney or agent as shall be reasonably required; (iii) to the extent necessary to fulfill its obligations and/or duties hereunder, and (iv) in its regulatory filings or other communications with the US Food and Drug Administration or equivalent foreign regulatory authority pertaining to Licensed Products. Company will immediately inform University, and provide University with a copy of any use of University’s Confidential Information.

15.4. Access to University Information . University is an agency of the State of Washington and is subject to the Washington Public Records Act, RCW 42.56 et seq., (“Act”), and no obligation assumed by University under this Agreement shall be deemed to be inconsistent with University’s obligations as defined under the Act and as interpreted by University in its sole discretion. In the event University receives a request for public records under the Act for documents containing Confidential Information, and if University concludes that the documents are not otherwise exempt from public disclosure, University will provide Company notice of the request before releasing such documents. Such notice shall afford Company a minimum of [***] to review such documents and/or seek a protective order, at Company’s expense utilizing the procedures described in RCW 42.56.540. University shall have no obligation to protect the Confidential Information from disclosure in response to a request for public records.

16. Consent and Approvals. Except as otherwise expressly provided, all consents or approvals required under the terms of this Agreement shall be in writing and shall not be unreasonably withheld or delayed.

17. Construction. The headings preceding and labeling the sections of this Agreement are for the purpose of identification only and shall not in any event be employed or used for the purpose of construction or interpretation of any portion of this Agreement. As used herein and where necessary, the singular shall include the plural and vice versa, and masculine, feminine, and neuter expressions shall be interchangeable.

18. Enforceability. If a court of competent jurisdiction adjudges a provision of this Agreement unenforceable, invalid, or void, such determination shall not impair the enforceability of any of the remaining provisions hereof and such provisions shall remain in full force and effect.

19. Entire Agreement; No Third-Party Beneficiaries. Company has evaluated the Licensed Technology under a Confidentiality Agreement (“Confidentiality Agreement”) with University [***] with an effective date of April 27 th , 2006. This Agreement (including all attachments, exhibits, and amendments hereto) is intended by the parties as the final and binding expression of their contract and agreement and as the complete and exclusive statement of the terms thereof. This Agreement cancels, supersedes, and revokes all prior negotiations,

 

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representations and agreements, including the Confidentiality Agreement, among the parties, whether oral or written, relating to the subject matter of this Agreement.

No provision of this Agreement, express or implied, is intended to confer upon any person other than the parties to this Agreement any rights, remedies, obligations, or liabilities hereunder. No Sublicensee shall have a right to enforce or seek damages under this Agreement.

20. Language and Currency. Unless otherwise expressly provided in this Agreement, all notices, reports, and other documents and instruments that a party hereto elects or is required by the terms of this Agreement to deliver to the other party hereto shall be in English, and all notices, reports, and other documents and instruments detailing revenues and earned under this Agreement or expenses chargeable to a party hereto shall be United States dollar denominated.

21. Notices. All notices, requests, and other communications that a party is required or elects to deliver shall be in writing and shall be delivered personally, or by facsimile, or by a recognized overnight courier service or by United States mail, first-class, certified or registered, postage prepaid, return receipt requested, to the other party at its address set forth below or to such other address as such party may designate by notice given pursuant to this article:

 

If to University:   

UW TechTransfer Invention Licensing

ATTN: [***]

4311 11 th Avenue NE, Suite 500

Seattle, WA 98105-4608

Facsimile No.: 206-685-4767

For notices sent pursuant to Article 8, with a copy to:   

University of Washington

Office of the Attorney General

101 Gerberding Hall

Seattle, WA 98105

Facsimile No.: 206-543-0779

If to Company:   

Attn: [***]

Vice President Business Development

7000 Shoreline Court, 3 rd Floor

South San Francisco, CA 94080

Facsimile No.: 650-266-1154

For notices sent pursuant to Article 8, with a copy to:   

[***]

Morgan, Lewis & Bockius, LLP

One Market Street, Spear Street Tower

San Francisco, CA 94105

Facsimile No.: 415-442-1001

22. Patent Marking. Company shall mark any and all material forms of Licensed Product(s) or packaging pertaining thereto made and sold by Company in the United States with patent marking conforming to 35 U.S.C. §287(a), as amended from time to time. Such marking shall

 

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further identify the pendency of any U.S. patent application and/or any issued U.S. or foreign patent forming any part of the Licensed Patents. All Licensed Product(s) shipped to or sold in other countries shall be marked in such a manner as to provide notice to potential infringers pursuant to the patent law and practice of the country of manufacture or sale.

23. Publicity. Either party may disclose to the public the execution and delivery of this Agreement along with other party’s name and the name of the technology.

24. Relationship of Parties. In entering into, and performing their duties under, this Agreement, the parties are acting as independent contractors and independent employers. No provision of this Agreement shall create or be construed as creating a partnership, joint venture, or agency relationship between the parties. No party shall have the authority to act for or bind the other party in any respect.

25. Security Interest. In no event shall Company grant, or permit any person to assert or perfect, a security interest in Company’s rights under this Agreement.

26. Survival. Immediately upon the termination or expiration of this Agreement, except for certain rights granted for the Post-termination Period described above in section 8.3, all Company’s rights under this Agreement shall terminate; provided, however, Company’s obligations that have accrued prior to the effective date of termination or expiration of this Agreement (e.g., the obligation to report and make payments on sales, leases, or dispositions of Licensed Products and to reimburse University for costs) and the obligations specified in sections 6.1 and 6.4 of the Agreement shall survive. The obligations and rights set forth in sections 6.5 and 8.3 and Articles 9 of this Agreement shall survive the termination or expiration of this Agreement. Additionally, the non-exclusive license to Know-How granted in subsection 3.1.1 shall survive the expiration (but not the earlier termination) of this Agreement as set out in Article 2 (Term).

27. Dispute Resolution. The parties agree that any and all disputes and controversies arising from, connected with, or relating to this Agreement, including relating to the construction, meaning, performance or effect of this Agreement or any breach thereof (collectively “Disputes”) will he resolved in accordance with the terms of this Article 27 as follows:

27.1. Informal Dispute Resolution . Prior to initiating formal dispute resolution procedures, the parties will first attempt to resolve any Dispute directly through good faith negotiations. Either party may deliver to the other a written notice requiring negotiation of the Dispute (“Notice to Negotiate”). The parties will seek to resolve Disputes through negotiations, but may, during this informal dispute resolution period, escalate the resolution of any Dispute internally as necessary or appropriate to Company’s Chief Executive Officer and University’s Director of UW TechTransfer Invention Licensing, or their authorized representatives. If the Dispute has not been resolved within [***] after the delivery of a Notice to Negotiate, either party may by written notice (“Notice to Mediate”) request to mediate the Dispute in accordance with section 27.2 subject to the other party’s consent. Subject to the Washington State Public Records Act (RCW 42.56), the parties will conduct the negotiations in confidence.

 

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27.2. Mediation . Subject to the parties’ mutual agreement to mediate the Dispute pursuant to section 27.1, the parties agree to retain the services of a mutually acceptable Third Party mediator to mediate the resolution of the Dispute. Unless the parties otherwise agree in writing, the mediator will be resident in the city in which University is situated, and all meetings regarding the mediation will be held either by video or telephone conference or by in-person meetings held in such city. No party will unreasonably withhold acceptance of a mediator, and the selection of a mediator will be made within [***] following the conclusion of direct negotiations regarding a Dispute pursuant to section 27.1 above. If a mediator is not appointed, or if, following the appointment of a mediator, the Dispute is not resolved within [***], or such extended period that the parties may agree to in writing, after the delivery of the Notice to Mediate, then any party may elect to pursue any options available to them under this Agreement, or commence litigation pursuant to section 27.3 below. Subject to the Washington State Public Records Act (RCW 42.56), the parties agree to maintain the mediation proceedings in confidence; and [***]. All communications during the mediation referred to in this section 27.2 including any documents or information prepared and exchanged solely for the purposes of that mediation, will be considered to be “without prejudice” and will not be admissible in any subsequent litigation.

27.3. Litigation . Any party may seek (i) interim measure of protection, including injunctive relief, prior to or during the negotiation or mediation of Disputes, and (ii) final resolution, from the courts sitting in the city in which University is situated regarding any Dispute, and each party irrevocably and unconditionally agrees to the exclusive jurisdiction of such courts, and all courts competent to hear appeals therefrom, for that purpose.

IN WITNESS WHEREOF , the parties have caused this Agreement to be duly executed by their respective authorized representatives.

 

University of Washington     Achaogen, Inc.
By:   /s/ Fiona Willis     By:   /s/ John F. Hollway
  Name: Fiona Willis       Name: John F. Hollway
  Title: Director       Title: VP, Business Development
  Date: December 1, 2006       Date: December 1, 2006

 

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Exhibit A

Exclusive Patent License Schedule

A1. University and Novartis Intellectual Property:

[***]

 

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[***]

A2. Performance Milestones:

Company shall use at least the level of effort set forth in section 5.1 above to meet all of the following diligence milestones:

[***]

The parties will conduct annual program review meeting at which time Company may propose adjustments to the performance milestones for University’s approval, such approval not to be unreasonably withheld or delayed. In the event the parties cannot agree on revisions to the performance milestones, or in the event that a performance milestone is missed by [***] the parties will resolve the issue using the dispute resolution mechanism provided for in Article 27.

A3. Payments:

A3.1 Patent Cost Reimbursement Schedule . Within [***] of its receipt of University’s invoice for reimbursable expenses as set out below, Company shall deliver to University payment in the amount of such invoice.

A3.1.1. Company shall reimburse University for all reasonable out-of-pocket costs incurred by University in applying for, [***], prosecuting, and maintaining the Licensed Patents, including both costs incurred prior to the Effective Date of this Agreement, as well as all such costs incurred by University during the term of this Agreement (“Patent Expenses”). Notwithstanding the foregoing, for a period of [***] from the Effective Date, Company’s obligation to pay, or reimburse University for paying, Patent Expenses shall not include an obligation to pay patent costs incurred prior to the Effective Date of this Agreement and shall not exceed [***] in aggregate. For purposes of clarity, the parties agree that Patent Expenses shall include [***], but shall

 

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not include costs and expenses for which University has been previously reimbursed by a Third Party. University will be under no obligation to prosecute Licensed Patents that are not reimbursed by Company. The parties acknowledge that the amount of the Patent Expenses invoiced and received prior to the Effective Date is approximately [***].

A3.1.2. Beginning on [***] of the Effective Date, Company shall pay all ongoing Patent Expenses, and shall reimburse University for paying all unreimbursed Patent Expenses pursuant to section A3.1.1 incurred during the first [***] of this Agreement.

A3.1.3. Company shall also reimburse University for all Patent Expenses incurred prior to the Effective Date to [***]. Such payment of past Patent Expenses may occur, at Company’s option, in [***] installments. Company shall have no obligation to reimburse University for past Patent Expenses for which University has been previously reimbursed by a Third Party.

A3.2 Up-front Payment . Company shall pay to University within [***] days of the Effective Date One Hundred Thousand Dollars ($100,000) as an up-front payment. This upfront payment shall be non-refundable and not creditable against future royalty obligations. At Company’s option, subject to Section A3.9 below, [***] of this amount shall be payable in shares of the series of preferred stock sold, at [***].

A3.3 Running Royalty Payments . Company shall pay to University within [***] days after the last day of each calendar quarter during the term of this Agreement and the Post-termination Period an amount equal to [***] of the Net Sales of all sales, leases, or dispositions of Licensed Products made by Company and its Sublicensees during such quarter as a running royalty payment.

A3.4 Royalty Offset for Litigation Relating to University’s Improper Grant of Rights . In the event that Company is named in a suit alleging that University improperly granted rights in the Licensed Patent(s) to Company, Company may deduct from its royalty payments to University with respect to Licensed Products covered by the Licensed Patent(s) subject to suit, an amount not exceeding [***] of Company’s expenses and costs related to such action, including reasonable attorneys’ fees and any amounts payable to such Third Party in connection with settlement of such suit; provided, however, that such reduction shall not exceed [***] of the total royalty due to University with respect to the Licensed Products covered by the Licensed Patent(s) subject to suit for each calendar year. If such [***] of Company’s expenses and costs exceeds the maximum amount of royalties deductable by Company for any calendar year, Company may to that extent reduce the royalties due to University from Company in succeeding calendar years, but never by more than [***] of the total royalty due in any one year with respect to the Licensed Products covered by the Licensed Patent(s) subject to suit. Notwithstanding the preceding sentences, in the event that the suit or claim against Company is caused directly or indirectly by University’s gross negligence or intentional misconduct, Company may deduct [***]of its expenses and costs as described above from the total royalty due to University in that year as well as successive years.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Exclusive Patent License Agreement

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A3.5 Third Party Royalties . The royalty due to University pursuant to section A3.3 shall not be reduced other than as set out in section A3.4 even in the event that Company is required to pay royalties to a Third Party based on Company’s manufacture, use, or sale of Licensed Product being subject to one or more patents of such Third Party.

A3.6 Minimum Annual Royalties . Company shall pay to University minimum annual royalties in the amount of [***] in the first full calendar year following [***] and [***] in each subsequent year for the term of this Agreement. Minimum annual royalty payments for each year will be due in full and payable on the anniversary of the Effective Date of the relevant calendar year and will be creditable against royalties for such calendar year on a non-cumulative basis.

A3.7 Annual Maintenance Fee . Beginning on the third anniversary of the Effective Date and continuing for the term of this Agreement, Company shall pay to University an annual maintenance fee of Ten Thousand Dollars ($10,000) due on the anniversary of the Effective Date provided that no annual maintenance fee will be due in any year Company pays minimum annual royalties according to Section A3.6. This annual payment shall be non-refundable and not creditable against Company’s other royalty obligations.

A3.8 Milestone Payments . Company shall pay to University the following non-cumulative and non-refundable milestone achievement payments within [***] days of achieving the corresponding milestone, whether achieved by Company or a Sublicensee.

A3.8.1. Upon [***], Company shall pay University [***] the first time this milestone is met for a Licensed Product and [***] each of the second and third times this milestone is met for a License Product.

A3.8.2. Upon [***], Company shall pay University [***]the first time this milestone is met for a Licensed Product and [***] for each of the second and third times this milestone is met.

A3.8.3. Upon [***], Company shall pay University [***] the first time this milestone is met for a Licensed Product and [***] for each of the second and third times this milestone is met for a Licensed Product.

A3.8.4. Upon [***], Company shall pay University [***] the first time this milestone is met for a Licensed Product and [***] for each of the second and third times this milestone is met for a Licensed Product.

A3.8.5. Upon [***] Company shall pay University [***] the first time this milestone is met for a Licensed Product and [***] for each of the second and third times this milestone is met for a Licensed Product.

For the avoidance of doubt, Company shall pay [***] of the first milestone payment on each of the second and third times that a particular milestone is met. Notwithstanding the foregoing, Company shall notify University in the event development of a Licensed Product is

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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terminated after Company has paid a milestone payment for that Licensed Product and in cases of such product termination milestone payments made for the terminated product shall be creditable towards payments for the follow-on product under development as if the follow-on product had replaced the terminated product. At Company’s option, subject to Section A3.9 below, up to [***] of any milestone payment set forth in this Section A3.8 may be paid by Company in shares of Company’s preferred stock [***].

A3.9 Equity . In the event Company elects to pay part of its fees pursuant to sections A3.2 or A3.8 in equity, and prior to any such payment, the parties shall enter into a Stock Issuance Agreement substantially in the form attached hereto as Annex A of this Exhibit A, together with such other agreements as they deem necessary and desirable pursuant to which Company shall issue to University shares of the Company’s equity securities. All equity issuances pursuant to this Agreement shall be subject to the approval of Company’s Board of Directors and stockholders, as necessary, and compliance with applicable agreements to which Company is party that relate to Company’s issuance of capital stock. Each share shall have voting rights and shall be non-assessable.

A3.10 Sublicensing Consideration . In addition to the running royalty payments due pursuant to subsection A3.3 of this Exhibit A on the Net Sales by any Sublicensee, Company will pay to University a percentage of all Sublicensing Consideration, depending upon the milestones achieved in developing Licensed Products at time of execution of Sublicense according to the schedule below. The Sublicensing Consideration fee shall be due [***] days after Sublicensing Consideration is received by Company from Sublicensee. Sublicensing Consideration shall be fully creditable against milestone payments due to University based upon activities of the same Sublicensee from which Sublicensing Consideration was received.

A3.10.1. [***] of all Sublicensing Consideration except where additional milestones have been achieved by Company at time of execution of Sublicense as follows:

A3.10.2. [***] of all Sublicensing Consideration where University has been notified pursuant to section A2.1 above that [***]; or

A3.10.3. [***] of all Sublicensing Consideration if [***]; or

A3.10.4. [***] of all Sublicensing Consideration if [***]; or

A3.10.5. [***] of all Sublicensing Consideration if [***].

A3.11 Sublicensing Consideration Offset .

A3.11.1. Novartis Intellectual Property . Where Company grants a Sublicense of substantially similar rights with regard to Field of Use and Territory under both the Licensed Patents and Novartis Intellectual Property, then notwithstanding section A3.10 above, in the event that Company is obligated to share Sublicensing Consideration received in connection with such Sublicense with both University and Novartis,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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Company shall be entitled to offset against the portion of such Sublicensing Consideration owed to University under section A3.10 above any amounts it is obligated to pay to Novartis with respect to such Sublicensing Consideration so that the total combined portion of Sublicensing Consideration payable by Company to University and Novartis will not exceed [***], subject to the limitation that that the Sublicensing Consideration due to University shall not be reduced below [***] of the amount specified above in [***]. For purposes of clarity, the offset set forth in this section A3.11.1 shall only be available to Company to the extent that the total aggregate consideration for the Sublicense of Licensed Patents and Novartis Intellectual Property is treated as Sublicensing Consideration.

A3.11.2. Third Party Intellectual Property . A reduction of the percentage of Sublicensing Consideration payable to University under this Agreement will be negotiated in good faith between the parties where, in addition to the Sublicense of any rights granted to Company hereunder, Company [***] provided, and only to the extent that [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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UW Reference [***]

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Annex A of Exhibit A

Form of Stock Issuance Agreement

 

UW/Achaogen Exclusive Patent License Agreement

UW Reference [***]

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Page 29


ACHAOGEN, INC.

STOCK ISSUANCE AGREEMENT

This Stock Issuance Agreement (this “ Agreement ”) is made as of                      , 20      by and between Achaogen, Inc., a Delaware corporation (the “ Company ”), and the University of Washington, a public institution of higher education and an agency of the state of Washington (“ University ”).

In consideration of the mutual covenants and representations set forth below, the Company and University agree as follows:

1. Issuance of Shares . Pursuant to Section A3.9 of Exhibit A to that certain Exclusive Patent License Agreement entered into as of                      between the Company and University (the “ License Agreement ”), the Company hereby issues to University                      (                      ) shares of the Company’s Series              Preferred Stock (including the common stock into which such shares are convertible, the “ Shares ”). The Company will issue, as promptly as practicable after the date hereof, a stock certificate, registered in the name of University, reflecting the Shares.

2. Restrictions on Transfer .

A. University hereby makes the investment representations and warranties listed on Exhibit A to the Company as of the date of this Agreement, and agrees that such representations and warranties are incorporated into this Agreement in their entirety by this reference, such that the Company may rely on them in issuing the Shares. University understands and agrees that the Company shall cause the legends set forth below, or substantially equivalent legends, to be placed upon any certificate(s) evidencing ownership of the Shares, together with any other legends that may be required by the Company or by applicable state or federal securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE COMPANY, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

University (and any subsequent transferee thereof) agrees not to make any sale, assignment, transfer, pledge or other disposition of all or any portion of the Shares, or any beneficial interest therein, unless and until (x) the transferee thereof has agreed in writing for the benefit of the Company to take and hold such securities subject to, and to be bound by, the terms and conditions set forth in this Agreement, and (y) the transferee has delivered to the Company representations and warranties substantially similar to those set forth on Exhibit A hereto.

B. Stop-Transfer Notices . University agrees that to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

C. Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

D. Lock-Up Period . University hereby agrees, and each transferee of University shall agree in writing, that University and such transferee shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any common stock (or other securities) of the Company held by University and such transferee (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of the Company’s first firm commitment underwritten public offering of the Company’s common stock registered under the Securities Act of 1933, as amended (or such shorter period as permitted by the underwriters), provided that all officers and directors of the Company are bound by and have entered into similar agreements. The obligations described in this Section 2D shall not apply to a registration relating solely to employee benefit plans on Form 5-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. University hereby agrees, and each transferee of University shall agree in writing, to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 2D.

3. Tax Consequences . University has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. University is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. University understands that University (and not the Company) shall be responsible for any tax liability that may arise as a result of its receipt of the Shares and the transactions contemplated by this Agreement.

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


4. General Provisions .

A. Choice of Law; Entire Agreement . This Agreement shall be governed by the internal substantive laws, but not the choice of law rules, of California.

B. Integration . This Agreement, the License Agreement and the ancillary agreements executed in connection with the issuance of the Shares represent the entire agreement between the parties with respect to the issuance of the Shares to University and supersede and replace any and all prior written or oral agreements regarding the subject matter of this Agreement.

C. Notices . Any notice, demand, offer, request or other communication required or permitted to be given by either the Company or University pursuant to the terms of this Agreement shall be in writing and shall be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) [***] after being delivered, by facsimile (with receipt of appropriate confirmation), (iv) 1 business day after being deposited with an overnight courier service or (v) [***] after being deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses provided to the Company (which the Company agrees to disclose to the other parties upon request) or such other address as a party may request by notifying the other in writing.

D. Successors . Subject to the restrictions on transfer described in this Agreement, the rights and obligations of the Company and University shall be binding upon and benefit the successors, assigns and transferees of the parties.

E. Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative and shall not constitute a waiver of either party’s right to assert any other legal remedy available to it.

F. University Investment Representations and Further Documents . University agrees, upon request, to execute any further documents or instruments necessary or required to carry out the purposes or intent of this Agreement, including (but not limited to) Exhibit A of this Agreement

G. Severability . Should any provision of this Agreement be found to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable to the greatest extent permitted by law.

H. Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. Facsimile copies of signed signature pages shall be binding originals.

[Signature page follows]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


The parties represent that they have read this Agreement in its entirety, have had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understand this Agreement. University agrees to notify the Company of any change in its address below.

 

THE UNIVERSITY OF WASHINGTON     ACHAOGEN, INC.
 

 

     

 

Signature of Authorized Signatory     Signature of Authorized Signatory
 

 

     

 

Print Name     Print Name
 

 

     

 

Print Title     Print Title

Address:

University of Washington

Treasury Office

4311-11th Ave NE, Suite 600

Box 354998

Seattle, WA 98105-4608

phone 206-685-1822

fax 206-543-3698

Contact: Randy Lewis, Associate Treasurer

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


EXHIBIT A

INVESTMENT REPRESENTATION STATEMENT

 

PURCHASER

   :    THE UNIVERSITY OF WASHINGTON

COMPANY

   :    ACHAOGEN, INC.

SECURITY

   :    Series Preferred Stock

AMOUNT

   :                         shares (including the common shares into which they are convertible, the “ Shares ”)

DATE

   :                                      , 200     

In connection with the receipt of the Shares, the University of Washington, a public institution of higher education and an agency of the state of Washington (“ University ”), hereby represents and warrants to the Company as follows:

1. The Company May Rely on These Representations . University understands that the Company’s issuance of the Shares to University has not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), because the Company believes, relying in part on the representations and warranties of University in this document, that an exemption from such registration requirement is available for such issuance. University understands that the availability of this exemption depends upon the representations and warranties it is making to the Company in this document being true and correct.

2. University is Acquiring for Investment . University is acquiring the Shares solely for investment purposes, and not for further distribution. University’s entire legal and beneficial ownership interest in the Shares is being purchased and shall be held solely for its account. University is not a party to, and does not presently intend to enter into, any contract or other arrangement with any other person or entity involving the resale, transfer, grant of participation with respect to or other distribution of any of the Shares. University’s investment intent is not limited to its present intention to hold the Shares for the minimum capital gains period specified under any applicable tax law, for a deferred sale, for a specified increase or decrease in the market price of the Shares, or for any other fixed period in the future.

3. University Can Protect Its Own Interests . University can properly evaluate the merits and risks of an investment in the Shares and can protect its own interests in this regard, whether by reason of its own business and financial expertise, the business and financial expertise of certain professional advisors unaffiliated with the Company with whom it has consulted, or its preexisting business or personal relationship with the Company or any of its officers, directors or controlling persons.

4. University is Informed About the Company . University is sufficiently aware of the Company’s business affairs and financial condition to reach an informed and knowledgeable

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


decision to acquire the Shares. University has had opportunity to discuss the plans, operations and financial condition of the Company with its officers, directors or controlling persons, and has received all information it deems appropriate for assessing the risk of an investment in the Shares.

5. University Recognizes Its Economic Risk . University realizes that the purchase of the Shares involves a high degree of risk, and that the Company’s future prospects are uncertain. University is able to hold the Shares indefinitely if required, and is able to bear the loss of its entire investment in the Shares.

6. University Knows the Shares are Restricted Securities . University understands that the Shares are “restricted securities” in that the Company’s issuance of the Shares to University has not been registered under the Securities Act in reliance upon an exemption for non-public offerings. In this regard, University also understands and agrees that:

(a) it must hold the Shares indefinitely, unless any subsequent proposed resale by it is registered under the Securities Act, or unless an exemption from registration is otherwise available (such as Rule 144);

(b) the Company is under no obligation to register any subsequent proposed resale of the Shares by University; and

(c) the certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless such transfer is registered or such registration is not required in the opinion of counsel for the Company.

7. University is Familiar With Rule 144 . University is familiar with Rule 144 adopted under the Securities Act, which in some circumstances permits limited public resales of “restricted securities” like the Shares acquired from an issuer in a non-public offering. University understands that its ability to sell the Shares under Rule 144 in the future is uncertain, and will depend upon, among other things: (i) the availability of certain current public information about the Company; (ii) the resale occurring more than one year after its acquisition and full payment (within the meaning of Rule 144) for the Shares; and (iii) if University is an affiliate of the Company, or a non-affiliate who has held the Shares less than two years: (A) the sale being made through a broker in an unsolicited “broker’s transaction” or in transactions directly with a market maker, as said term is defined under the Securities Exchange Act of 1934, as amended, (B) the amount of Shares being sold during any three month period not exceeding the specified limitations stated in Rule 144, and (C) timely filing of a notice of proposed sale on Form 144, if applicable.

8. University Knows Rule 144 May Never be Available . University understands that the requirements of Rule 144 may never be met, and that the Shares may never be saleable. University further understands that at the time its wishes to sell the Shares, there may be no public market for the Company’s stock upon which to make such a sale, or the current public information requirements of Rule 144 may not be satisfied, either of which would preclude it from selling the Shares under Rule 144 even if the one-year minimum holding period had been satisfied.

 

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Annex A - Stock Issuance Agreement


9. University Knows It is Subject to Further Restrictions on Resale . University understands that in the event Rule 144 is not available to it, any future proposed sale of any of the Shares by it will not be possible without prior registration under the Securities Act, or each of the following: (i) University’s providing written notice to the Company containing detailed information regarding the proposed sale, and (ii) if requested by the Company, (A) University’s providing an opinion of its counsel to the effect that such sale will not require registration, and the Company notifying University in writing that its counsel concurs in such opinion, or (B) a “no action” letter from the Securities and Exchange Commission (the “ Commission ”) to the effect that the transfer of such Shares without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto. University understands that neither the Company nor its counsel is obligated to provide it with any such opinion. University understands that although Rule 144 is not exclusive, the Staff of the SEC has stated that persons proposing to sell private placement securities other than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

10. Accredited Investor . The University is a public institution of higher education which is an “accredited investor” under the Securities Act of 1933 with investment assets over $5 million.

11. Residence . The address of University’s principal executive offices is set forth on the signature page below.

By signing below, University acknowledges its agreement with each of the statements contained in this Investment Representation Statement as of the date first set forth above, and its intent for the Company to rely on such statements in issuing the Shares to University.

 

THE UNIVERSITY OF WASHINGTON
 

 

Signature of Authorized Signatory
 

 

Print Name
 

 

Print Title

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


Address of University’s Principal Executive Offices:

University of Washington

Treasury Office

4311-11th Ave NE, Suite 600

Box 354998

Seattle, WA 98105-4608

phone 206-685-1822

fax 206-543-3698

Contact: Randy Lewis, Associate Treasurer

 

UW/Achaogen Exclusive Patent License Agreement

Annex A - Stock Issuance Agreement


Exhibit B

Royalty Report Form

Date

Company Name & Address

License Number      [***]                                        

 

Reporting Period:                 Report Due Date:          
               

This report must be submitted regardless of whether royalties are owed. Please do not leave any column blank. State all information requested below.

 

Product Description

  

        Royalty Rate        

  

        Quantity/        

        Net Sales        

  

        Royalty Due        

        

 

Report Completed by:                Total Royalties Due:          
           
Telephone Number:                  
           

If you have questions please contact:

Please make check payable to: University of Washington

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.4B

Amendment No. 1 to

EXCLUSIVE PATENT LICENSE AGREEMENT

This agreement (“Amendment No. 1”) amends that certain Exclusive Patent License Agreement by and between the University of Washington, a public institution of higher education and an agency of the state of Washington (“University”) and Achaogen, Inc., a corporation organized under the laws of the state of Delaware (“Company”) effective December 1, 2006 (the “Original License Agreement”). This Amendment No. 1 shall be effective as of March 1, 2009 (the “Amendment No. 1 Effective Date”).

WHEREAS Section 4.1 of the Original License Agreement, considered together with Sections A3.1.2 and A3.1.3 of Exhibit A of the Original License Agreement contemplate that after December 1, 2008, the Company will reimburse the University for certain Patent Expenses incurred prior to the effective date of the Original License Agreement up to an amount of [***], and may make such reimbursement payments in [***].

WHEREAS pursuant to Sections A3.1.2 and A3.1.3 of Exhibit A of the Original License Agreement, Achaogen has paid [***] in an amount of [***] toward reimbursement of the University for such Patent Expenses incurred prior to the effective date of the Original License Agreement,

WHEREAS the parties are mutually agreeable to defer further payments for the remaining [***] contemplated under Sections A3.1.2 and A3.1.3 of Exhibit A of the Original License Agreement,

WHEREFORE the parties, intending to be legally bound, acknowledge and agree as follows:

1. The rights and obligations of the parties shall be governed by the terms and conditions of the Original License Agreement and this Amendment No. 1. All capitalized terms used in this Amendment No. 1 and not defined herein shall have the same meaning as set forth in the Original License Agreement.

2. The Original License Agreement is hereby amended by amending and restating the second sentence of Section A3.1.3 of Exhibit A of the Original License Agreement in its entirety as follows:

“Such payment of past Patent Expenses will occur in [***] due and payable as set forth in the following Table A3.1.3.”

3. The Original License Agreement is hereby amended by adding the following Table A3.1.3 to Section A3.1.3 of Exhibit A of the Original License Agreement:

Table A3.1.3

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Amendment No.1

UW Reference [***]

Page 1 of 2


4. For clarity, except as set forth in paragraphs 2 and 3 hereof, no amendment or modification is made to any other portion of Section A3.1.3 of Exhibit A of the Original License Agreement.

5. All other terms and conditions of the Original License Agreement shall remain in full force and effect.

6. Duplicate executed originals of this Amendment No. 1 are provided, each of which shall be deemed an original, but both of which together shall constitute the same instrument.

IN WITNESS WHEREOF , the parties have executed this Amendment No. 1 effective as of the Amendment No. 1 Effective Date.

 

University of Washington     Achaogen, Inc.
By:   /s/ Fiona Wills     By:   /s/ John Hollway
Name:   Fiona Wills, Ph.D. MBA     Name:   John F. Hollway
Title:   Director of Technology Licensing     Title:   SVP, Corporate Development
Date:   08/18/09     Date:   8/19/09

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Amendment No.1

UW Reference [***]

Page 2 of 2

Exhibit 10.4C

Amendment No. 2 to

EXCLUSIVE PATENT LICENSE AGREEMENT

This amendment (“Amendment No. 2”) to the Exclusive Patent License Agreement is entered into by and between the University of Washington, a public institution of higher education and an agency of the state of Washington (“University”) and Achaogen, Inc., a corporation organized under the laws of the state of Delaware (“Company”), effective as of January 5, 2011 (the “Amendment No. 2 Effective Date”).

WHEREAS University and Company entered into that certain Exclusive Patent License Agreement effective as of December 1, 2006 (“Original License Agreement”);

WHEREAS University and Company agreed, effective as of March 1, 2009, to amend the Original License Agreement and establish a revised payment schedule for deferred past patent costs pursuant to which Company agreed to pay University such deferred past patent costs in eight equal quarterly installments, all as further described in such amendment (“Amendment No. 1”; the Original License Agreement, as amended by Amendment No. 1, hereinafter referred to as the “Current License Agreement”);

WHEREAS Company has paid to University the first [***] quarterly installments called for under Amendment No. 1 and the [***] installments are not due until [***], respectively;

WHEREAS pursuant to Section 5.1 and Section A2 of Exhibit A of the Current License Agreement, Company has obligations to perform, or shall cause to happen or be performed, as the case may be, all the performance milestones described in Section A2 of Exhibit A;

WHEREAS the parties agree that Company has used its commercially reasonable efforts, consistent with sound and reasonable business practices and judgment, to meet such performance milestones as set forth in the Current License Agreement;

WHEREAS Company has met the first performance milestone and now proposes adjustments to extend the remaining performance milestones; and

WHEREAS the University has agreed extend the remaining performance milestones in exchange for Company’s agreeing to accelerate the payment of the [***] installments of the deferred past patent costs.

WHEREFORE the parties, intending to be legally bound, acknowledge and agree as follows:

1. The rights and obligations of the parties shall be governed by the terms and conditions of the Current License Agreement, as amended by this Amendment No. 2. All capitalized terms used in this Amendment No. 2 and not defined herein shall have the same meaning as set forth in the Current License Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Amendment No.2

UW Reference [***]

Page 1 of 3


2. The Original License Agreement is hereby amended by amending and restating Section A2 of Exhibit A in its entirety as follows:

“A2 Performance Milestones:

Company shall use at least the level of effort set forth in Section 5.1 above to meet all of the following diligence milestones:

A2.1 Company shall have [***].

A2.2 Company shall have [***].

A2.3 Company shall have [***].

A2.4 Company shall have [***].

If Company achieves one of the above performance milestones on a product which is not a Licensed Product, Company may elect to classify such product as a Licensed Product to meet such milestone provided that such product must then be treated as a Licensed Product for all other purposes of this Agreement.

The parties will conduct annual program review meeting at which time Company may propose adjustments to the performance milestones for University’s approval, such approval not to be unreasonably withheld or delayed. In the event the parties cannot agree on revisions to the performance milestones, or in the event that a performance milestone is [***], the parties will resolve the issue using the dispute resolution mechanism provided for in Article 27.”

3. As consideration for the foregoing amendment of Section A2 of Exhibit A, Company agrees to pay to University within [***] of the execution of this Amendment No. 2 the [***], which [***]. Upon receipt of such payment, University acknowledges that Company’s reimbursement obligations with respect to past patent costs shall have been satisfied in full.

4. All other terms and conditions of the Original License Agreement shall remain in full force and effect.

5. Duplicate executed originals of this Amendment No. 2 are provided, each of which shall be deemed an original, but both of which together shall constitute the same instrument.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

UW/Achaogen Amendment No.2

UW Reference [***]

Page 2 of 3


IN WITNESS WHEREOF , the parties have executed this Amendment No. 2 effective as of the Amendment No. 2 Effective Date.

 

University of Washington     Achaogen, Inc.
By:   /s/ Fiona Wills     By:   /s/ John Holloway
Name:   Fiona Wills, PhD. MBA     Name:   John F. Holloway
Title:   Director of Technology Licensing     Title:   VP, Business Development
Date:   01/05/11     Date:   Jan. 6, 2011

 

UW/Achaogen Amendment No.2

UW Reference [***]

Page 3 of 3

Exhibit 10.5 (A)

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this “Agreement”) is made and entered into effective as of January 25, 2006 (the “Effective Date”), by and between Achaogen, Inc., a Delaware corporation (“Achaogen”), and Isis Pharmaceuticals, Inc., a Delaware corporation (“Isis”). Achaogen and Isis each may be referred to herein individually as a “Party,” or collectively as the “Parties.”

WHEREAS, Achaogen wishes to develop and commercialize Aminoglycoside Products and Isis wishes to license to Achaogen the Aminoglycoside Program Intellectual Property so that Achaogen may develop and commercialize Aminoglycoside Products, on the terms set forth below;

NOW , THEREFORE, the Parties do hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used in this Agreement and not otherwise defined herein have the meanings set forth in Appendix I.

ARTICLE 2

GRANT OF RIGHTS

Section 2.1 License Grants.

2.1.1 Subject to the terms and conditions of this Agreement, Isis hereby grants to Achaogen an exclusive, worldwide license (with the right to sublicense) under the Aminoglycoside Program Intellectual Property to research, develop, make, have made, use, sell, offer for sale, have sold and import Aminoglycoside Products.

2.1.2 Conditions to Licenses . Achaogen will use commercially reasonable efforts (efforts and resources commonly used by a company of similar size in the pharmaceutical industry for products of similar commercial potential at a similar stage in their lifecycle) to develop and commercialize Aminoglycoside Products.

ARTICLE 3

PRODUCT DEVELOPMENT; EXCLUSIVITY AND REPLACEMENT

Section 3.1 Development/Commercialization/Regulatory Responsibilities . Achaogen is responsible for the continued research, development and commercialization of Aminoglycoside Products. Notwithstanding the foregoing, it is understood that Achaogen may research, develop and/or commercialize the Aminoglycoside Products alone, and through contractors, sublicensees and other third parties.

Section 3.2 Data; Transfer of Technology . Promptly after the Effective Date, Isis will disclose to Achaogen all data, results and information related to testing and studies under the Aminoglycoside Program (including analytical test results and non-clinical pharmacology and safety data) to the extent such data, results and/or information is [***] for the continued research, development and commercialization of Aminoglycoside Products and [***] for the research, development and commercialization of Aminoglycoside Products.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Section 3.3 Reports . Subject to Article 5, Achaogen will keep Isis reasonably informed with respect to its (including its Affiliates and sublicensees) activities and progress toward development and commercialization of Aminoglycoside Products, to the extent such information is known by Achaogen, by providing a written summary of such activities and progress to Isis every [***]. Achaogen will notify Isis of [***] any Aminoglycoside Product that is in development or on the market. Achaogen will provide such notice as soon as reasonably practicable after such event, but in any case prior to its public disclosure of such event (to the extent then known by Achaogen).

Section 3.4 Exclusivity . Beginning on the Effective Date and for a period of [***] thereafter, Isis will not engage, [***]. This Section 3.4 will not (i) limit the activities of any company which combines with Isis to the extent such company [***] prior to such combination, (ii) prevent Isis from [***], or (iii) prevent Isis from providing to Achaogen the consulting and support services contemplated in Section 3.5 below.

Section 3.5 Consulting . For [***] following the Effective Date Isis will provide up to [***] of consulting to Achaogen to aid in the development of Aminoglycoside Products (no more than [***]). Thereafter Isis will make its personnel reasonably available by telephone, to answer questions related to the Aminoglycoside Program. Additional hours of consulting requested by Achaogen, and agreed to by Isis, will be provided at a rate of [***].

Section 3.6 [***] Collaboration . Achaogen will make reasonable efforts to extend Isis’ collaboration with [***], including the Research Chair Funding Agreement dated April 24, 2003 between Isis and [***] (the “Funding Agreement”), though [***] as a condition for this Agreement. Any rights that Isis has to inventions related to the Aminoglycoside Program made under the Funding Agreement, either before or after the Effective Date will be treated as Aminoglycoside Program Patents hereunder. If Achaogen enters into a collaboration with [***], Isis will cooperate with Achaogen to have the [***] below directly transferred to Achaogen. Isis shall be free to collaborate with [***] and/or [***] outside the area of [***], provided that such collaboration does not [***] under the Funding Agreement or any successor agreement that either Isis or Achaogen may enter into with [***].

Section 3.7 Recruiting. With prior written consent from Isis, Achaogen may solicit [***]; provided , however , that Achaogen agrees that [***]. Achaogen will have no obligation to [***] will have no obligation to [***].

ARTICLE 4

FINANCIAL PROVISIONS

Section 4.1 Up-Front Payment by Achaogen . In consideration of the license granted by Isis to Achaogen hereunder, Achaogen will pay an up-front license fee of US$1,500,000 to Isis, the full amount of which will be, subject to Isis’ execution and delivery to Achaogen of a Stock Issuance Agreement (the “Stock Issuance Agreement”) in substantially the form attached hereto as Exhibit 4.1 and the requisite approval of Achaogen’s stockholders, paid by issuance

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

2


and delivery of 1,071,428 shares of Achaogen’s Series A Preferred Stock pursuant to the Stock Issuance Agreement within thirty (30) days after the Effective Date. In connection with such issuance, Isis will become a party to that certain Investors’ Rights Agreement, Voting Agreement and Right of First Refusal and Co-Sale Agreement, each dated as of August 16, 2004, as amended through the date hereof. In the event Achaogen does not obtain the required stockholder approvals, and issue the above-described shares to Isis, within thirty (30) days after the Effective Date, Isis may terminate this Agreement upon written notice to Achaogen (in which case this Agreement, including without limitation Article 2 above and Article 7 below, shall be of no force or effect).

Section 4.2 Sublicense Revenue . In further consideration of the license granted by Isis to Achaogen hereunder, Achaogen will pay Isis [***] of Sublicense Revenue; provided however , in no event shall: (i) Achaogen’s combined cumulative obligation under this Section 4.2 and Section 4.3 with respect to the first Aminoglycoside Product exceed the sum of the milestones payments specified in Section 4.3 (i.e., $19,500,000 (U.S.)), (ii) Achaogen’s combined cumulative obligation under this Section 4.2 and Section 4.4 with respect to the second sublicensed Aminoglycoside Product exceed the sum of the milestones payments specified in Section 4.4 (i.e., $9,750,000 (U.S.)), and (iii) Achaogen’s combined cumulative obligation under this Section 4.2 and Sections 4.3 and 4.4, exceed in any event the sum of the milestones payments specified in Sections 4.3 and 4.4 (i.e., $29,250,000 (U.S.)). The share of Sublicense Revenue owed to Isis pursuant to this Section 4.2 is due and payable within [***] days after the date on which Achaogen receives such Sublicense Revenue. Furthermore, Achaogen may credit any payments made to Isis under this Section 4.2 against milestone payments otherwise due under Section 4.3 and Section 4.4 that have not yet been paid. Similarly, Achaogen may credit any payments made to Isis under Sections 4.3 or 4.4 against any payments that are or become due under this Section 4.2. An example of the foregoing credits is described in Exhibit 4.2 hereto.

Section 4.3 Milestone Payments by Achaogen for First Aminoglycoside Product . In further consideration of the license granted by Isis to Achaogen hereunder, Achaogen will pay to Isis the applicable milestone payment set forth below not more than [***] days after first achievement by Achaogen or its Affiliates (or within [***] days if first achieved by a sublicensee) of each of the following events for the first Aminoglycoside Product to reach each such milestone:

 

Event

  

Payment

Filing an IND    $1,000,000 (U.S.), subject to Section 4.8.2
Initiation of Phase II Clinical Trial    $2,000,000 (U.S.), subject to Section 4.8.2
Initiation of Phase III Clinical Trial    $4,000,000 (U.S.)
[***]    $[***] (U.S.)
[***]    $[***] (U.S.)

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

3


For purposes of clarification, if there are multiple Aminoglycoside Products in development, the above milestones will be deemed to be achieved upon the first of the Aminoglycoside Products to reach such milestone and will not necessarily be based upon the [***]. Any milestone payments shall be made no more than once and no amounts shall be due hereunder for any subsequent or repeated achievement of such milestones. The Parties acknowledge and agree that the amount to be paid to Isis under this Section 4.3 (Milestone Payments by Achaogen for First Aminoglycoside Product) shall in no event exceed $19,500,000 (U.S.).

Section 4.4 Milestone Payments by Achaogen for Second Aminoglycoside Product . In further consideration of the license granted by Isis to Achaogen hereunder, Achaogen will pay to Isis the applicable milestone payment set forth below not more than [***] days after first achievement by Achaogen or its Affiliates (or within [***] days if first achieved by a sublicensee) of each of the following events for the second Aminoglycoside Product to reach such milestone:

 

Event

  

Payment

[***]    [***]

For purposes of clarification, if there are multiple Aminoglycoside Products in development, the above milestones will be deemed to be achieved upon the second of the Aminoglycoside Products to reach such milestone and will not necessarily be based upon [***]. Any milestone payments shall be made no more than once and no amounts shall be due hereunder for any subsequent or repeated achievement of such milestones. The Parties acknowledge and agree that the amount to be paid to Isis under this Section 4.4 (Milestone Payments by Achaogen for Second Aminoglycoside Product) shall in no event exceed $9,750,000 (U.S.).

Section 4.5 Milestone Payment for Net Sales . Achaogen will pay to Isis a one-time, non-creditable milestone payment of $[***] upon the first achievement of (a) annual Net Sales of all Aminoglycoside Products exceeding $[***] in the aggregate in a given calendar year and (b) annual Net Sales of all Aminoglycoside Products exceeding $[***] in the aggregate in a given calendar year. Any milestone payments shall be made no more than once with respect to the achievement of such milestone and no amounts shall be due hereunder for any subsequent or repeated achievement of such milestones. The Parties acknowledge and agree that the amount to be paid to Isis under this Section 4.5 (Milestone Payment for Net Sales) shall in no event exceed $20,000,000 (U.S.). For purposes of clarification, it is possible for both of the milestones due under this Section 4.5 to become due and payable in the same calendar year.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

4


Section 4.6 Royalty Payments by Achaogen.

4.6.1 Base Royalty . As additional consideration of the rights and licenses granted by Isis to Achaogen herein, Achaogen will pay Isis a royalty equal to [***]% of Net Sales of Aminoglycoside Products. In no event shall more than one royalty be due under this Section 4.6.1 with respect to any Aminoglycoside Product.

4.6.2 UM Royalty . In addition to the foregoing, Achaogen will reimburse Isis the [***] royalty on Net Sales of Aminoglycoside Products due from Isis to Université de Montréal under the Funding Agreement (the “UM Royalty”); provided , however , if the Funding Agreement is replaced by an agreement between Achaogen and Université de Montréal which eliminates the UM Royalty payment due from Isis under the Funding Agreement, Achaogen will no longer be required to pay the UM Royalty to Isis. In no event will the royalty owed to Isis under this Section 4.6.2 exceed the royalty actually paid by Isis to Université de Montréal under the Funding Agreement on Net Sales of Aminoglycoside Products.

4.6.3 Royalty Term . The royalties due to Isis under Section 4.6.1 shall be payable on a country-by-country and product-by-product basis for sales of Aminoglycoside Products by Achaogen, its Affiliates or sublicensees after the date of the first commercial sale of an Aminoglycoside Product until the later of (a) ten (10) years from the date of first commercial sale of such Aminoglycoside Product [***]; and (b) the abandonment, revocation, invalidation or expiration of the last Valid Claim within the [***]. Notwithstanding the foregoing, (i) the term described in (b) shall not in any case extend for more than 20 years after the first commercial sale of such Aminoglycoside Product [***], and (ii) solely with respect to Net Sales by a sublicensee, shall not extend beyond the term (i.e., if less than such 20-year period) during which Achaogen is receiving royalties from such sublicensee on such Net Sales.

4.6.4 Third Party Licenses . Achaogen will be responsible for any third party licenses that may be necessary or useful or may relate to the development, commercialization or sale of Aminoglycoside Products. Achaogen may reduce the royalties due to Isis under Section 4.6.1 above on a country-by-country and product-by-product basis by [***]% of the royalty due by Achaogen under any license agreement with a third party licensor under any intellectual property (including any Patents) necessary to make, use or sell an Aminoglycoside Product [***] beginning with the date such royalties are actually paid to such third party licensor. Notwithstanding the foregoing, in no event will a royalty due to Isis on Net Sales of an Aminoglycoside Product be reduced by more than [***]% (to a minimum royalty due to Isis of [***]%).

4.6.5 Combination Products . In the event that an Aminoglycoside Product is sold for a single price in combination with another therapeutically active ingredient, or other product or service, for which no royalty would be due hereunder if sold separately, Net Sales from such combination sales, for purposes of calculating the applicable royalty rate and the applicable royalty due under Section 4.6.1 (Base Royalty) shall be calculated by multiplying the Net Sales of the combination product by the fraction A/(A + B), where A is the average gross selling price during the previous calendar quarter of the Aminoglycoside Product sold separately and B is the gross selling price during the previous calendar quarter of the therapeutically active ingredient, product or service. In the event that separate sales of the Aminoglycoside Product or

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

5


the additional therapeutically active ingredient, product or service were not made during the previous calendar quarter, then the Net Sales shall be reasonably allocated in good faith between such Aminoglycoside Product and such other active ingredient, product or service; provided, however, that upon the request of Isis, such allocation shall be agreed upon by the Parties separately, or failing agreement, determined in accordance with Section 11.4 (Dispute Resolution) below.

4.6.6 Generic Competition . In any country where Generic Competition exists during the Term, as long as such Generic Competition exists in such country, the otherwise applicable royalty due under this Section 4.6 with respect to Net Sales of the corresponding Aminoglycoside Product in such country shall be reduced by [***]; provided , however , any pass through royalties due Isis under such Sublicense will only be reduced to [***] but in no event will the royalty due to Isis be reduced by more than [***] under this Section 4.6.6.

Section 4.7 Timing of Royalty and Milestone Payments . The royalties from Achaogen to Isis set forth in Section 4.6 will become due and payable within [***] days after the end of each calendar quarter and will be calculated based on Net Sales in the calendar quarter. The Milestone Payments for Net Sales from Achaogen to Isis set forth in Section 4.5 will become due and payable within [***] days immediately following the end of the calendar year for which the milestone accrued. Royalties on Net Sales by Sublicensees will be due in the quarter in which Achaogen receives payment on such Net Sales from the Sublicensee, but in no event later than the next calendar quarter after the Sublicensee made such Net Sales.

Section 4.8 Payment Method.

4.8.1 Any amounts due to Isis under this Agreement will be paid in U.S. dollars, by wire transfer in immediately available funds to an account designated by Isis. Any payments or portions thereof due hereunder which are not paid on the date such payments are due under this Agreement will bear simple interest at an annual rate equal to the lesser of the prime rate as published in The Wall Street Journal, Eastern Edition, on the first day of each calendar quarter in which such payments are overdue, plus [***] or the maximum rate permitted by law, calculated on the number of days such payment is delinquent and based on a 365 day year.

4.8.2 Notwithstanding the foregoing in Section 4.8.1:

(a) if [***]the Milestone Payments due under Section 4.3 for achieving the [***] are achieved [***] Achaogen may elect to pay up to [***] (but only to the extent allowable in (b) below) of the such Milestone Payments by, at Isis’ option either :

(i) issuing equity securities of Achaogen to Isis on the [***], or

(ii) by issuing a convertible promissory note convertible into the equity securities (including any warrants or derivatives) to Isis on the [***];

(b) provided , however , that Isis’ ownership interest in Achaogen cannot exceed [***] on an as issued basis.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

6


(c) The remaining portion of the above referenced Milestone Payments, and payments for all other milestones, will be payable in U.S. dollars as set forth above in Section 4.8.1.

Section 4.9 Currency; Conversion . All payments due hereunder and Net Sales calculations will be reflected in U.S. dollars. If any currency conversion is required to reflect Net Sales in U.S. dollars, such conversion will be made by using the average of the exchange rates for the purchase and sale of U.S. dollars as published in The Wall Street Journal, Eastern Edition, on the last business day of the calendar quarter to which such payments relate.

Section 4.10 Records Retention; Audit.

4.10.1 Record Retention. Achaogen will maintain (and will require that its sublicensees maintain) complete and accurate books and records of their Net Sales with respect to each Aminoglycoside Product, in each case in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with generally accepted accounting procedures of the United States (GAAP), which books, records and accounts will be retained by Achaogen until 3 years after the end of the period to which such books and records pertain.

4.10.2 Audit . Isis will have the right to have an independent certified public accounting firm, reasonably acceptable to Achaogen, upon reasonable prior written notice, examine Achaogen’s records (and to the extent Achaogen is able to secure for Isis the right to audit its sublicensees, the records of its sublicensees) during regular business hours as may be reasonably necessary to verify the accuracy of Net Sales and Sublicense Revenue received not more than [***] prior to the date of such request; provided , however , that Isis will not exercise the right to conduct such audit more than once in any calendar year or more than once with respect to any calendar quarter. To the extent that Achaogen does not have the right to grant Isis the right to audit its sublicensees’ books and records hereunder, Achaogen shall obtain for itself such right and, at the request of Isis, Achaogen shall exercise such audit right with respect to sublicensees and provide the results of such audit for inspection by Isis pursuant to this Section 4.10.2. Isis will bear the cost of such audit unless the audit reveals an underpayment to Isis of more than [***] for the audited period, in which case Achaogen will bear the cost of the audit. All information contained in reports provided to Isis in connection with payments made under this Article 4, or learned by Isis under this Section 4.10.2, shall be Achaogen’s Confidential Information.

4.10.3 Payment of Additional Amounts. If, based on the results of such audit, additional payments are owed by Achaogen under this Agreement, Achaogen will make such additional payments, with interest as set forth in Section 4.8, within [***] after the date on which such accounting firm’s written report is provided to Achaogen.

ARTICLE 5

CONFIDENTIALITY

Section 5.1 Disclosure and Use Restriction . Except as expressly provided herein, the Parties agree that, for the Term and for [***] years thereafter, each Party will keep completely confidential and will not publish, submit for publication or otherwise disclose, and will not use for any purpose except for the purposes contemplated by this Agreement, any Confidential Information received from the other Party. Other than expressly set forth herein, during the Term, Isis shall not disclose any of its own Confidential Information relating to Aminoglycoside Products.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

7


5.1.1 Authorized Disclosure. Each Party may disclose Confidential Information of the other Party to the extent that such disclosure is:

(a) made in response to a valid order of a court of competent jurisdiction; provided , however , that in each case such Party will first have given notice to such other Party and given such other Party a reasonable opportunity to take appropriate action; provided , further , that in each case, the Confidential Information disclosed in response to such court or governmental order will be limited to that information which is legally required to be disclosed in response to such court or governmental order, as determined in good faith by counsel to the Party that is obligated to disclose Confidential Information pursuant to such order;

(b) otherwise required by law or regulation; provided , however , that the Party that is so required will provide such other Party with notice of such disclosure in advance thereof to the extent practicable;

(c) made as required by applicable securities laws and regulations or made to a regulatory authority in connection with its development or commercialization of an Aminoglycoside Product pursuant to this Agreement, including without limitation as required in connection with any filing, application or request for Regulatory Approval; provided , however , that reasonable measures will be taken to assure confidential treatment of such information;

(d) made by such Party, in connection with the performance of this Agreement, to such Party’s sublicensees, directors, officers, employees, consultants, representatives or agents, or to other third parties, in each case on a need to know basis and solely for use of such information as permitted in this Agreement, and provided that each individual and entity to whom such Confidential Information is disclosed is bound in writing to non-use and non-disclosure obligations at least as restrictive as those set forth in this Article 5; or

(e) made by such Party to existing or potential acquirers, existing or potential pharmaceutical collaborators, investment bankers, accountants, attorneys, existing or potential investors, merger candidates, partners, venture capital firms or other financial institutions or investors for use of such information as permitted in this Agreement, and provided that each individual and entity to whom such Confidential Information is disclosed is bound in writing to non-use and non-disclosure obligations at least as restrictive as those set forth in this Article 5.

Section 5.2 Press Releases . Press releases or other similar public communication by either Party disclosing the terms of this Agreement, including Confidential Information of the other Party disclosed to a Party under Section 3.3, [***]. The foregoing notwithstanding, communications required by applicable law, and disclosures of information for which [***], but will be provided to the other Party as soon as practicable after the release or communication thereof. In addition, Achaogen agrees that Isis may [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

8


ARTICLE 6

INTELLECTUAL PROPERTY

Section 6.1 Ownership of Inventions

6.1.1 As between the Parties, Achaogen shall solely own any inventions made solely by Achaogen employees (i.e., without inventive contribution by employees of Isis) in the course of the performance of any work under this Agreement. Inventions made jointly by employees of Isis and Achaogen shall be owned jointly by Isis and Achaogen. Notwithstanding the foregoing, [***] shall [***]. [***] in evidencing, perfecting and obtaining [***].

6.1.2 Inventorship and rights of ownership of inventions shall be determined in accordance with United States patent law. It is understood that except as otherwise provided in this Agreement or as the Parties may otherwise agree in writing, neither Party shall have any obligation to account to the other Party for profits, or to obtain any approval of the other Party to license, assign, mortgage or exploit a jointly owned invention by reason of joint ownership of any such invention, and may otherwise undertake all activities a sole owner might undertake with respect to such inventions without the consent of and without accounting to the other joint owner, and each Party hereby waives any right it may have under the laws of any jurisdiction to require such consent or accounting.

Section 6.2 Prosecution of Patents.

6.2.1 Aminoglycoside Program Patents .

(a) Subject to Section 6.2.2, Achaogen will be responsible for and, at its expense, will prosecute and maintain (including conducting interferences, oppositions, obtaining reexaminations, reissuances, patent term extensions and other similar proceedings) throughout the world [***]. As soon as practicable following the Effective Date, Isis will transfer the subject patent files to Achaogen and will execute such documents and perform such acts as may be reasonably necessary for Achaogen to take control of such patent prosecution and maintenance.

(b) Subject to Section 6.2.2, Achaogen will have the right, at its expense, to prepare, file, prosecute and maintain throughout the world [***].

(c) It is the intention of the Parties to secure broad patent protection for inventions and the Parties will cooperate with each other in furtherance of this intention. Achaogen will, in a timely manner, provide Isis with copies of all draft applications, responses and other substantive papers relating to the filing, prosecution and maintenance (including the verification of all fees and annuities) of [***] and will provide Isis with an opportunity to comment on any draft applications, responses or amendments at least [***] prior to filing and incorporate any Isis comments. Achaogen will discuss foreign filing decisions (including [***]) with Isis at least [***] before any foreign filing decisions are due.

6.2.2 Discontinued Patents . If under Section 6.2.1 Achaogen elects to discontinue the preparation, filing, prosecution and/or maintenance of any particular applications or patents in the [***] in a selected jurisdiction, Achaogen will give [***] days advance written notice to Isis of any such election regarding such Patent (a “Discontinued Patent”). In such case,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

9


Isis may elect to continue preparation, filing, prosecution and/or maintenance of such Discontinued Patent in such jurisdiction at its expense, and thereafter (i) [***], and (ii) [***]. In the event that Isis elects to assume control of the preparation, filing, prosecution and/or maintenance of any Discontinued Patent as provided for in this Section 6.2.2, Achaogen will transfer the Discontinued Patent files to Isis and will execute such documents and perform such acts as may be reasonably necessary for Isis to take control of such patent preparation, filing, prosecution and maintenance.

Section 6.3 Enforcement of Patents

6.3.1 Rights and Procedures. If any third party is, in the reasonable opinion of either Party, within any jurisdiction, infringing any [***], the Party learning of such infringement will promptly notify the other Party and provide it with any reasonably available evidence of such possible infringement.

(a) Achaogen will have the first right to take steps to abate the infringement and/or bring and control any action or proceeding with respect to such infringement and will bear all expenses thereof, and Isis will have the right, at its own expense, to be represented in any such action or proceeding. In this regard, Achaogen shall be entitled to use its good faith discretion in determining (i) whether to contact and/or institute any action or proceeding against an alleged third party infringer; (ii) the timing of any contact with an alleged third party infringer and/or action or proceeding to be instituted against an alleged third party infringer; (iii) the location of any action or proceeding to be instituted against an alleged third party infringer; and (iv) should there be more than one alleged third party infringer, which alleged infringer to contact regarding its alleged infringement or against whom any action or proceeding is to be brought; provided , however , that, if within [***] after having been requested by Isis to initiate an enforcement action against the alleged infringement of the Aminoglycoside Program Patents by a third party, Achaogen shall have been unsuccessful in persuading the alleged infringer to cease and desist and shall not have brought and/or be diligently prosecuting an infringement action (itself or through its sublicensees), or shall not have begun bona fide negotiations regarding the terms under which Achaogen would grant a sublicense to the alleged infringer, or if Achaogen earlier notifies Isis in writing of its intent not to take such steps, then, and in those events only, Isis will have the right, but not the obligation, to take steps to abate the infringement and/or bring and control any action or proceeding with respect to such infringement at its expense, and Achaogen will have the right, at its own expense, to be represented in any such action or proceeding. If Isis requests that Achaogen bring an action with respect to such infringement and Achaogen believes it is not commercially reasonable to bring such actions, the Executive Officers will meet as soon as reasonably possible thereafter and in good faith attempt to reach agreement on commercially reasonable actions to curtail or eliminate such infringement.

(b) The Party not enforcing the applicable Patent will provide reasonable assistance to the enforcing Party (at such enforcing Party’s expense), including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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6.3.2 Recovery.

(a) Any amounts recovered by Achaogen in connection with or as a result of any action or proceeding contemplated by Section 6.3.1(a), whether by settlement or judgment, will first be used to reimburse the Parties for their reasonable out-of-pocket costs and expenses in making such recovery (which amounts will be allocated pro rata based on each Party’s costs and expenses if insufficient to cover the totality of such costs expenses), with any remainder going to [***].

(b) If, however, a sublicense to the infringer is issued in connection with or as a result of any action or proceeding contemplated by Section 6.3.1(a), after reimbursing the Parties for their reasonable out-of-pocket costs and expenses in making such recovery (which amounts will be allocated pro rata based on each Party’s costs and expenses if insufficient to cover the totality of such costs expenses), (i) [***] and (ii) [***] herein.

(c) Any amount recovered by Isis in connection with or as a result of any action or proceeding contemplated by Section 6.3.1(a), whether by settlement or judgment, will first be used to reimburse the Parties for their reasonable out-of-pocket costs and expenses in making such recovery (which amounts will be allocated pro rata based on each Party’s costs and expenses if insufficient to cover the totality of such costs expenses), with any remainder [***].

Section 6.4 Defense . If Achaogen, its Affiliate, sublicensee, manufacturer, distributor or other customer is sued by a third party charging infringement of patent rights that cover the manufacture, use, or sale of an Aminoglycoside Product, Achaogen will promptly notify Isis. If Achaogen, its Affiliates or sublicensees is required to pay amounts to a third party with respect to the manufacture, sale or use of an Aminoglycoside Product as a result of a final judgment or settlement of an infringement claim (“Infringement Payments”), [***] of such Infringement Payments may be credited against the royalties paid to Isis under Section 4.6.1 above, as follows: (i) with respect to any royalties paid to Isis under Section 4.6.1 above for such Aminoglycoside Product prior to such Infringement Payments, [***] shall be [***] of the Infringement Payments attributable to such period and Achaogen may credit the amount of such reduction against royalties otherwise due under Section 4.6.1; and (ii) [***].

ARTICLE 7

TERM AND TERMINATION

Section 7.1 Term . Unless earlier terminated in accordance with the provisions of this Article 7, the term of this Agreement (the “Term”) commences upon the Effective Date and will continue until expiration of all obligations to pay royalties under Section 4.6, provided that Achaogen’s license with respect to the Aminoglycoside Program Know-How shall survive the expiration, (but not an earlier termination, except as provided in Section 7.4 below) of this Agreement.

Section 7.2 Termination for Cause.

7.2.1 Other than Non-Payment . Subject to Section 7.2.2, this Agreement may be terminated by either Party upon 60 days’ written notice to the other Party in the event of a material breach of this Agreement by the other Party and the breach is not cured within such 60-day period. Notwithstanding the foregoing, in the event the other Party disputes that it is in

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

11


material breach of this Agreement, subject to such 60-day period, the dispute will be referred to the attention of the Chief Executive Officer of Achaogen and the Executive Vice President of Isis (the “Executive Officers”). The Executive Officers will meet as soon as reasonably possible thereafter and in good faith attempt to resolve such dispute and attempt to resolve the underlying breach. If, within 30 days after such matter is referred to them, the Executive Officers are unable to resolve such dispute or resolve the underlying breach then, the dispute regarding whether there has been a material breach of the Agreement will referred for resolution by arbitration pursuant to Section 11.4. If the arbitrator determines that the agreement has been materially breached and the breaching Party fails to cure such breach within 60 days of such determination, the non-breaching Party shall thereafter be entitled to terminate this Agreement without further delay and pursue any rights and remedies available to such Party (at law or in equity).

7.2.2 Non-Payment . Without limiting rights otherwise available to it (including under this Agreement), this Agreement may be terminated by Isis upon 30 days’ written notice to Achaogen in the event Achaogen fails to timely make any undisputed payment hereunder when due by Achaogen, and such breach is not cured within such 30-day period.

Section 7.3 Termination by Achaogen Without Cause . Achaogen may terminate this Agreement, in its entirety, or as to any particular Aminoglycoside Product, at any time by giving Isis at least sixty (60) days prior written notice. From and after the effective date of a termination under this Section 7.3 with respect to a particular Aminoglycoside Product, the license granted under Section 2.1 above shall terminate with respect to such Aminoglycoside Product, and the same shall cease to be an Aminoglycoside Product for all purposes of this Agreement. Upon a termination of this Agreement in its entirety under this Section 7.3, all rights and obligations of the Parties shall terminate, except as provided in Section 7.4 below.

Section 7.4 Consequences of Termination.

7.4.1 Licenses to Achaogen . Upon termination of this Agreement for any reason, the licenses granted by Isis to Achaogen hereunder will terminate. Notwithstanding the foregoing, any Sublicense granted by Achaogen hereunder shall survive, provided that (i) such sublicensee promptly agrees in writing to be bound by the applicable terms of this Agreement and agrees to pay directly to Isis all applicable milestones and royalties due hereunder that accrue following termination of this Agreement based on the Sublicensee’s exercise of such Sublicense, and (ii) such sublicensee is not itself in breach of this Agreement.

7.4.2 Effect of Termination by Isis for Cause or by Achaogen Without Cause .

(a) Return of Materials . In the event this Agreement is terminated in its entirety by Isis pursuant to Section 7.2 (Termination for Cause), or terminated by Achaogen pursuant to Section 7.3 (Termination by Achaogen Without Cause), Achaogen shall return to Isis all written Isis Confidential Information and all copies thereof, and Achaogen shall promptly assign to Isis or Isis’ designee, all approvals, permits, and registrations (including all INDs and NDAs) obtained by Achaogen from a regulatory authority with respect to Aminoglycoside Products unless local laws prohibit such assignment, in each case to the extent that Achaogen has the right to make such return and/or assignment. Further, subject to Section 7.4.1 above,

 

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Achaogen and its controlled Affiliates will immediately (i) cease selling any Aminoglycoside Products, (ii) cease all research and/or development programs related to Aminoglycoside Products, and (iii) make any payments which have accrued under Article 4 and provide Isis with a final accounting for Net Sales of any Aminoglycoside Products.

(b) Licenses to Isis . In addition, upon such termination Achaogen agrees to grant to Isis a non-exclusive license under any [***],in each case solely for the purpose of making, having made, using, selling, offering for sale and importing [***]. Notwithstanding the foregoing and Section 7.4.2(a), Achaogen shall have no obligation to grant such license to Isis, or to assign to Isis any approvals, permits, and registrations to the extent relating to any Aminoglycoside Product within a Sublicense granted hereunder if (i) such sublicensee promptly agrees in writing to be bound by the applicable terms of this Agreement and agrees to pay directly to Isis all applicable milestones and royalties due hereunder that accrue following termination of this Agreement based on the Sublicensee’s exercise of such Sublicense, and (ii) such sublicensee is not itself in breach of this Agreement.

7.4.3 Effect of Termination by Achaogen for Cause . In the event this Agreement is terminated by Achaogen pursuant to Section 7.2 (Termination for Cause), each Party shall return to the other all documents and other tangible objects containing or representing Confidential Information of such other Party. Further, Achaogen will make any payments which have accrued as of the date of such termination under Article 4 and provide Isis with a final accounting for Net Sales of any Aminoglycoside Products. Notwithstanding the foregoing, Achaogen shall have no obligation to return the Isis Confidential Information provided to a sublicensee to the extent such Confidential Information relates to any Program Compound and/or the Aminoglycoside Product that is within a Sublicense granted hereunder if such sublicensee agrees to be bound by the applicable terms of this Agreement and agrees to pay directly to Isis all applicable milestones and royalties due hereunder that accrue following termination of this Agreement based on the Sublicensee’s exercise of such Sublicense, and (ii) such sublicensee is not itself in breach of this Agreement.

Section 7.5 Accrued Rights; Surviving Obligations.

7.5.1 Accrued Rights . Termination or expiration of this Agreement for any reason will be without prejudice to any rights (including financial compensation) that have or will accrue to the benefit of a Party prior to such termination or expiration.

7.5.2 Survival . Articles 5, 9 and 11, and Sections 4.10, 6.1, 7.4 and 7.5 of this Agreement will survive termination or expiration of this Agreement for any reason.

ARTICLE 8

RIGHTS IN BANKRUPTCY

Section 8.1 Rights in Bankruptcy . All rights and licenses granted under or pursuant to this Agreement by Isis or Achaogen are, and will otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under this Agreement, will retain and may fully exercise all of

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

13


their rights and elections under the United States Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the United States Bankruptcy Code, the Party hereto that is not a Party to such proceeding will be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non-subject Party’s possession, will be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

ARTICLE 9

INDEMNIFICATION AND INSURANCE

Section 9.1 Indemnification of Isis . Achaogen will indemnify Isis and each of its directors, officers, employees and agents (“Isis Parties”) and defend and hold each of them harmless, from and against any and all losses, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and expenses) to the extent arising from or occurring as a result of any and all liability suits, investigations, claims or demands by a third party (collectively, “Losses”) arising from or occurring as a result of or in connection with (a) [***], or (b) breach by Achaogen of any representations, warranties, or covenants set forth in Article 10 of this Agreement. Notwithstanding the foregoing, Achaogen will have no obligations under this Section 9.1 to the extent Losses arise from the (x) gross negligence or willful misconduct (including non-compliance with any applicable laws and regulations) on the part of an Isis Party or (y) breach by Isis of any representations, warranties, or covenants set forth in this Agreement.

Section 9.2 Indemnification of Achaogen . Isis will indemnify Achaogen and its directors, officers, employees and agents (“Achaogen Parties”), and defend and hold each of them harmless, from and against any and all Losses to the extent arising from or occurring as a result of or in connection with (a) [***] or (b) breach by Isis of any representations, warranties, or covenants set forth in Article 10 of this Agreement. Notwithstanding the foregoing, Isis will have no obligations under this Section 9.2 to the extent Losses arise from or occurs as a result of or in connection with (x) gross negligence or willful misconduct (including noncompliance with any applicable laws and regulations) on the part of an Achaogen Party or (y) breach by Achaogen of any representations, warranties, or covenants set forth in this Agreement.

Section 9.3 Each Party’s agreement to indemnify and hold the other harmless is conditioned upon the indemnified Party (a) providing written notice to the indemnifying Party of any claim, demand or action arising out of the indemnified activities within [***] after the indemnified Party has knowledge of such claim, demand or action, (b) permitting the indemnifying Party to assume full responsibility to investigate, prepare for and defend against any such claim or demand, (c) assisting the indemnifying Party, at the indemnifying Party’s reasonable expense, in the investigation of, preparation of and defense of any such claim or demand and (d) not compromising or settling such claim or demand without the indemnifying Party’s prior written consent; provided, however, that, if the Party entitled to indemnification fails to promptly notify the indemnifying Party pursuant to the foregoing clause (a), the indemnifying Party will only be relieved of its indemnification obligation to the extent prejudiced by such failure.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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Section 9.4 Insurance . Achaogen will have and maintain such types and amounts of liability insurance (including product liability insurance) as is normal and customary in the industry generally for parties similarly situated, and will upon request provide Isis with a certificate of insurance. Achaogen will promptly notify Isis of any material change in insurance coverage or lapse in coverage in that regard.

Section 9.5 Applicable Laws . Achaogen and its sublicensees will comply with all applicable laws and regulations in connection with the development and commercialization of Aminoglycoside Products.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

Section 10.1 Representations, Warranties and Covenants . Each Party hereby represents, warrants and covenants to the other Party as of the Effective Date as follows:

10.1.1 Corporate Authority . Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

10.1.2 Consents, Approvals, etc . All necessary consents, approvals and authorizations of any Regulatory Authority and other parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.

10.1.3 Conflicts . The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way and (b) do not conflict with, violate, or breach or constitute a default or require any consent not already obtained under, any contractual obligation or court or administrative order by which such Party is bound.

Section 10.2 Isis Representations, Warrants, and Covenants . Isis hereby represents, warrants and covenants to Achaogen as of the Effective Date as follows:

10.2.1 Isis has the sufficient legal and/or beneficial title and ownership of the Aminoglycoside Program Intellectual Property as is necessary to fulfill its obligations under this Agreement and to grant the licenses (or sublicenses, as the case may be) to Achaogen pursuant to this Agreement; (ii) Isis agrees not to transfer ownership of Aminoglycoside Program Intellectual

 

15


Property to any third party during the period of this Agreement unless such transferee expressly takes such Aminoglycoside Program Intellectual Property subject to the rights and licenses granted to Achaogen under this Agreement; (iii) the Patents listed in Appendix 2 have not been assigned, transferred, conveyed or otherwise encumbered, and Isis has the right to exclusively license the Patents listed in Appendix 2 to Achaogen; (iv) all existing research and preclinical data, information and know how with respect to the Isis Identified Compounds developed by or under authority from Isis or its Affiliates is owned by Isis (except for those items that are subject the Funding Agreement), (v) Isis is not aware of any Patents owned by or in which Isis or its Affiliates has any rights or an interest, other than the Aminoglycoside Program Patents, that are necessary to develop or manufacture Isis Identified Compounds

10.2.2 To Isis’ actual knowledge (with no duty to conduct an investigation) as of the Effective Date, neither the manufacture, sale nor use of Isis Identified Compounds as contemplated hereunder would be covered by Patents of any third party.

10.2.3 There is no matter within the actual knowledge of Isis that Isis has intentionally or knowingly failed to disclose to Achaogen which, by itself or in connection with any other matters, is material to the evaluation of the Isis Identified Compounds.

Section 10.3 DISCLAIMER OF WARRANTY . EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTION 10.1 or SECTION 10.2, ACHAOGEN AND ISIS MAKE NO REPRESENTATIONS AND GRANT NO WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND ACHAOGEN AND ISIS EACH SPECIFICALLY DISCLAIM ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

ARTICLE 11

MISCELLANEOUS

Section 11.1 Assignment . Neither Party will sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder without the prior written consent of the other Party; provided , however , that (a) either Party hereto may assign or transfer this Agreement or any of its rights or obligations hereunder without the consent of the other Party to (i) an Affiliate, provided such Affiliate agrees to be bound by the terms of this Agreement and such transfer does not relieve Achaogen of any of its obligations hereunder, or (ii) any third party successor in interest with which it has merged or consolidated, or to which it has assigned or transferred all or substantially all of its assets or business to which this Agreement relates if, in any such event, the third party assignee, transferee or successor assumes in writing all of the assigning or transferring Party’s obligations under this Agreement or (b) [***]. Any purported assignment or transfer in violation of this Section will be void ab initio and of no force or effect.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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Section 11.2 Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable by a court of competent jurisdiction, such adjudication will not affect or impair, in whole or in part, the validity, enforceability, or legality of any remaining portions of this Agreement. All remaining portions will remain in full force and effect as if the original Agreement had been executed without the invalidated, unenforceable or illegal part.

Section 11.3 Governing Law . This Agreement will be governed by and construed in accordance with the laws of California, without reference to its principles of conflicts of law.

Section 11.4 Dispute Resolution.

11.4.1 Any dispute that arises under this Agreement will be first referred to the Executive Officers for resolution as set forth in Section 7.2.1 above. In the event that the Executive Officers fail to resolve the dispute, the Parties may agree to refer the dispute to arbitration; provided, however, that any dispute relating to the construction or validity of any Aminoglycoside Program Patent will not be subject to arbitration under this Section 11.4.

11.4.2 Arbitration Proceedings. If the Parties pursue arbitration proceedings under Section 7.2.1 or 11.4.1 above, the dispute will be finally resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). The arbitration will be conducted by a single arbitrator experienced in the business and technology which is the subject of this Agreement. The place of arbitration will be in either San Diego, CA or San Francisco, CA. Either Party may apply to the arbitrators or to a court for interim injunctive relief until the arbitration award is rendered or the dispute, controversy or claim is otherwise resolved.

11.4.3 Costs and Expenses . Each Party will bear its own costs and expenses and attorneys’ fees and an equal share of the mediators’ and/or arbitrators’ and any administrative fees of mediation and/or arbitration. Notwithstanding the foregoing, [***].

11.4.4 Confidentiality . Except to the extent necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration without the prior written consent of both Parties, and provided that the foregoing will not prevent a Party from confidentially disclosing the existence, content and results of the arbitration in confidence to its directors, professional advisors, and existing or potential investors or acquirors, and others on a need to know basis or as required by law or regulation.

11.4.5 Awards . The arbitrators may award monetary damages and injunctive relief. All awards of the arbitrators will be final and binding on the Parties, and there will be no appeal of any such award and judgment on the arbitration award may be entered in any court having jurisdiction thereof.

Section 11.5 Notices . All notices or other communications that are required or permitted hereunder will be in writing and delivered personally with acknowledgement of receipt, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier as provided herein), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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If to Achaogen, to:

Achaogen, Inc.

7000 Shoreline Court, 3rd Floor

South San Francisco, CA 94080

Attention: [***]

Facsimile: [***]

with a copy to:

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, California 94304

Attention: [***]

Facsimile: [***]

If to Isis, to:

Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, California 92008

Attention: Executive Vice President

Facsimile: [***]

with a copy to:

Attention: General Counsel

Facsimile: [***]

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such communication will be deemed to have been given (a) when delivered, if personally delivered or sent by facsimile on a business day, (b) on the business day after dispatch, if sent by nationally-recognized overnight courier and (c) on the third business day following the date of mailing, if sent by mail. It is understood and agreed that this Section 11.5 is not intended to govern the day-to-day business communications necessary between the Parties in performing their duties, in due course, under the terms of this Agreement.

Section 11.6 Entire Agreement; Modifications . This Agreement sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understanding, promises and representations, whether written or oral, with respect thereto are superseded hereby. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment, modification, release or discharge will be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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Section 11.7 Relationship of the Parties . It is expressly agreed that the Parties will be independent contractors of one another and that the relationship between the Parties will not constitute a partnership, joint venture or agency.

Section 11.8 Waiver . Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set forth in

a written instrument duly executed by or on behalf of the Party waiving such term or condition. Any such waiver will not be deemed a waiver of any other right or breach hereunder.

Section 11.9 Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[Signature page follows]

 

19


IN WITNESS WHEREOF , the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

 

ACHAOGEN, INC.     ISIS PHARMACEUTICALS, INC.
Per:  

/s/ John F. Hollway

    Per:  

/s/ B. Lynne Parshall

John F. Hollway

Vice President, Business Development

   

B. Lynne Parshall

Executive Vice President and CFO

 

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APPENDIX 1

DEFINITIONS

Affiliate ” means any person, corporation or other business entity of such Party which, directly or indirectly through one or more intermediaries, actually controls, is actually controlled by, or is under common control with such Party, as the case may be. As used herein, “control” means to possess, directly or indirectly, the power to affirmatively direct the management and policies of such person, corporation or other business entity, whether through ownership of voting securities or by contract relating to voting rights or corporate governance.

Aminoglycoside Program Intellectual Property ” means (i) all Aminoglycoside Program Patents, (ii) Isis’ ownership interest, if any, in the Derivative Patents, and (iii) all Aminoglycoside Program Know-How.

Aminoglycoside Program ” means research and development activities directed towards the identification and development of aminoglycoside and aminoglycoside analog compounds conducted by Isis (including any consultants or collaborators of Isis) and/or by [***] under the Funding Agreement (as defined in Section 3.6).

Aminoglycoside Products ” means any therapeutic agents for the treatment and/or prevention of human disease, an active pharmaceutical ingredient of which is a Program Compound. [***] Aminoglycoside Product (for example, for purposes of determining the royalty term under Section 4.6.3(a) above).

Aminoglycoside Program Know-How ” shall mean any proprietary, non-public information or materials, directed to the research, development, registration, manufacture, use, marketing or sale of Aminoglycoside Products which is developed prior to or during the term of this Agreement by or on behalf of Isis (including by [***] under the Funding Agreement (as defined in Section 3.6)). Aminoglycoside Program Know-How may include, without limitation: (i) all biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical and safety data and information specifically directed to Aminoglycoside Products; (ii) compositions of matter, assays, development and validation reports and biological materials necessary or actually used for development, manufacture, use or sale of Aminoglycoside Products; (iii) development data and data and information necessary or actually used for manufacturing the Aminoglycoside Products; and (iv) all regulatory applications, registrations licenses, authorizations, approvals and correspondences submitted to or received from any regulatory authorities with jurisdiction over an investigational drug containing an Aminoglycoside Product.

Aminoglycoside Program Patents ” means the Patents on inventions which were developed [***].

Confidential Information ” means all information and know-how and any tangible embodiments thereof provided by or on behalf of one Party to the other Party either in connection with the discussions and negotiations pertaining to this Agreement or in the course of performing this Agreement (including the consulting work contemplated by Section 3.5), which may include data, knowledge, practices, processes, ideas, research plans, engineering designs and drawings, research data, manufacturing processes and techniques, scientific, manufacturing, marketing and business plans, and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Notwithstanding the foregoing, information or know-how of a Party will not be deemed Confidential Information of such Party for purposes of this Agreement if such information or know-how:

(a) was already known to the receiving Party, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;

(b) was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such receiving Party;

(c) became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of the receiving Party;

(d) was disclosed to such receiving Party, other than under an obligation of confidentiality or non-use, by a third party who had no obligation to the disclosing Party not to disclose such information or know-how to others; or

(e) was independently discovered or developed by such receiving Party, as evidenced by their written records, without the use of Confidential Information belonging to the disclosing Party and prior to any subsequent disclosure by the receiving Party.

Control ” means possession of the ability to make a disclosure, grant a license or sublicense hereunder without violating the terms of any agreement with any third party and without any compensation to such third party; provided, however, that if a Party has a right to grant a license or sublicense, with respect to an item of intellectual property, information or materials, to the other Party only upon compensation, including e.g. milestones or royalties, to a third party, which compensation is due because of the other Party’s receipt or exercise of such license or sublicense (and only to the extent allocable to such receipt or exercise), pursuant to the agreement under which the first Party first licensed or acquired such item (“Third Party Reimbursement”), then the first Party shall not be deemed to have “Control” of the relevant item unless the other Party agrees to bear the Third Party Reimbursement upon request of the first Party.

Derivative Compound ” means an aminoglycoside or aminoglycoside analog compound “derived” from an Isis Identified Compound by (a) [***] and/or (b) [***]. A compound will be deemed to have been “derived” from an Isis Identified Compound if it is [***] of the Effective Date of this Agreement and (i) is the result of [***], (ii) is the result of [***], and/or (iii) is based on [***]. A compound will be deemed to have been [***] (i) the date such compound is [***] Notwithstanding the foregoing, [***]. In addition, an Isis Identified Compound that [***] will be a Derivative Compound.

Derivative Patents ” means those Patents which [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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Generic Competition ” means the situation, in any particular country in the Territory, in which (i) a Generic Drug is sold by a third party in such country, (ii) such Generic Drug achieves market penetration of [***] or more in such country (based on sales of units of such Generic Drug and the corresponding Aminoglycoside Product in such country, as reported by [***] reasonably agreed upon by the Parties), and (iii) there are no Valid Claims within the [***] in such country that cover such Aminoglycoside Products and such Generic Drug.

Generic Drug ” means, with regard to any specific Aminoglycoside Product, (a) any product containing the Program Compound which is incorporated into the Aminoglycoside Product, for which Regulatory Approval is obtained by abbreviated NDA (“ANDA”) or other abbreviated process not requiring the filing of a complete NDA in the United States according to applicable US laws and regulations or a corresponding application in any country or pursuant to 21 U.S.C. 505(b)(2), 21 U.S.C. 505(j) or other similar procedure based upon the Aminoglycoside Product containing such Program Compound, which is being sold in such country by any third party other than an Aminoglycoside Product being sold in such country by Achaogen, or its Affiliates or Sublicensees.

IND ” means an investigational new drug application (as defined in 21 CFR 312.3) that is required to be filed with the United Stated Food and Drug Administration for authorization to commence human clinical trials of a drug product, and its equivalent in other countries or regulatory jurisdictions.

Initiation of Phase II Clinical Trial ” means the first administration of an Aminoglycoside Product to the first human in a human clinical trial of such Aminoglycoside Product that would meet the definition in 21 CFR 312.21(b) which is designed to generate dosing and preliminary efficacy data.

Initiation of Phase III Clinical Trial ” means the first administration of an Aminoglycoside Product to the first patient in a human clinical trial of such Aminoglycoside Product which is designed to be of a size and statistical power to support an NDA filing alone or in combination with other similar studies. If it is unclear whether or not a particular study will be sufficient to support an NDA filing (other than by virtue of the uncertainty of safety and efficacy data from that trial) the clinical trial will be deemed to be a Phase III Clinical Trial upon the initiation of activities to prepare an N DA filing for such Aminoglycoside Product.

Isis Identified Compound ” means an [***], including, but not limited to, those which (i) [***], or (ii) are [***].

Major Market ” means the [***]. For purposes hereof, an Aminoglycoside Product will be deemed to have received Regulatory Approval [***] upon receipt of Regulatory Approval in any one of the following countries: [***].

NDA ” means a New Drug Application filed, in whole or in part after completion of clinical trials, with the United Stated Food and Drug Administration to obtain marketing approval for a drug product in the United States or equivalent application for Regulatory Approval in other Major Market countries.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

A-3


Net Sales ” means the aggregate gross receipts received by Achaogen and its Affiliates and sublicensees, as applicable, for the sale of Aminoglycoside Products, less the following deductions:

(a) Prompt payment or other trade, cash or quantity discounts actually allowed and taken in such amounts as are customary in the trade;

(b) Government rebates or chargebacks;

(c) Commissions paid or allowed to distributors and agents who are independent third parties other than such parties who are solely performing detailing functions;

(d) Amounts paid or credited by reason of timely rejection or returns;

(e) Taxes (other than franchise or income taxes on the income of Achaogen) actually paid or withheld, provided that upon the refund of any such tax, such refund will be deemed a receipt;

(f) Allowances, including [***], provided that upon the extinguishment of any such allowance, such extinguishment will be deemed a receipt;

(g) Transportation and delivery charges, including insurance premiums, actually incurred.

Notwithstanding the foregoing, amounts received by Achaogen or its Affiliates and sublicensees for the sale of Aminoglycoside Products among Achaogen or its Affiliates and sublicensees whether for their internal use or for resale or other disposition will not be included in the computation of Net Sales hereunder except to the extent the Aminoglycoside Product is used in a commercial business (e.g. in a clinic).

Patents ” will include (a) all U.S. patents and patent applications, (b) any substitutions, divisions, continuations, continuations-in-part, reissues, renewals, registrations, confirmations, re-examinations, extensions, supplementary protection certificates and the like, and any other patents and patent applications claiming priority to any of the foregoing and (c) any foreign or international equivalent of any of the foregoing.

Program Compound ” means an aminoglycoside or aminoglycoside analog compound that is (a) an Isis Identified Compound [***] or (b) a Derivative Compound.

Regulatory Approval ” means (a) in the United States, approval by the Food and Drug Administration of an NDA, or similar application for marketing approval, and (b) in a Major Market other than the United States, approval by the applicable regulatory authority having jurisdiction over such country of a single application or set of applications comparable to an NDA. In the event that the first Regulatory Approval for a given Aminoglycoside Product is obtained in a jurisdiction where a governmental authority establishes pricing and reimbursement levels, Regulatory Approval with respect to such Aminoglycoside Product shall not be deemed to have been obtained until pricing and reimbursement approval for such Aminoglycoside Product in such jurisdiction has been obtained. Except as provided in the previous sentence, in

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

A-4


jurisdictions where the applicable regulatory authority sets the pricing authorizations necessary for an Aminoglycoside Product, Regulatory Approval will be deemed to have occurred even if the final approval to market and sell the Aminoglycoside Product is being withheld because Achaogen (or its Affiliates or sublicensee) and the regulatory authority have not yet determined pricing so long as all other approvals, licenses, registrations or authorizations necessary for marketing, sale, and/or use of such Aminoglycoside Product in such jurisdiction have been obtained.

Sublicense ” means a sublicense from Achaogen to a third party under the Aminoglycoside Program Patents for the continued development and/or commercialization of an Aminoglycoside Product.

Sublicensee ” means a third party that develops, manufactures and/or sells an Aminoglycoside Product, with respect to Aminoglycoside Products made and/or sold pursuant to a Sublicense hereunder. For purposes clarity, it is understood that “Sublicensee” shall also include distributors, provided such distributors are responsible for the marketing and promotion of such an Aminoglycoside Product in their respective territories. It is understood that the term “Sublicensee” shall have the foregoing meaning wherever used in this Agreement, whether or not such term is capitalized.

Sublicense Revenue ” means any Payment (defined below) that Achaogen receives from a sublicensee in consideration for a Sublicense, including, but not limited to, license fees, milestone payments, and license maintenance fees, but excluding: (a) royalty payments on the sale of Aminoglycoside Products, (b) payments made in consideration of equity or convertible debt securities of Achaogen at fair market value (but including any premium over fair market value that is paid for such equity or debt securities), (c) payments specifically committed to reimburse Achaogen for the cost of research and development (charged at Achaogen’s fully-burdened costs) incurred after the effective date of the applicable Sublicense, (d) payments specifically committed to reimburse Achaogen for the direct out-of-pocket cost of patent prosecution and maintenance incurred after the effective date of the applicable Sublicense, (e) bona fide, interest bearing non-convertible loans (unless and until such loans are forgiven or repaid at a discounted rate), payments to reimburse Achaogen’s costs for products or materials and (f) any applicable withholding taxes and any other amounts actually withheld against the amounts actually received by Achaogen or its Affiliates unless or until Achaogen or its Affiliates recoup such taxes and charges. For purposes of calculating Sublicense Revenue, a series of Sublicenses to the same sublicensee or related sublicensees will be aggregated to constitute a single Sublicense. As used in this definition, “Payment” shall mean a payment that Achaogen receives in cash, or in the form of debt or equity of the sublicensee. If Achaogen receives such a Payment in the form of debt or equity of the sublicensee, the portion of such payment due to Isis under Section 4.2 shall be paid in kind (i.e., [***] of such debt or equity will be transferred to Isis); provided that [***]).

Valid Claim ” means a claim of an issued and unexpired Patent, or a claim of a pending Patent application which has not been held unpatentable, invalid or unenforceable by a court or other government agency of competent jurisdiction and has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise; provided , however , that if the holding of such court or agency is later reversed by a court or agency with overriding

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

A-5


authority, the claim shall be reinstated as a Valid Claim with respect to Net Sales made after the date of such reversal. Notwithstanding the foregoing, if a claim of a pending Patent application within the Aminoglycoside Program Patents has not issued as a claim of an issued Patent within the Aminoglycoside Program Patents, within [***] years after the filing date from which such claim takes priority, such pending claim shall not be a Valid Claim for purposes of this Agreement until such claim issues as a claim of an issued Patent, after which it shall be a Valid Claim to the extent described above.

Venture Capital Financing ” means any sale or issuance by Achaogen of its equity securities to investors for capital raising purposes with total cash proceeds received by Achaogen of not less than $[***] under this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

A-6


APPENDIX 2

AMINOGLYCOSIDE PROGRAM PATENTS

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


EXHIBIT 4.1

FORM OF STOCK ISSUANCE AGREEMENT

 

 

D-2


EXHIBIT 4.2

Following is an example of the application of credits under Section 4.2.

Assume Achaogen develops the first Aminoglycoside Product through [***] on its own, and pays to Isis the $1M IND milestone and the $2M Initiation of Phase II Clinical Trial milestone under Section 4.3. Achaogen subsequently enters into a partnering agreement and receives Sublicense Revenue of $25M with respect to such Aminoglycoside Product. The net amount payable to Isis with respect to such $25M Sublicense Revenue would equal $[***] (i.e., [***] of such Sublicense Revenue, or $[***], less a combined credit of $3M for the IND milestone and the Initiation of Phase II milestone previously paid). Following receipt of such Sublicense Revenue, the Sublicensee initiates the first Phase III Clinical Trial for such Aminoglycoside Product; upon Initiation of such Phase III Clinical Trial, Achaogen would owe Isis an additional $[***] under Section 4.3 (i.e., the $4M Initiation of Phase III milestone under Section 4.3, less a credit equal to the $[***] Sublicense Revenue payment described above).

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

D-3

Exhibit 10.5B

January 25, 2006

Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, CA 92008

Attn: B. Lynne Parshall

 

  re: U.S. Patent Application [***]

Dear Ms. Parshall:

Isis Pharmaceuticals, Inc. (“Isis”) and Achaogen, Inc. (“Achaogen”) are parties to a certain License Agreement of even date herewith (the “Agreement”) under which Isis has licensed to Achaogen certain intellectual property relating to aminoglycosides and aminoglycoside analogs, including without limitation U.S Patent Application [***] (the “Application”), all as further specified in the Agreement.

The purpose of this letter (the “Letter”) is to set forth the understanding of the parties with respect to the prosecution of the Application. Isis and Achaogen agree that (i) following the execution of the Agreement, Achaogen will have the right to prosecute and maintain the Application, (ii) as part of such prosecution, Achaogen may, on advice of counsel, decide to withdraw and/or abandon the Application, in which case the Application [***], and (iii) Isis shall not (and shall not authorize any affiliate or third party to) [***] of the Agreement.

Notwithstanding Section 11.6 of the Agreement, this Letter, together with the Agreement, constitutes the entire agreement with respect to the subject matter hereof, and supersedes all prior or contemporaneous understanding or agreements, whether written or oral, between Isis and Achaogen with respect to the Application.

It is understood that each party is entering into the Agreement in reliance on the agreements and undertakings in this Letter. Please sign below to indicate your agreement with the terms set forth above and return this letter to me. A duplicate original is enclosed for your records. If you have any questions or comments, please do not hesitate to contact me at [***] or by e-mail at [***]. Thank you.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


Sincerely,

/s/ John F. Hollway

John F. Hollway
Vice President, Business Development
Agreed and accepted:
Isis Pharmaceuticals, Inc.

 

/s/ B. Lynne Parshall

B. Lynne Parshall
Title: Executive Vice President and CFO
Date:                     

Exhibit 10.6

D EVELOPMENT S ERVICES A GREEMENT

BETWEEN

A CHAOGEN I NC .

AND

ARK D IAGNOSTICS , I NC .

August 19, 2013

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


T ABLE OF C ONTENTS

 

1.    Definitions      2   
2.    Services to be Provided      7   
3.    Fees and Payments      11   
4.    Joint Development Committee      12   
5.    Proprietary Rights      13   
6.    Patent Prosecution and Defense      16   
7.    BARDA Requirements      18   
8.    Commercialization      19   
9.    Confidentiality      23   
10.    Representations, Warranties and Covenants      24   
11.    Testing of the Assays and Other Work Products      26   
12.    Indemnities      26   
13.    Limitation of Liability      27   
14.    Term and Termination of this Agreement      27   
15.    Notices      28   
16.    Miscellaneous      29   

 

E XHIBITS   

Exhibit A

   Statement of Work

Exhibit B

   U.S. Government Rights

Exhibit C

   Applicable Prime Contract Provisions

Exhibit D

   Animal Use Provisions
  
A TTACHMENT   

Attachment A

   Background IP

 

- i -


D EVELOPMENT S ERVICES A GREEMENT

This Development Services Agreement (this “ Agreement ”), effective as of August 19, 2013 (the “ Effective Date ”), is made by and between Achaogen Inc. (“ Achaogen ”), a corporation with offices at 7000 Shoreline Court, Suite 371, South San Francisco, California 94080, and ARK Diagnostics, Inc. (“ Ark ”), a corporation with offices at 48089 Fremont Boulevard, Fremont, California 94538 (each a “ Party ,” and collectively the “ Parties ”).

W HEREAS , Achaogen is a biopharmaceutical company focused on the discovery and development of new antibacterials for the treatment of multi-drug resistant (“ MDR ”) gram-negative bacterial infections;

W HEREAS , Achaogen’s lead compound, ACHN-490 or plazomicin, is a novel aminoglycoside antibiotic, and Phase 1 and 2 studies of plazomicin support its progression to Phase 3 clinical development;

W HEREAS , plazomicin, like other aminoglycosides, is cleared through the kidneys and dose adjustment may be required in patients with moderate or severe renal impairment;

W HEREAS , to facilitate plazomicin dose monitoring and adjustment, Achaogen wishes to develop an Assay (as defined herein);

W HEREAS , Achaogen receives Federal funding from BARDA in support of Achaogen’s discovery and development of new antibacterial for the treatment of MDR gram-negative bacterial infections pursuant to the Prime Contract (as defined herein)

W HEREAS , Ark is a diagnostics company focused on, among other things, homogenous enzyme immunoassays for therapeutic drug monitoring; and

W HEREAS , Achaogen and Ark have previously entered into a Material Transfer Agreement (as defined herein) pursuant to which Achaogen provided selected materials to Ark and Ark began selected Assay preparatory work;

W HEREAS , Achaogen wishes to retain Ark (in part as a subcontractor under the Prime Contract) to further develop the Assay and to provide clinical supply of Assays for the Trial (as defined herein).

N OW , T HEREFORE , in consideration of the mutual promises contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows.


1. Definitions

(a) “ Achaogen ” means Achaogen Inc., as identified in the opening paragraph of this Agreement.

(b) “ Achaogen Background IP ” means all Background IP owned or controlled by Achaogen, including, but not limited to, all such Background IP identified on Attachment A hereof, all Intellectual Property [***], and all Intellectual Property [***].

(c) “ Achaogen Improvements ” means all Foreground IP which constitutes any improvements or modifications to Achaogen Background IP.

(d) “ Achaogen Materials ” means all Specifications, and all other technology, processes, equipment, software, documentation and other materials provided to Ark by or on behalf of Achaogen under this Agreement, including any Antibodies provided to Ark by Achaogen.

(e) “ Antibody ” means any antibody [***] under this Agreement or the Material Transfer Agreement which [***], including but not limited to[***].

(f) “ Applicable Laws ” means all applicable federal, state, and local laws, statutes, ordinances, rules, and regulations, and any applicable orders, injunctions, or decrees of any court, administrative agency, or similar authority, and the rules and regulations of the FDA or any other regulatory authority in any jurisdiction in the world having jurisdiction over the development, manufacture or supply of the Assay, including without limitation the U.S. Federal Food, Drug, and Cosmetic Act, as amended from time to time (21 U.S.C. § 301 et seq.), all requirements related to the methods used in, and the facilities and controls for, developing, manufacturing, testing, packaging, labeling, storing, shipping and distributing drugs, as addressed in the FDA’s Quality System Regulation (21 CFR Part 820), and all requirements pertaining to the lawful marketing of the Assay.

(g) “ Ark ” means ARK Diagnostics, Inc., as identified in the opening paragraph of this Agreement.

(h) “ Ark Background IP ” means all Background IP owned or controlled by Ark, including but not limited to all such Background IP identified on Attachment A hereof and [***].

(i) “ Ark Improvements ” means all Foreground IP which constitutes any improvements or modifications to Ark Background IP, specifically excluding all Antibodies and the Assay.

(j) “ Ark Materials ” means all technology, processes, equipment, software, documentation and other materials provided to Achaogen by or on behalf of Ark under this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 2 -


(k) “ Assay ” means a homogenous therapeutic drug monitoring immunoassay developed under this Agreement in accordance with the Specifications, including calibrators and controls, for the quantitative measurement of plazomicin in serum or plasma.

(l) “ Assay Components ” means proprietary components of the Assay sufficient to allow a Third Party manufacturer to package, label and finish (collectively, “ Finish ”) into the Assay using commercially available reagents and materials.

(m) “ Background IP ” means all Intellectual Property (i) developed or owned by a Party prior to the Effective Date, or (ii) developed or owned by a Party after the Effective Date but not developed (x) in the course of performing under this Agreement, or (y) directly or indirectly based on any work with or information received from the other Party.

(n) “ BARDA ” means the Biomedical Advanced Research and Development Authority within the Office of the Assistant Secretary for Preparedness and Response in the U.S. Department of Health and Human Services.

(o) “[ ***] Antibody ” means that certain antibody which [***].

(p) “ Claims ” has the meaning set forth in Section 12(a) of this Agreement.

(q) “ Commercialization Agreement ” means the agreement governing the commercial sale and marketing of Assays by the Parties, and/or the supply of Assays or Assay Components by Ark, to be negotiated between the Parties in accordance with Section 8(a) of this Agreement.

(r) “ Compound ” means Achaogen’s lead compound, ACHN-490, also known as plazomicin.

(s) “ Confidential Information ” means any information or material disclosed by either Party to the other Party, directly or indirectly, in writing, orally, visually or by inspection of tangible objects, including, without limitation, any and all information relating to such Party’s or its business partners’ research, development, know-how, products, product plans, services, customers, customer lists, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, marketing, finances, or other business information or trade secrets, that is designated as “confidential”, “proprietary” or the like, or that should reasonably be understood to be confidential or proprietary based on the nature of such information or the circumstances of its disclosure. For purposes of this Agreement, the terms of this Agreement shall be deemed to be Confidential Information of both Parties. All [***] shall be deemed to be Confidential Information of Achaogen. [***] shall be deemed Confidential Information of Ark.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 3 -


(t) “ Effective Date ” has the meaning set forth in the opening paragraph of this Agreement.

(u) “ European Union ” means all member states of the European Union as may be updated from time to time.

(v) “ FDA ” means the U.S. Food and Drug Administration.

(w) “ Finish ” or “ Finishing ” has the meaning set forth in Section 1 (l) of this Agreement.

(x) “ Foreground IP ” means any Intellectual Property that is conceived, reduced to practice, discovered, developed or otherwise made by or on behalf of a Party after the Effective Date (i) [***], or (ii) [***].

(y) “ IDE Approval ” means approval of the Assay by the FDA of an Investigational Device Exemption.

(z) “ Indemnitee ” has the meaning set forth in Section 12(c) of this Agreement.

(aa) “ Intellectual Property ” means all new or improved apparatuses, designs, processes, formulae, information, products, inventions, discoveries, ideas, suggestions, materials, data, equipment, designs, drawings, prototypes, molds, masks, tooling, reports, computer software, documentation, proprietary information and other intellectual property and know-how.

(bb) “ Intellectual Property Rights ” means all patent, trade secret, copyright, know-how and other proprietary rights with respect to any present or future Intellectual Property that may be secured in any place under laws now or hereafter in effect.

(cc) “ Interim Supply Date ” has the meaning set forth in Section 8(c)(1) of this Agreement.

(dd) “ Interim Supply Period ” has the meaning set forth in Section 8(c)(1) of this Agreement.

(ee) “ Joint Development Committee ” has the meaning set forth in Article 4 of this Agreement.

(ff) “ Joint Patents ” has the meaning set forth in Section 6(c)(1) of this Agreement.

(gg) “ Losses ” has the meaning set forth in Section 12(a) of this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 4 -


(hh) “ Marketing Registrations ” means any Registration Applications and other regulatory filings and approvals necessary for marketing the Assay.

(ii) “ Material Transfer Agreement ” means that certain Material Transfer Agreement by and between Ark and Achaogen as of October 24, 2012.

(jj) “ MDR ” has the meaning set forth in the first W HEREAS clause of this Agreement.

(kk) “ NDA ” means a new drug application filed with the FDA as more fully defined in U.S. 21 C.F.R. §314.50 et. seq. or any similar application or submission filed with or submitted to any Regulatory Authority outside of the U.S. to obtain permission to commence marketing and sales of the Compound.

(ll) “ Nondisclosure Agreement ” means that certain Mutual Nondisclosure Agreement by and between Ark and Achaogen as of July 24, 2012.

(mm) “ Party ” or “ Parties ” has the meaning set forth in the opening paragraph of this Agreement.

(nn) “ Patents ” means any U.S. provisional or nonprovisional patent application, including any continuations, divisionals, and continuations-in-part, and any substitute patents, any reissues or re-examinations of any such applications, as well as any foreign equivalent of any of the foregoing or Patent Cooperation Treaty (“PCT”) filings, and any patents issuing from any of the foregoing, and any renewal or extension of the term of any such patent.

(oo) “ Patent Expenses ” means all [***]costs for patent filing, prosecution, and maintenance of [***] that are incurred pursuant to this Agreement. [***].

(pp) “ Prime Contract ” means Contract No. HHSO 100201000046C between Achaogen and BARDA (as modified).

(qq) “ Registration Application ” means any filing(s) made with the Regulatory Authority in any country in the Territory for regulatory approval or clearance (including pricing approval when applicable) necessary to commence marketing and sale of the Assay in such country.

(rr) “ Regulatory Authority ” means the FDA or the authority(ies) in each country in the world that are comparable to the FDA and have responsibility for granting regulatory approval or clearance for the manufacture, use and sale of medical products, including the Assay in such country, including but not limited to pricing and reimbursement approvals.

(ss) “ Resolution Officers ” has the meaning set forth in Section 4(c) of this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 5 -


(tt) “ ROW Marketing Registrations ” has the meaning set forth in Section 2(c)(2)(iv) of this Agreement.

(uu) “ Services ” has the meaning set forth in Section 2(a)(1) of this Agreement.

(vv) “ Selected Antibody ” means any [***].

(ww) “ Side Letter ” has the meaning set forth in Section 8(d)(1) of this Agreement.

(xx) “ Specifications ” has the meaning set forth in Section 2(a)(1) of this Agreement.

(yy) “ Statement of Work ” or “ SOW ” has the meaning set forth in Section 2(a)(1) of this Agreement.

(zz) “ Technology Transfer and License Agreement ” has the meaning set forth in Section 8(d)(1) of this Agreement.

(aaa) “ Term ” has the meaning set forth in Section 14(a) of this Agreement.

(bbb) “ Third Party ” means any individual, corporation, partnership, company or similar entity who or which is neither a Party nor an Affiliate of a Party.

(ccc) “ Third Party Material ” has the meaning set forth in Section 5(g) of this Agreement.

(ddd) “ Third Party Supplier ” has the meaning set forth in Section 8(d)(1) of this Agreement.

(eee) “ Trial ” means Achaogen’s global Phase 3 clinical trial program for the Compound, including a randomized Phase 3 study and an open-label safety study.

(fff) “ Trial Registrations ” means any Registration Applications and other regulatory filings and approvals necessary for clinical use of the Assay in the Trial.

(ggg) “ United States ” means the United States of America and its possessions and territories.

(hhh) “ US/EU Marketing Registrations ” has the meaning set forth in 2(c)(2)(i)

(iii) “ Verification ” means a determination that [***].

(jjj) “ Work Products ” means all documentation, works of authorship, and data generated as part of the Agreement, including clinical data, and all other work

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 6 -


products created or made by or on behalf of Ark pursuant to this Agreement as provided in the applicable SOW, but not including [***].

2. Services to be Provided

(a) General

(1) Ark shall provide services to support the development and regulatory approval of the Assay, based on designs and specifications developed in collaboration by the Parties (collectively, the “ Specifications ”), pursuant to this Agreement and each Statement of Work attached hereto as Exhibit A as agreed from time to time by the Parties (each, a “ Statement of Work ” or “ SOW ”). The term “ Services ” refers to all work performed by Ark pursuant to this Agreement, each Statement of Work and the Material Transfer Agreement, including, without limitation, the design, development and delivery of all Work Products and the Assay.

(2) In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of any Statement of Work or any other documentation exchanged between the Parties, the terms and conditions of this Agreement shall prevail.

(3) Notwithstanding any provision of this Agreement to the contrary, it is understood that (i) neither Party guarantees that the development of the Assay will be successful or the Assay will be approved by any Regulatory Authority for use in the Trial or for commercial sale in any territory, and (ii) there are uncertainties and potentially technical challenges beyond the control of the Parties in the development of the Assay that could adversely affect the successful and/or timely completion of the Assay according to the Specifications, which could require good faith discussions between the Parties to revise the Specification, Statement of Work, and/or terms of this Agreement.

(b) Development and Clinical Supply Services

(1) Ark shall develop the Assay according to the Specifications. Ark shall be responsible for [***], including [***]. Ark shall perform analytical Verification studies of the Assay to support IDE Approval, and shall timely provide all necessary information and materials and provide other cooperation reasonably required for the IDE preparation, submission, and Approval, including without limitation, those responsibilities allocated to Ark as set forth in the SOW. Achaogen shall timely provide all necessary information and materials and provide other cooperation reasonably required for the development and analytical Verification studies of the Assay.

(2)Ark shall manufacture and supply to Achaogen the Assay in sufficient quantities but in no event exceed [***] for use by Achaogen in the Trial in accordance with the Statement of Work, and according to a schedule agreed upon with

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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Achaogen based on projected shelf life of kits and length of Trial. In the event that more than [***] are required for the Trial, Ark and Achaogen will [***].

(3) The rights and obligations of the Parties with respect to any Antibodies owned or controlled by Achaogen and provided by Achaogen to Ark in connection with Assay development, validation, manufacture or supply shall be governed by the terms and conditions of the Material Transfer Agreement, except as expressly otherwise provided herein.

(4) ARK shall provide additional services to support Achaogen’s conduct of the Trial as defined in the SOW, including but not limited to training personnel at a Contract Research Organization designated by Achaogen on how to train clinical laboratory site(s) in performance of the Assay, and providing ongoing support to clinical laboratory sites in operation of the assay, including troubleshooting for out-of-specification assay results. ARK will also perform specimen testing and primary analysis for the method comparison between the ARK immunoassay and the reference method in support of market registrations. ARK will provide the aforementioned support at ARK’s facility in Fremont, CA or by teleconference and/or electronically.

(c) Regulatory Services . The Parties shall consult and collaborate on the most effective and expeditious plan for obtaining regulatory clearance for investigational use and commercial marketing of the Assay.

(1) Trial Registrations

(i) Ark and Achaogen shall be responsible for formulating regulatory strategy, preparing, filing and obtaining IDE Approval, with Achaogen being the lead party and formal holder of the IDE.

(ii) ARK is responsible for preparing and providing all technical and manufacturing information required for IDE approval

(iii) Achaogen is responsible for preparing and providing all information related to the investigational plan for IDE approval

(iv) Achaogen is responsible for compiling and submitting the IDE applications, and scheduling and managing meetings and teleconferences with the FDA.

(v) Ark shall be included in all meetings with the FDA and in all scheduled teleconferences with the FDA and, to the extent practicable, unscheduled teleconferences with the FDA.

(vi) Except as provided in Section 2(c)(1)(i), and unless otherwise expressly agreed by the Parties under any SOW, Achaogen shall be responsible for formulating regulatory strategy, preparing, filing and obtaining all Trial Registrations necessary for use of the Assay in the Trial throughout the world with Ark’s support and

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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involvement as reasonably required or as otherwise agreed by the Parties from time to time.

(vii) Achaogen shall own all Trial Registrations (including IDE Approval). Any expenses [***].

(2) Marketing Registrations

(i) In the event Ark will be commercializing the Assay in the US and EU, Ark shall be responsible for formulating regulatory strategy, preparing, filing and obtaining all Marketing Registrations necessary for marketing the Assay in the United States and European Union, with Achaogen’s active support and involvement as reasonably required or as otherwise agreed by the Parties from time to time. Ark shall own all such Marketing Registrations for the Assay in the United States and European Union (collectively, the “ US/EU Marketing Registrations ”), and shall be responsible for and conduct all interactions with such United States and European Union Regulatory Authorities involving such US/EU Marketing Registrations. Ark shall [***]. Achaogen shall be included in all meetings with the US and EU regulatory authorities and in all planned teleconferences. To the extent possible, Achaogen will be included in impromptu teleconferences with US and EU regulatory authorities.

(ii) In the event Achaogen will be commercializing the Assay in the US and EU, and Ark remains the manufacturer/supplier of the Assay, Achaogen shall be responsible for formulating regulatory strategy, preparing, filing and obtaining all Marketing Registrations necessary for marketing the Assay in the United States and European Union, with Ark’s support and involvement as reasonably required or as otherwise agreed by the Parties from time to time. Achaogen shall own all such Marketing Registrations for the Assay in the United States and European Union (collectively, the “ US/EU Marketing Registrations ”), and shall be responsible for and conduct all interactions with such United States and European Union Regulatory Authorities involving such US/EU Marketing Registrations. Achaogen shall [***]. Ark shall be included in all meetings with the US and EU regulatory authorities and in all planned teleconferences. To the extent possible, Ark will be included in impromptu teleconferences with US and EU regulatory authorities.

(iii)In the event Achaogen will be commercializing the Assay in the US and EU, and Ark will remain the manufacturer/supplier of the Assay, Ark shall be responsible for ensuring that all applicable manufacturing regulations are met, including but not limited to the manufacture of the Assay under FDA current Good Manufacturing Practices and maintenance of Ark’s certification under ISO 13485. Ark shall support Achaogen’s ongoing maintenance of the Market Registrations (e.g., the filing of annual reports or audits by regulatory agencies), including but not limited to the provision of materials and information, as reasonably required or as otherwise agreed by the Parties from time to time. In this case, Ark will work with Achaogen to ensure the Assay manufacturing conforms to Achaogen’s Quality System for ensuring compliance with Quality System Regulations.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(iv) Achaogen shall be responsible for formulating regulatory strategy, preparing, filing and obtaining all Marketing Registrations necessary for marketing the Assay in all jurisdictions and territories in the world other than the United States and the European Union, with Ark’s support and involvement as reasonably required or as otherwise agreed by the Parties from time to time. For clarity, Ark shall not be responsible for conducting any additional studies for obtaining any ROW Marketing Registrations, provided that, [***], Ark will provide reasonable cooperation to Achaogen and its designees in performing any such additional studies required for obtaining ROW Marketing Registrations, as well as supporting Achaogen’s ongoing maintenance of the ROW Market Registrations (e.g., the filing of periodic reports or audits by regulatory agencies). Achaogen shall own all such Marketing Registrations for the Assay (collectively, the “ ROW Marketing Registrations ”), and shall be responsible for and conduct all interactions with Regulatory Authorities involving such ROW Marketing Registrations. Achaogen shall [***].

(3) License to Registrations . Ark hereby grants to Achaogen a nonexclusive, sublicensable and transferable license under any US/EU Marketing Registrations and data required for any ROW Marketing Registrations for the purpose of (i) applying for and obtaining ROW Marketing Registrations and (ii) Finishing and commercializing the Assay in all jurisdictions and territories in the world (excluding United States and the European Union in the event Ark has exercised its right to commercialize the Assay in the United States and European Union pursuant to the Commercialization Agreement). Achaogen hereby grants to Ark a nonexclusive, sublicensable and transferable license under any ROW Marketing Registrations and data required for any US/EU Marketing Registrations for the purpose of (i) applying for and obtaining US/EU Marketing Registrations and (ii) Finishing and commercializing the Assay in United States and European Union in the event Ark has exercised its right to commercialize the Assay in the United States and European Union pursuant to the Commercialization Agreement.

(d) Delivery of Work Products and Assays . Ark shall prepare the Work Products and the Assays identified in each Statement of Work, and shall provide to Achaogen the Work Products and the Assays in accordance with the schedule for performance and delivery set forth in the applicable Statement of Work. During the course of performing the Services, Ark shall consult with Achaogen as requested by Achaogen, and shall address feedback received from Achaogen relating to each project.

(e) Conformance with Specifications . If Achaogen reasonably determines that the Assay or any Work Products do not materially conform to the applicable Specifications or other requirements set forth in a Statement of Work, Ark promptly shall, subject to Section 2(a)(3), correct the nonconformance to Achaogen’s reasonable satisfaction, at no cost to Achaogen. In the event Achaogen requests any change to the Specification or other requirement for the Assay, Ark agrees to use commercially reasonable efforts to accept such request to the extent reasonable and practicable, provided that in no event shall Ark be obligated to incur any additional costs and expenses required for implementing any such change.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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3. Fees and Payments . The following payments shall be made for the Services:

(a) Prepaid Fee . Ark acknowledges that on [***], Achaogen paid to Ark a fee of [***] Dollars ($[***]) in [***], which amount is nonrefundable and noncreditable.

(b) Development and Regulatory Milestones

(1) Achaogen shall pay to Ark nonrefundable, noncreditable milestone payments in consideration for the achievement of the following one-time development and regulatory milestone events for the Assay:

 

No.

  

Event

  

Payment

[***]      

 

* For clarity, the determination as to whether milestones [***] shall be paid [***] as mutually agreed by the Parties. Also, for clarity, [***].

(2) Achaogen shall pay all milestone payments due to Ark under Section 3(b)(1) within [***] days of receiving notice of the occurrence of such milestone, except that the Parties acknowledge and agree that [***] has been achieved prior to the execution of this Agreement and the corresponding milestone payment in the amount of $[***] shall be payable upon execution of this Agreement.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(c) Complete Compensation; Currency . Without limiting Achaogen’s payment obligation under Section 14(d), the payments required by Sections 3(a) and 3(b) shall constitute [***]. All amounts payable under this Agreement shall be invoiced to and paid by Achaogen in U.S. dollars.

(d) Books and Records; Audit . Ark shall maintain complete and accurate records relating to its performance under this Agreement. Ark shall retain such records for the longer of [***] years after the termination or expiration of this Agreement or the period of time required by Applicable Laws and shall make such records available to Achaogen or its representative upon request during the record-keeping period set forth herein. Ark shall cooperate in any audit of such records that Achaogen or its representative may undertake, at no additional cost to Achaogen; provided, however, that Achaogen shall be responsible for any expenses directly incurred by Achaogen or its representative in connection with the audit.

4. Joint Development Committee . Within thirty (30) days from the Effective Date, the Parties shall establish a joint development committee (the “ Joint Development Committee ”) to coordinate and oversee the development of the Assay in the Territory.

(a) Composition of the Joint Development Committee . The Joint Development Committee is, and at all times during the Term shall be, comprised of [***] representatives from each Party, each of whom has relevant experience and skill appropriate for service on the Joint Development Committee, such as heads of clinical development and manufacturing. The Parties may establish and later change the number of representatives that each Party has on the Joint Development Committee, as long as [***] voting representatives from [***] is maintained (unless a Party desires to have fewer representatives). Each Party may change any of its representatives on the Joint Development Committee at any time upon notice to the other Party.

(b) Activities of the Joint Development Committee . The Joint Development Committee shall be responsible for establishing and approving plans and activates relating to development of the Assay, evaluating Ark’s progress under such plans, discussing any changes to such plans, and determining the successful completion of milestone events associated with the development of the Assay. The Joint Development Committee may also provide a forum for discussion of [***]. For clarity, the Joint Development Committee shall not have the authority to amend any terms or conditions of this Agreement or any SOW.

(c) Decisions of the Joint Development Committee . It is understood that Achaogen shall have final authority to approve the Specifications or any modifications thereto, in each case which are initially proposed by Ark. For any other matter within the jurisdiction of the Joint Development Committee as to which the Joint Development Committee cannot reach a decision, such matter under dispute shall first be referred to the Vice-President of Corporate Development of Achaogen and the president or chief executive officer of Ark (together, the “ Resolution Officers ”), for attempted resolution by good faith negotiations within [***] of notice thereof. Except as otherwise

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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provided in this Agreement, any dispute, other than one for which Achaogen has final decision-making authority, that cannot be resolved by the Resolution Officers may be resolved pursuant to Section 16(c).

(d) Meetings of the Joint Development Committee . The Joint Development Committee shall hold its first meeting within [***] after the Effective Date and shall meet thereafter on a schedule and at locations mutually determined by the Parties. Ad hoc meetings of the Joint Development Committee may be called by either Party upon reasonable advance notice to the other. Subject to the Parties’ mutual agreement, regular and ad hoc meetings may be face-to-face or by teleconference or videoconference.

(e) Joint Development Committee Expenses . Each Party shall bear the expense of the participation of its representatives on the Joint Development Committee and in Joint Development Committee meetings.

5. Proprietary Rights

(a) Background IP

(1) All right, title and interest, including all Intellectual Property Rights, in and to all Achaogen Background IP and all Achaogen Materials shall be and remain the exclusive property of Achaogen.

(2) All right, title and interest, including all Intellectual Property Rights, in and to all Ark Background IP and all Ark Materials shall be and remain the exclusive property of Ark.

(b) Improvements, Work Products, Antibodies and the Assay

(1) Achaogen shall have sole and exclusive ownership of all right, title and interest in all Achaogen Improvements, and any and all Intellectual Property Rights with respect thereto, regardless of whether such Achaogen Improvements were conceived, reduced to practice, discovered, developed or otherwise generated by Ark, by Achaogen, or jointly by the Parties.

(2) As between the Parties, Achaogen shall have sole and exclusive ownership of all right, title and interest in all Antibodies developed or acquired by Ark in the course of providing Services, and any and all Intellectual Property Rights with respect thereto, regardless of whether such Antibodies were conceived, reduced to practice, discovered, developed or otherwise generated by or on behalf of Ark, by or on behalf of Achaogen, or jointly by or on behalf of the Parties.

(3) Ark shall have sole and exclusive ownership of all right, title and interest in all Ark Improvements, and any and all Intellectual Property Rights with respect thereto, regardless of whether such Ark Improvements were conceived,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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reduced to practice, discovered, developed or otherwise generated by Ark, by Achaogen, or jointly by the Parties.

(4) The Parties shall jointly own all right, title and interest in all [***], and any and all Intellectual Property Rights with respect thereto, regardless of whether such [***] was conceived, reduced to practice, discovered, developed or otherwise generated by Ark, by Achaogen, or jointly by the Parties. Ark shall disclose to Achaogen any subject inventions, as further described in Exhibits B and C, within [***] days of their conception or reduction to practice, so as to permit Achaogen to comply with its obligations under Article 7.

(5) Ark shall disclose all Achaogen Improvements and all Ark improvements to Achaogen, to the extent they are conceived, reduced to practice, discovered, identified or otherwise created in whole or in part by Ark, promptly and, in any event, within [***] of such conception or reduction to practice, so as to permit Achaogen to comply with its obligations under Article 7.

(c) Other Foreground IP

(1) All Foreground IP that is not otherwise owned as specifically provided in Section 5(b), and that is conceived, reduced to practice, discovered, developed or otherwise generated solely by employees or consultants of a Party, shall be owned by such Party.

(2) All Foreground IP that is not otherwise owned as specifically provided in Section 5(b), and that is conceived, reduced to practice, discovered, developed or otherwise generated by employees or consultants of both Parties, shall be owned jointly by the Parties.

(d) Assignment

(1) To the extent, if any, that [***] or any of its employees or others providing Services has rights in any [***], then, notwithstanding Section 5(b)(1) and Section 5(b)(2), [***] hereby irrevocably assigns to [***]) all right, title and interest in and to such [***], as applicable, including without limitation all Intellectual Property Rights therein. Upon the request of [***], [***] shall sign and deliver, and shall cause its personnel to sign and deliver, any assignments or other necessary documents and otherwise assist [***] to obtain, maintain, perfect or enforce any of [***] rights hereunder.

(2) To the extent, if any, that [***]or any of its employees has rights in any Ark Improvements, then, notwithstanding Section 5(b)(3), [***] hereby irrevocably assigns to [***] all right, title and interest in and to such [***], including without limitation all Intellectual Property Rights therein. Upon the request of [***], [***] shall sign and deliver, and shall cause its personnel to sign and deliver, any assignments or other necessary documents and otherwise assist Ark to obtain, maintain, perfect or enforce any of [***] rights hereunder.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(e) Licenses

(1) Achaogen hereby grants to Ark a nonexclusive, worldwide, royalty-free, nonsublicensable and nontransferable (except in connection with the assignment permitted under Section 16(g) license to use the Achaogen Materials to the limited extent necessary to perform the Services in accordance with the terms and conditions of this Agreement. Ark shall not have the right to use the Achaogen Materials for any other purpose, and shall return to Achaogen all Achaogen Materials following the earlier of completion of the Services or expiration or termination of this Agreement, or earlier at Achaogen’s request.

(2) Achaogen hereby grants to Ark a nonexclusive, worldwide, royalty-free, nonsublicensable and nontransferable (except in connection with the assignment permitted under Section 16(g)) license under the Achaogen Background IP, the Achaogen Improvements, Antibodies, and any other Foreground IP owned or controlled by Achaogen to the limited extent necessary to perform the Services in accordance with the terms and conditions of this Agreement.

(3) Ark hereby grants to Achaogen a nonexclusive, worldwide, royalty-free, irrevocable, perpetual, fully paid up, sublicensable and nontransferable (except in connection with the assignment permitted under Section 16(g)) license under the Ark Background IP, the Ark Materials and the Ark Improvements solely to the extent necessary to use the Assays and any Work Products for Achaogen’s (i) development of the Compound, and (ii) use of the Assay in the Trial.

(4) Ark hereby grants to Achaogen a nonexclusive, worldwide, royalty-free, irrevocable, perpetual, fully paid up, sublicensable and nontransferable (except in connection with the assignment permitted under Section 16(g)) license under any Foreground IP owned or controlled by Ark and which is not an Ark Improvement, solely to the extent necessary to use the Assays and any Work Products for Achaogen’s (i) development of the Compound, (ii) use of the Assay in the Trial, and (iii) development, manufacture, use or sale of any other assays which may be used in connection with the Compound.

(5) Any rights granted to Achaogen under this Agreement that are sublicensable pursuant to this Agreement, including any rights granted to Achaogen under this Article 5 and Article 6 shall also inure to the benefit of, and be enforceable by, any sublicensee of any rights granted to Achaogen under this Agreement, provided that such sublicensee agrees in writing to be bound by the applicable terms and conditions set forth herein.

(f) Reservation of Rights . Neither Party shall acquire, directly, indirectly or by estoppel or implication, any rights in or under any Intellectual Property or Intellectual Property Rights of the other Party except as expressly provided herein or in any other written agreement between the Parties.

 

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(g) Original Work . All Work Products shall be the original work of Ark and its employees or others providing Services, except for any portion of any Work Products that consist of material created by a Third Party and with respect to which Ark has advised Achaogen in writing of such material’s Third Party origin (“ Third Party Material ”). Ark shall not disclose to Achaogen or knowingly induce Achaogen to use any confidential, proprietary or trade secret information of any Third Party unless it has a sublicensable or assignable right to such Third Party information. Ark shall not knowingly incorporate any Third Party Material into any Work Product without obtaining Achaogen’s prior written approval. To the extent that Third Party Material is included or incorporated into any Work Products, Ark hereby grants to Achaogen a nonexclusive, worldwide, royalty-free, irrevocable, perpetual, fully paid up, sublicensable and nontransferable (except in connection with the assignment permitted under Section 16(g)) license under Ark’s rights in the Intellectual Property Rights in such Third Party Materials (i) to use the Assay and any Work Products for Achaogen’s development of the Compound and use of the Assay in the Trial; and (ii) to use, make, have made, offer for sale, sell and import the Assays and the Work Products in accordance with the terms and conditions of the Commercialization Agreement, if and when entered into.

(h) Covenant Not to Sue . Ark covenants that it shall not enforce its Intellectual Property Right against Achaogen or any of its designees for any proper exercise of any license of Intellectual Property Rights granted by Ark to Achaogen pursuant to this Agreement.

6. Patent Prosecution and Defense

(a) Achaogen IP . As between the Parties, Achaogen shall have the sole right, at its expense, for managing the filing, prosecution and maintenance of all Patents directed to [***] in accordance with Section 5(c)(1) of this Agreement.

(b) Ark IP . As between the Parties, Ark shall have the sole right, at its expense, for managing the filing, prosecution and maintenance of all Patents directed to [***] in accordance with Section 5(c)(1) of this Agreement.

(c) Jointly-Owned IP

(1) Achaogen shall be responsible for managing the filing, prosecution and maintenance of all Patents directed to any [***] in accordance with Section 5(c)(2) of this Agreement (collectively, the “ Joint Patents ”). Achaogen shall consult with Ark on a timely basis on all significant matters relating to the Joint Patents (including providing a copy of any patent application and any material correspondence with the applicable patent office reasonably in advance of its filing or submission) and consider in good faith Ark’s reasonable comments or suggestions with respect thereto. Achaogen shall not [***] without prior written notice to Ark, which notice shall be given sufficiently in advance of any statutory bar or other deadline that would cause such Joint Patents to be abandoned or otherwise lapse.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 16 -


(2) Achaogen shall, or shall instruct patent counsel to, promptly provide copies to Ark of all Joint Patents, as well as patents, patent documents and correspondence pertaining to the Joint Patents. Ark shall be allowed to review and provide comment thereon. Achaogen will consider any comments provided by Ark in good faith.

(3) Subject to Section 6(c)(4) below, Achaogen shall be responsible for [***] percent ([***]%) of the Patent Expenses, and Ark shall be responsible for [***] percent ([***]%) of the Patent Expenses. In the event Achaogen has paid a Patent Expense without receiving a prepayment from Ark of its proportionate share of such Patent Expense, Achaogen shall provide written notification to Ark of the nature, amount and date of payment of such Patent Expense, together with the receipt or other appropriate documentation, and subject to Section 6(c)(4) below, Ark shall reimburse Achaogen its share of the Patent Expenses within thirty (30) days of receipt of such notification.

(4) [***], shall determine the countries or jurisdictions where Joint Patents will be filed, prosecuted, and maintained. If, during the term of this Agreement, either Party [***] with respect to any Joint Patent in any country or jurisdiction, the other Party may pay all such expenses but thereafter, the paying Party shall have sole authority over licensing and patent prosecution of the Joint Patents in any such country or jurisdiction and the non-paying Party shall assign to the paying Party all of its right, title and interest in and to such Joint Patents in such country or jurisdiction.

(d) Patent Infringement and Defense

(1) In the event either Party learns of the actual or threatened infringement of a Joint Patent by a Third Party, the Party that learned of the infringement shall promptly notify the other Party in writing and will provide the other Party with all available evidence of such infringement. Achaogen, in cooperation with Ark, will have the first right, but not the obligation, to use commercially reasonable efforts to eliminate the infringement without litigation. If Achaogen does not within a reasonable period of time notify the infringer of the infringement, then Ark, after providing notice to Achaogen of its intent to do so, may use commercially reasonable efforts to eliminate the infringement without litigation.

(2) If the infringement has not ceased within [***] of the infringer being notified of the infringement, Achaogen and Ark shall confer regarding possible courses of action.

(3) Neither Party has an obligation under this Agreement to bring an infringement action; provided, however, that as between Achaogen and Ark, Achaogen shall have the first right to bring such an action. If Achaogen has not brought such an action within [***] after conferring with Ark as provided in Section 6(d)(2), then Ark shall have the right to bring such an action after providing notice to Achaogen of its intent to do so. Unless otherwise mutually agreed by the Parties in writing, (i) the Party

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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controlling the enforcement action shall [***], and (ii) any recovery resulting from a settlement or judgment on an infringement action will be first used to reimburse the controlling Party of the costs of litigation and the remainder of the recovery, if any, shall be divided between the controlling Party and non-controlling party on a [***] basis.

(4) In the event that a Third Party commences an action challenging any of the Joint Patents, Achaogen shall have the first right to defend such Joint Patents against such challenge. If Achaogen does not commence the defense against such challenge within [***] of Ark’s request to do so, then Ark shall have the right to defend such challenge after providing notice to Achaogen of its intent to do so; provided, however, that if Ark reasonably believes it must [***]. The controlling Party shall bear its own costs and expenses associated with any defense undertaken pursuant to this Section 6(d)(4).

(5) At the controlling Party’s request and expense, the non-controlling Party shall cooperate fully with the controlling Party in any action brought to enforce the Joint Patents against an infringer and in any defense of the Joint Patents against a challenge by a Third Party.

7. BARDA Requirements

(a) U.S. Government Rights . The rights and obligations of the Parties in Articles 5 and 6 of this Agreement are subject to the terms and conditions of Exhibit B, which are included herewith in compliance with Achaogen’s obligations to BARDA under the Prime Contract. In accordance with the terms of the Prime Contract, the language in Exhibit B has been reproduced verbatim from the Prime Contract except as otherwise instructed therein, including all defined terms and related conventions.

(b) Applicable Prime Contract Provisions . The rights and obligations of the Parties in this Agreement are subject to the Prime Contract terms and conditions listed in Exhibit C, which are included herewith in compliance with Achaogen’s obligations to BARDA under the Prime Contract.

(c) Animal Use Provisions . The rights and obligations of Ark in this Agreement are subject to the animal use provisions listed in Exhibit D, which are included herewith in compliance with Achaogen’s obligations to BARDA under the Prime Contract.

(d) Correspondence. Ark shall provide Achaogen and BARDA with electronic copies of all written materials submitted to any Regulatory Authority upon submission, and of all written correspondence sent to or received from any Regulatory Authority upon delivery. To the extent reasonably practicable, Ark shall share with Achaogen drafts of any written materials in advance of submitting such materials to a Regulatory Authority so as to allow for comment by Achaogen and/or BARDA.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(e) Meetings.  Ark may, from time to time, schedule meetings between Ark and a Regulatory Authority to discuss issues relevant to Ark’s performance of the Services hereunder. Ark shall notify Achaogen of the date and time of any such scheduled meeting as soon as possible, targeting within [***] within scheduling meeting. In addition, with respect to FDA meetings, Ark shall coordinate with FDA to enable at least [***] personnel total from Achaogen and BARDA to attend as observers.

8. Commercialization

(a) Terms . On or before October 31, 2013, the Parties shall commence good faith negotiations of a Commercialization Agreement consistent and in coordination with Achaogen’s plans for global commercialization of the Compound. The Commercialization Agreement shall include the following:

(1) Ark shall have the first right, but not the obligation, to commercialize (itself or through one or more designees) the Assay in the United States and European Union. Achaogen shall have the first right, but not the obligation, to commercialize (itself or through one or more designees) the Assay in any countries and territories other than the United States and European Union. If, for any reason, Ark elects not to exercise its right to commercialize the Assay in the United States and/or the European Union, Achaogen shall have the right to commercialize or appoint a distributor to commercialize the Assay in those territories;

(2) Subject to Section 8(a)(10), Ark shall have [***] right to manufacture and supply the Assay and Assay Components for commercialization. It is understood that with respect to any territory in which Ark does not commercialize the Assay (itself or through one or more designees), Ark will manufacture (or have manufactured) and supply either Assays or Assay Components which may be Finished by Achaogen or its designees (the provision of Assays or Assay Components to be determined in Ark’s reasonable discretion, unless otherwise outlined herein) such that Achaogen or its designees in the applicable territory may commercialize the Finished Assay in the applicable territory;

(3) A license under [***] solely to the extent necessary for [***] to commercially market and sell directly the Assay, or to sublicense the marketing and sale of the Assay, to a commercial partner, wherever the Compound is approved for such sale and marketing;

(4) A license under [***], solely to the extent necessary for Achaogen to develop, manufacture, use and sell any other assays which may be used in connection with the Compound;

(5) A provision that each Party and its sublicensees shall retain [***];

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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(6) Terms addressing Ark’s [***] Assays by reference to agreed-upon conditions, including the [***];

(7) Terms for the supply of Assays for sale by Achaogen or a co-promotion partner of Achaogen on [***], taking into consideration all relevant factors including without limitation, market size and volume of orders;

(8) Appropriate protections for continuity of supply, including [***];

(9) [***];

(10) In the event that (x) for specified reasons, including, but not limited to, [***], or (y) [***], Achaogen would have the limited right to elect to make or have made the Assays for sale in any jurisdiction in the world, and Ark would have the obligation to provide to Achaogen or its designated Third Party manufacturer [***];

(11) To mitigate the risk of supply interruption of Assays for any reason, commencing with commercialization activities involving the Assays, Ark would maintain and store, at its expense, a stockpile of Assays that the Parties agree is reasonably sufficient to supply the global market for a period equal to a conservative, good faith estimate of the time necessary to establish, qualify and start up a new, Third Party Assay manufacturing capacity. The extent of this stockpile would be reassessed by the Parties every [***], based on a [***]; and

(12) Necessary and appropriate terms for development and regulatory activities in jurisdictions where Regulatory Approvals for the Assay have not been received.

(b) Process for Entering Into Commercialization Agreement . If, by April 1, 2014, the Parties have been unable to agree on the terms and conditions of a Commercialization Agreement pursuant to Section 8(a), either Party may send the other Party a written notice that such Party wishes to appoint an expert panel made up of [***] to establish any unresolved terms for a Commercialization Agreement consistent with Section 8(a).

(1) In furtherance of this Subsection 8(b), each Party shall, within [ ***] of receipt of the notice seeking to establish such a panel, appoint [***] member of the panel who is not affiliated with either Party, and the [***] appointed members] shall, within [***] days of such notice, appoint the [***] member of the panel, who also shall [***]. Each appointed member shall also have demonstrated [***].

(2)Each appointed member shall enter into a written agreement providing for such member’s compensation, and binding such member to confidentiality and non-use provisions no less stringent than those contained in this Agreement. Each panel member shall be compensated at a rate to be agreed to by the Parties, and the fees and disbursements of the panel shall be [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 20 -


(3) The Parties may submit such materials and arguments to the panel at a hearing to be held within [***] days of the appointment of the [***] of the panel, and the panel shall render its judgment [***] days of such hearing. Such terms shall be [***] and shall be [***].

(4) The [***] decision of the panel shall be binding upon the Parties, and the Parties shall [***].

(c) Interim Supply Period

(1) If, by [***], 2016 (the “Interim Supply Date”), the Parties have been unable to agree on the terms and conditions of a Commercialization Agreement pursuant to Section 8(a), Ark shall supply the Assay or Assay Components to Achaogen and its designees at a price that [***], for a period of five (5) years after the date Achaogen receives approval of the NDA for the Compound (the “Interim Supply Period”). Ark to supply Assays instead of Assay Components in the US and EU for at least the first two (2) years of the five (5) year supply period.

(2) The Parties may extend the Interim Supply Period by mutual agreement in writing.

(3) As of the Interim Supply Date, if no Commercialization Agreement has been entered into, Ark hereby grants to Achaogen and its designees a nonexclusive, nontransferable (except in connection with the assignment permitted under Section 16(g)), royalty-free, fully paid up license under the Ark Background IP, Ark Improvements and any Foreground IP owned or controlled by Ark solely to the extent necessary for Achaogen or such designee to Finish and commercialize the Assay during the Interim Supply Period.

(4) As of the Interim Supply Date, if no Commercialization Agreement has been entered into, Achaogen hereby grants to Ark and its designees a nonexclusive, nontransferable (except in connection with the assignment permitted under Section 16(g)), royalty-free, fully paid up license under Achaogen Background IP, Achaogen Improvements, Antibodies, and any other Foreground IP owned or controlled by Achaogen solely to the extent necessary for Ark or its designee to manufacture and supply the Assay to Achaogen and its designees during the Interim Supply Period.

(5) It is understood that prior to or after the Interim Supply Date the Parties may negotiate additional terms and conditions for the supply of Assays and/or Assay Components during the Interim Supply Period, provided, however, that such additional terms and conditions shall be customary, commercially reasonable and otherwise consistent with the applicable terms and conditions of this Agreement, and further provided that Ark’s obligations to supply Assays and/or Assay Components in accordance with this Section 8(c)(5) shall take effect as of the Interim Supply Date regardless of whether the Parties agree to any such additional terms and conditions. Unless and until such other terms are negotiated, the applicable terms and conditions of

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 21 -


this Agreement shall continue to apply, to the extent practicable, including but not limited to the provisions of Articles 7, 9, 10, 12 and 14.

(6) During the Interim Supply Period, the Parties shall continue to use good faith efforts to negotiate and execute the Commercialization Agreement.

(d) Third Party Supplier

(1) If, by January 1, 2018, the Parties have been unable to agree on the terms and conditions of a Commercialization Agreement pursuant to Section 8(b), at Achaogen’s request, Ark, Achaogen and a Third Party manufacturer that is reasonably acceptable by Ark (a “ Third Party Supplier ”) shall negotiate and enter into a technology transfer and license agreement (the “ Technology Transfer and License Agreement ”) pursuant to which, subject to commercially reasonable terms and conditions, Ark grants such Third Party Supplier a nonexclusive, nontransferable license under Ark Background IP and Foreground IP owned by Ark hereunder and provide reasonable know-how transfer to such Third Party Supplier; in each case to the extent necessary and solely for the purpose of manufacturing and supplying the Assay to Achaogen for use or commercialization by Achaogen and its designees. With respect to the Parties’ choice of Third Party Supplier, [***], provided that such Third Party Supplier has agreed to the requirements of confidentiality and the restrictions contained in the license as provided in this Section 8(d).

(2) Such Third Party Supplier would enter into a supply agreement directly with Achaogen on such terms as the Third Party Supplier and Achaogen may agree.

(3) If the Parties and such Third Party Supplier cannot agree on the terms and conditions of the Technology Transfer and License Agreement prior to [***], then either Party may send the other Party a written notice that such Party wishes to appoint an expert panel as provided pursuant to Section 8(b). For purposes of this Section 8(d), all of the provisions of Section 8(b) shall apply under such circumstances, but references to Commercialization Agreement shall constitute references to such Technology Transfer and License Agreement and references to 8(a) shall constitute references to this Section 8(d).

(4) For the avoidance of doubt, the Third Party Supplier shall be bound by reasonable confidentiality obligations with respect to any information, materials and know-how provided by Ark pursuant to the Technology Transfer and License Agreement. Without limiting the foregoing, the Technology Transfer and License Agreement shall provide the right for Ark to [***]. Achaogen agrees to reasonably cooperate with Ark to [***].

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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9. Confidentiality

(a) Effectiveness of the Nondisclosure Agreement . The terms and conditions of the Nondisclosure Agreement are hereby superseded by this Agreement and all Confidential Information furnished by one Party to the other under the Nondisclosure Agreement prior to the Effective Date shall be deemed Confidential Information under this Agreement and subject to the terms and conditions of this Article  9 .

(b) Use of Confidential Information . Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, during the Term and for [***] years thereafter, the receiving Party shall keep, and shall ensure that its employees, officers and directors keep, completely confidential and shall not publish or otherwise disclose and shall not use for any purpose any Confidential Information of the other Party, except to the extent that it can be established by the receiving Party by competent proof that such Confidential Information: (i) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (iii) became generally available to the public or was otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; (iv) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or (v) was developed by the receiving Party independent of any disclosure received under this Agreement as shown by written records prepared by the receiving Party contemporaneously with such independent development.

(c) Authorized Disclosures . Each Party may disclose Confidential Information of the other Party to the extent such disclosure is reasonably necessary in the following instances: (i) is submitted by the recipient to governmental authorities to facilitate the issuance of Trial Registrations and/or Marketing Registrations for the Assay, provided that reasonable measures shall be taken to assure confidential treatment of such information; (ii) is provided by the recipient to Third Parties under confidentiality agreements having provisions at least as stringent as those in this Article 9, for consulting, manufacturing development, manufacturing, external testing, marketing trials, in each case to the extent necessary to perform its obligations or exercise its rights under this Agreement; (iii) to its actual or prospective investors or collaborators, or its accountants, attorneys and other professional advisors, in each case under confidentiality agreements having provisions at least as stringent as those in this Article 9; or (iv) is otherwise required to be disclosed in compliance with Applicable Laws (including any securities laws or rules of any recognized stock exchange) order by a court or other regulatory body having competent jurisdiction; provided that if a Party is required to make any such disclosure of the other Party’s Confidential Information such Party will give reasonable advance written notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its reasonable efforts in assisting the disclosing Party to secure confidential treatment of such Confidential Information required to be disclosed.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 23 -


(d) Limitations on Use . Each Party shall use any Confidential Information obtained by such Party from the other Party and its Affiliates pursuant to this Agreement or otherwise, solely in connection with the activities or transactions contemplated by this Agreement.

(e) Publication . Neither Party shall publish any manuscript, abstract, text or any other material containing any Work Product or Foreground IP without the other Party’s prior written approval, with such approval not to be unreasonably withheld.

(f) Injunctive Relief . Each Party acknowledges and agrees that its actual or threatened breach of this Article 9 would cause the other irreparable injury for which it may not have an adequate remedy at law. Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to seek an injunction, without the posting of any bond or other security, enjoining or restraining the other Party from any violation or threatened violation of this Article 9.

(g) Return or Destruction of Confidential Information . Upon the disclosing Party’s written request at any time or upon expiration or termination of this Agreement, the receiving Party shall:

(1) immediately cease use of use of Confidential Information of the disclosing Party as well as any information or materials that contain, incorporate or are derived from such Confidential Information; and

(2) return to the disclosing Party or shall destroy, at the disclosing Party’s discretion, any and all Confidential Information of the disclosing Party (including all copies and reproductions thereof), provided, however, that the receiving Party may retain one (1) copy of such Confidential Information solely for archival purposes. Notwithstanding the return or destruction of the Confidential Information, the receiving Party and its Representatives will continue to be bound by their obligations under the Agreement.

10. Representations, Warranties and Covenants

(a) Authority Relative to this Agreement . Each Party represents and warrants to the other Party, as of the Effective Date, that:

(1) such Party is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

(2) such Party is free to enter into this Agreement;

(3) in entering into this Agreement, such Party will not violate any other agreement to which it is a party; and

 

- 24 -


(4) such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement.

(b) Standard of Performance . Ark represents, warrants and covenants that it shall provide the Services in a good and workmanlike manner, in accordance with (i) applicable industry standards, (ii) the standards of care and diligence and the level of skill, knowledge and judgment customarily practiced by companies in the same industry in performing services of a similar nature, (iii) all quality control requirements that Achaogen provides to Ark at the time of this Agreement or as specified in any Statement of Work and (iv) all terms and conditions of this Agreement and each Statement of Work.

(c) Conformance with Specifications . Ark represents, warrants and covenants that the Work Products, including the Assay, shall conform to the applicable Specifications or other requirements set forth in a Statement of Work, and free of defects in material and workmanship.

(d) No Infringement of Third Party Rights . Ark represents, warrants and covenants that to its actual knowledge, its performance of the Services, and all Third Party Material and Ark Materials that Ark incorporates into any Work Products, and Achaogen’s use of any such Work Products, shall not infringe or misappropriate any Intellectual Property Rights of any Third Party or otherwise conflict with the rights of any Third Party. Achaogen represents, warrants and covenants that to its actual knowledge, the performance of the Services in accordance with the Specifications and the use of any Achaogen Materials in accordance with the terms and conditions of this Agreement shall not infringe or misappropriate any Intellectual Property Rights of any Third Party or otherwise conflict with the rights of any Third Party.

(e) Compliance With Applicable Laws

(1) The Parties represent, warrant and covenant that they shall perform all activities hereunder in accordance with, and shall develop, manufacture, supply and market all Assays in accordance with, the terms and conditions of this Agreement and all Applicable Laws.

(2) Ark shall obtain and maintain, at its expense, all licenses, permits and approvals necessary for it to provide the Services. Ark shall provide Achaogen with copies of any such licenses, permits and approvals upon request.

(f) Debarment . Each Party represents and warrants to the other Party that it has not used, and covenants that they shall not use, the services of any Person or entity in any capacity who has been debarred, disqualified, excluded, suspended, or is otherwise ineligible to: (i) participate in any federal health care program as provided under 42 U.S.C. § 1320a-7, or in any other federal payment or procurement program, or (ii) engage in activities subject to regulation by U.S. government (including the FDA) relating to any drug product. Each Party shall notify the other Party in writing if any Person or entity in any capacity connected with the development, manufacture, supply or

 

- 25 -


marketing of the Assay pursuant to this Agreement is or becomes debarred, disqualified, excluded, suspended, or is otherwise ineligible to participate in any federal health care program.

11. Testing of the Assays and Other Work Products . Except as otherwise provided herein or in an applicable Statement of Work, Achaogen acknowledges and agrees that Ark is not responsible for testing the Assays or the other Work Products provided by Ark or for ensuring that it is tested, manufactured, packaged, labeled (including adequate warnings and users manuals), sold, or used in a safe and careful manner.

12. Indemnities

(a) Indemnification by Ark . Ark shall defend, indemnify and hold harmless Achaogen, its affiliates, and its and their respective directors, officers, attorneys, agents, employees and assigns from and against all liabilities, losses, damages and expenses, including without limitation costs and reasonable attorneys’ fees (collectively, “ Losses ”) resulting from any claims, suits, demands or proceedings brought by any Third Party, including without limitation, Third Party claims for [***] (collectively, “ Claims ”) arising from (i) [***]; (ii) [***] acts or omissions of Ark or its employees or other Ark personnel in providing the Services; or (iii) Ark’s breach of any of its representations, warranties or obligations under this Agreement, including, without limitation, Ark’s failure to comply with all laws and regulations applicable to its provision of the Services, failure to obtain and maintain all licenses, permits and approvals necessary for it to provide the Services or otherwise required hereunder or failure to comply with the terms of Exhibit B; in each case, except to the extent any such Losses result from any Claim for which Achaogen is obligated to indemnify Ark pursuant to Section 12(b).

(b) Indemnification by Achaogen . Achaogen shall defend, indemnify and hold harmless Ark, its affiliates, and its and their respective directors, officers, attorneys, agents, employees and assigns from and against all Losses resulting from Claims arising from (i) [***]; (ii) [***]; or (iii) [***]; (iv) [***] acts or omissions of Achaogen or its employees or other Achaogen personnel in performing its activities under this Agreement; or (v) Achaogen’s breach of any of its representations, warranties or obligations under this Agreement; in each case, except to the extent any such Losses result from any Claim for which Ark is obligated to indemnify Achaogen pursuant to Section 12(a).

(c) Notice . In the event that any individual, corporation, partnership, company or similar entity (an “ Indemnitee ”) entitled to indemnification under Section 12(a) or 12(b), or under any other indemnity in this Agreement, is seeking such indemnification, such Indemnitee shall inform the indemnifying Party of the claim as soon as reasonably practicable after such Indemnitee receives notice of such claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the sole right to settle it at the sole discretion of the indemnifying Party,

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 26 -


provided that such settlement does not impose any obligation on the Indemnitee) and shall cooperate as reasonably requested (and at the expense of the indemnifying Party) in the defense of the claim.

(d) Complete Indemnification . As the Parties intend complete indemnification, [***].

13. Limitation of Liability . Except for (i) [***], (ii) each Party’s breach of any provision of Article 9, and (iii) any indemnity claim under Article 12, to the extent permitted by law, neither Party shall be liable for any indirect, incidental or consequential losses. In no event shall Ark’s total liabilities under this Agreement exceed [***]. These exclusions and limitations on damages apply to any loss or damage however caused and on any theory of liability, whether in contract, tort or otherwise.

14. Term and Termination of this Agreement

(a) Term . The term of this Agreement shall commence on the Effective Date and shall continue until the later of the completion of the Services and January 1, 2020 (the “ Term ”). The Term may be extended by the mutual written agreement of the Parties.

(b) Termination for Breach . If either Party materially breaches this Agreement and fails to remedy that breach within thirty (30) days of receiving written notice of that breach from the other Party, the non-breaching Party may terminate this Agreement by providing written notice of termination to the breaching Party; provided, however, that in the event of a good faith dispute with respect to the existence of a material breach, this Agreement shall not be terminated unless it is finally determined by a court of competent jurisdiction or through any other mutually agreed dispute resolution mechanism that this Agreement was materially breached, and the breaching Party fails to cure such breach within thirty (30) days after such determination.

(c) Termination for Convenience . Achaogen may terminate this Agreement at any time, for any reason or no reason (such as, for example, on cancellation of the Trial), upon sixty (60) days’ written notice to Ark.

(d) Effect of Expiration or Termination

(1) Upon the expiration or termination of this Agreement, Ark shall cease providing Services under all Statements of Work in effect and promptly deliver to Achaogen all Work Products and Assays created pursuant to this Agreement up to the date of expiration or termination, whether completed or work in progress.

(2) In the event of termination by Achaogen pursuant to Section 14(b), Ark shall:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 27 -


(i) assist Achaogen by [***]. Any information so provided by Ark shall be deemed Ark’s Confidential Information and may only be used by Achaogen for the sole purpose of [***]; and

(ii) immediately renounce in favor of Achaogen or its nominee and surrender automatically to Achaogen or its nominee any import permits, registrations, licenses, exemptions from customs duties and government consents of any nature whatsoever which Ark may have or retain directly or indirectly in connection with the Assay.

(3) In the event of termination pursuant to Section 14(c), Achaogen shall pay to Ark an amount equal (i) [***] of the [***] of this Agreement pursuant to Section 14(c), minus (ii) [***]; provided that no such amount shall be payable unless [***]. Achaogen shall pay such amount within [***] of receipt from Ark of an invoice containing reasonable supporting detail concerning such expenses.

(e) Survival . The provisions of Articles 1, 6, 7, 9, 12, 13, 14, 15 and 16, and Sections 2(c)(3), 3(d), 7(e), 8(c) and 8(d) shall survive the termination or expiration of this Agreement.

15. Notices

(a) Delivery of Notices . All notices sent under this Agreement shall be in writing and (i) hand delivered; (ii) transmitted by legible facsimile with a copy sent concurrently by certified mail, return receipt requested; or (iii) delivered by prepaid priority delivery service.

(b) Addresses for Notices . Notices shall be sent to the Parties at the following addresses or such other addresses as the Parties subsequently may provide:

 

If to Achaogen:

  

7000 Shoreline Court

Suite 371

South San Francisco, CA 94080

  
  

Attention:

   [***]   
  

Telephone:

   [***]   
  

Fax:

   [***]   

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 28 -


If to Ark:

  

48089 Fremont Boulevard

Fremont, CA 94538

  
  

Attention:

   [***]   
  

Telephone:

   [***]   
  

Fax:

   [***]   

16. Miscellaneous

(a) Use of Names . Neither Party shall, without the prior written approval of the other Party, (i) advertise or otherwise publicize the existence or terms of this Agreement or any other aspect of the relationship between Achaogen and Ark or (ii) use the other Party’s name or any trade name, trademark or service mark belonging to such other Party in press releases or in any form of advertising. Notwithstanding the foregoing, each Party shall have the right to disclose this Agreement, without the other Party’s approval, (a) to any existing or potential investors or collaborators, or its advisors (including financial advisors, lawyers and accountants) who are bound by confidentiality obligations no less restrictive than those provided in this Agreement, each on a need-to-know basis, or (b) to comply with any Applicable Laws including securities laws and rules of recognized stock exchange; provided that prior to such disclosure the disclosing Party shall notify the other Party and reasonably assist the other Party to limit such disclosure.

(b) Force Majeure . Neither Party shall have any liability to the other due to a delay or failure to perform under this Agreement which results without fault or negligence on the part of the Party involved and which is due to causes beyond its control including, without being limited to, acts of God or of the public enemy, any preference, priority or allocation order issued by the state or federal government or any other act of state or federal government, fires, floods, epidemics, quarantine restrictions, freight embargoes, and unusually severe weather. Each Party shall promptly notify the other in writing of any such delay and the cause thereof.

(c) Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the law of the State of California, without regard to its conflict of laws principles. For the adjudication of any disputes arising under this Agreement, the Parties hereby consent to personal jurisdiction in the applicable state or federal courts in the State of California.

(d) Severability . The provisions of this Agreement are severable, and the unenforceability of any provision of this Agreement shall not affect the enforceability of the remainder of this Agreement. The Parties acknowledge that it is their intention that if any provision of this Agreement is determined by a court to be unenforceable as drafted, that provision should be construed in a manner designed to effectuate the purpose of that provision to the greatest extent possible under Applicable Laws.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

- 29 -


(e) Construction of Agreement . The Parties acknowledge that they thoroughly have reviewed this Agreement and bargained over its terms. Accordingly, this Agreement shall be construed without regard to the Party or Parties responsible for its preparation, and shall be deemed to have been prepared jointly by the Parties.

(f) Cumulative Rights and Remedies . The rights and remedies provided in this Agreement and all other rights and remedies available to either Party at law or in equity are, to the extent permitted by law, cumulative and not exclusive of any other right or remedy now or hereafter available at law or in equity. Neither asserting a right nor employing a remedy shall preclude the concurrent assertion of any other right or employment of any other remedy, nor shall the failure to assert any right or remedy constitute a waiver of that right or remedy.

(g) Assignment . Neither Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party; provided that each Party may assign this Agreement to a successor of all or substantially all of its business or assets to which this Agreement pertains, whether by merger, sale, reorganization, reincorporation, operations of law or otherwise. Any purported assignment in violation of the foregoing shall be void. For clarity, each Party may subcontract or otherwise delegate any of its rights, obligations, or duties to any Third Party by providing prior written notice to the other Party; provided that each Party shall be fully responsible for any breach of or noncompliance with the applicable terms and conditions of this Agreement by such Third Party.

(h) Binding Effect . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns and legal representatives.

(i) Headings . All headings in this Agreement are included solely for convenient reference, are not intended to be full and accurate descriptions of the contents of this Agreement, shall not be deemed a part of this Agreement, and shall not affect the meaning or interpretation of this Agreement .

(j) Relationship of the Parties . The Parties are independent contractors, and nothing in this Agreement shall be construed as creating a partnership, joint venture, employment or agency relationship between the Parties, or between a Party and any employee of the other Party, or as authorizing either Party to act as agent for the other or to enter into contracts on behalf of the other.

(k) Amendments . This Agreement may be modified or amended only by written agreement of the Parties.

(l) Entire Agreement . This Agreement, each Statement of Work (all of which are incorporated herein by reference), all exhibits attached hereto or thereto, the Material Transfer Agreement and the Side Letter constitute the entire agreement between the Parties concerning the subject matter of this Agreement and each Statement of Work, and, except as otherwise provided herein, supersede all prior agreements between the

 

- 30 -


Parties concerning the subject matter hereof. To the extent there is any conflict between any provision of this Agreement, a Statement of Work or an exhibit attached hereto or thereto and any provision of the Material Transfer Agreement, this Agreement, Statement of Work or exhibit (as appropriate) shall govern and supersede such term of the Material Transfer Agreement.

END OF PAGE

[signatures appear on following page]

 

- 31 -


IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the Effective Date.

 

A CHAOGEN I NC .     ARK D IAGNOSTICS , I NC .
By:   /s/ Dennis Hom     By:   /s/ Johnny Valdez
Name:   Dennis Hom     Name:   Johnny Valdez
Title:   VP Finance & Corporate Development     Title:   President & CEO

[signature page to D EVELOPMENT S ERVICES A GREEMENT ]


EXHIBIT A

STATEMENT OF WORK

Achaogen Inc. (“Achaogen”) and Ark Diagnostics, Inc. (“Ark”) are entering into this Statement of Work pursuant to the Development Services Agreement (the “Agreement”) between them dated as of August 19, 2013. Capitalized terms used and not otherwise defined in this Statement of Work shall have the meanings given to them in the Agreement. In accordance with the Agreement, Ark shall provide the Services and deliverables specified below in accordance with the terms and conditions set forth below.

 

A-1


PURPOSE OF PLAN

ARK Diagnostics, Inc. develops, manufactures, and distributes in vitro diagnostic products in the field of therapeutic drug management, or monitoring, (TDM). Therapeutic Drug Management is a branch of clinical chemistry that specializes in the measurement of medication levels in biological fluids, such as plasma. ARK will collaborate with Achaogen Inc., to develop a TDM enzyme immunoassay for plazomicin.

This document outlines the project plan for the development of the ARK™ Plazomicin Assay. The Project Plan provides a description of the project, objectives, resources, specifications, timeline and risks.

BACKGROUND

Achaogen is a biopharmaceutical company focused on the discovery and development of new antibiotics for the treatment of serious multi-drug resistant gram-negative bacterial infections. Plazomicin is an aminoglycoside antibiotic that met all objectives in a multi-national Phase 2 study. Achaogen is developing plazomicin, a next-generation aminoglycoside that overcomes common bacterial resistance mechanisms, as an intravenous treatment for serious Gram-negative bacterial infections, including those caused by multi-drug resistant Escherichia coli  and  Klebsiella pneumoniae .

Plazomicin (Fig. 1) is a broad-spectrum aminoglycoside with differentiated activity against multidrug resistant Enterobacteriaceae and is being developed by Achaogen, Inc. as a first line treatment for resistant bacterial pathogens. The molecular formula for plazomicin is C 25 H 48 N 6 O 10 . Its molecular weight is 592.7 and the CAS Registry Number is 1154757-24-0. The chemical structure is shown below:

 

LOGO

Figure 1. Plazomicin structure.

[***]

 

[***] 17 pages in this document have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

A-2


IN WITNESS WHEREOF, the Parties have caused this Statement of Work to be executed by their respective duly authorized officers as of August 19, 2013.

 

A CHAOGEN I NC .     A RK D IAGNOSTICS , I NC .
By:   /s/ Dennis Hom     By:   /s/ Johnny Valdez
Name:   Dennis Hom     Name:   Johnny Valdez
Title:   VP Finance & Corporate Development     Title:   President

 

A-3


EXHIBIT B

U.S. GOVERNMENT RIGHTS

This Exhibit B to the Development Services Agreement between Achaogen Inc. and ARK Diagnostics, Inc. contains the language referenced in Section 7(a), in compliance with Achaogen’s obligations to BARDA under the Prime Contract. In accordance with the terms of the Prime Contract, the language in this Exhibit B has been reproduced verbatim from the Prime Contract except as otherwise instructed therein, including all defined terms and related conventions.

Ark understands and agrees that the obligations created by this Exhibit B constitute a contract between Ark and BARDA with respect to the matters covered by the clause; provided, however, that nothing in this paragraph is intended to confer any jurisdiction under the Contract Disputes Act in connection with proceedings under paragraph (h) of this clause.

To the extent any provisions of Articles 5 (“Proprietary Rights”) or 6 (“Patent Prosecution and Defense”) of this Agreement could be interpreted to contradict any of (i) Ark’s obligations under this Exhibit B or (ii) Achaogen’s obligations under the Prime Contract, the Parties shall first perform their obligations to BARDA under this Exhibit B or the Prime Contract, as applicable, and then shall perform any obligations to the other Party remaining under Articles 5 and 6. 1

(a) As used in this clause—

“Invention” means any invention or discovery that is or may be patentable or otherwise protectable under title 35 of the U.S. Code, or any variety of plant that is or may be protectable under the Plant Variety Protection Act (7 U.S.C. § 2321 et seq.)

“Made” means—

(1) When used in relation to any invention other than a plant variety, the conception or first actual reduction to practice of the invention; or

(2) When used in relation to a plant variety, that Ark has at least tentatively determined that the variety has been reproduced with recognized characteristics.

 

1   In order to assure each party retains the IP rights contemplated under this Agreement, each party will need to fully comply with their Government obligations first, and then provide ownership or licenses as provided herein. For example, if Ark employees invent something during the term of the Agreement, but Achaogen would own it under this agreement, Ark should first comply with its obligations to the Government to ensure that Ark retains title (versus the Government), and then should execute any necessary assignments to Achaogen.

 

B-1


“Nonprofit organization” means a university or other institution of higher education or an organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C. § 501(c)) and exempt from taxation under section 501(a) of the Internal Revenue Code (26 U.S.C. § 501(a)), or any nonprofit scientific or educational organization qualified under a State nonprofit organization statute.

“Practical application” means to manufacture, in the case of a composition of product; to practice, in the case of a process or method; or to operate, in the case of a machine or system; and, in each case, under such conditions as to establish that the invention is being utilized and that its benefits are, to the extent permitted by law or Government regulations, available to the public on reasonable terms.

“Subject invention” means any invention of Ark made in the performance of work under the Prime Contract.

(b) Ark’s rights

(1) Ownership . Ark may retain ownership of each subject invention throughout the world in accordance with the provisions of this clause.

(2) License

(i) Ark shall retain a nonexclusive royalty-free license throughout the world in each subject invention to which the Government obtains title, unless Ark fails to disclose the invention within the times specified in paragraph (c) of this clause. Ark’s license extends to any domestic subsidiaries and affiliates within the corporate structure of which Ark is a part, and includes the right to grant sublicenses to the extent Ark was legally obligated to do so at contract award. The license is transferable only with the written approval of the agency, except when transferred to the successor of that part of Ark’s business to which the invention pertains.

(ii) Ark’s license may be revoked or modified by the agency to the extent necessary to achieve expeditious practical application of the subject invention in a particular country in accordance with the procedures in FAR 27.302(i)(2) and 27.304-1(f).

(c) Contractor’s obligations

(1) Ark shall disclose in writing each subject invention to the Contracting Officer and Achaogen within two (2) months after the inventor discloses it in writing to Contractor personnel responsible for patent matters. The disclosure shall identify the inventor(s) and the Prime Contract under which the subject invention was made. It shall be sufficiently complete in technical detail to convey a clear understanding of the subject invention. The disclosure shall also identify any publication, on sale (i.e., sale or offer for sale), or public use of the subject invention, or whether a manuscript describing the subject invention has been submitted for publication and, if so, whether it

 

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has been accepted for publication. In addition, after disclosure to the agency, Ark shall promptly notify the Contracting Officer of the acceptance of any manuscript describing the subject invention for publication and any on sale or public use.

(2) Ark shall elect in writing whether or not to retain ownership of any subject invention by notifying the Contracting Officer and Achaogen within two (2) years of disclosure to the agency. However, in any case where publication, on sale, or public use has initiated the one (1) year statutory period during which valid patent protection can be obtained in the United States, the period for election of title may be shortened by the agency to a date that is no more than sixty (60) days prior to the end of the statutory period.

(3) Ark shall file either a provisional or a nonprovisional patent application or a Plant Variety Protection Application on an elected subject invention within one (1) year after election. However, in any case where a publication, on sale, or public use has initiated the one (1) year statutory period during which valid patent protection can be obtained in the United States, Ark shall file the application prior to the end of that statutory period. If Ark files a provisional application, it shall file a nonprovisional application within ten (10) months of the filing of the provisional application. Ark shall file patent applications in additional countries or international patent offices within either ten (10) months of the first filed patent application (whether provisional or nonprovisional) or six (6) months from the date permission is granted by the Commissioner of Patents to file foreign patent applications where such filing has been prohibited by a Secrecy Order.

(4) Ark may request extensions of time for disclosure, election, or filing under paragraphs (c)(1), (c)(2), and (c)(3) of this clause.

(d) Government’s rights—

(1) Ownership . Ark shall assign to the agency, on written request, title to any subject invention—

(i) If Ark fails to disclose or elect ownership to the subject invention within the times specified in paragraph (c) of this clause, or elects not to retain ownership; provided, that the agency may request title only within sixty (60) days after learning of Ark’s failure to disclose or elect within the specified times.

(ii) In those countries in which Ark fails to file patent applications within the times specified in paragraph (c) of this clause; provided, however, that if Ark has filed a patent application in a country after the times specified in paragraph (c) of this clause, but prior to its receipt of the written request of the agency, Ark shall continue to retain ownership in that country.

 

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(iii) In any country in which Ark decides not to continue the prosecution of any application for, to pay the maintenance fees on, or defend in reexamination or opposition proceeding on, a patent on a subject invention.

(2) License . If Ark retains ownership of any subject invention, the Government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice, or have practiced for or on its behalf, the subject invention throughout the world.

(e) Contractor action to protect the Government’s interest

(1) Ark shall execute or have executed and promptly deliver to the agency all instruments necessary to—

(i) Establish or confirm the rights the Government has throughout the world in those subject inventions in which Ark elects to retain ownership; and

(ii) Assign title to the agency when requested under paragraph (d) of this clause and to enable the Government to obtain patent protection and plant variety protection for that subject invention in any country.

(2) Ark shall require, by written agreement, its employees, other than clerical and nontechnical employees, to disclose promptly in writing to personnel identified as responsible for the administration of patent matters and in Ark’s format, each subject invention in order that Ark can comply with the disclosure provisions of paragraph (c) of this clause, and to execute all papers necessary to file patent applications on subject inventions and to establish the Government’s rights in the subject inventions. The disclosure format should require, as a minimum, the information required by paragraph (c)(1) of this clause. Ark shall instruct such employees, through employee agreements or other suitable educational programs, as to the importance of reporting inventions in sufficient time to permit the filing of patent applications prior to U.S. or foreign statutory bars.

(3) Ark shall notify the Contracting Officer and Achaogen of any decisions not to file a nonprovisional patent application, continue the prosecution of a patent application, pay maintenance fees, or defend in a reexamination or opposition proceeding on a patent, in any country, not less than thirty (30) days before the expiration of the response or filing period required by the relevant patent office.

(4) Ark shall include, within the specification of any United States nonprovisional patent or plant variety protection application and any patent or plant variety protection certificate issuing thereon covering a subject invention, the following statement, “This invention was made with Government support under (identify the contract) awarded by (identify the agency). The Government has certain rights in the invention.”

 

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(f) Reporting on utilization of subject inventions . Ark shall submit, on request, periodic reports no more frequently than annually on the utilization of a subject invention or on efforts at obtaining utilization of the subject invention that are being made by Ark or its licensees or assignees. The reports shall include information regarding the status of development, date of first commercial sale or use, gross royalties received by Ark, and other data and information as the agency may reasonably specify. Ark also shall provide additional reports as may be requested by the agency in connection with any march-in proceeding undertaken by the agency in accordance with paragraph (h) of this clause. Ark also shall mark any utilization report as confidential/proprietary to help prevent inadvertent release outside the Government. As required by 35 U.S.C. § 202(c)(5), the agency will not disclose that information to persons outside the Government without Ark’s permission.

(g) Preference for United States industry . Notwithstanding any other provision of this clause, neither Ark nor any assignee shall grant to any person the exclusive right to use or sell any subject invention in the United States unless the person agrees that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States. However, in individual cases, the requirement for an agreement may be waived by the agency upon a showing by Ark or its assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States, or that under the circumstances domestic manufacture is not commercially feasible.

(h) March-in rights . Ark acknowledges that, with respect to any subject invention in which it has retained ownership, the agency has the right to require licensing pursuant to 35 U.S.C. §§ 203 and 210(c), and in accordance with the procedures in 37 CFR Part 401.6 and any supplemental regulations of the agency in effect on the date of contract award.

(i) Special provisions for contracts with nonprofit organizations . If Ark is a nonprofit organization, it shall—

(1) Not assign rights to a subject invention in the United States without the written approval of the agency, except where an assignment is made to an organization that has as one of its primary functions the management of inventions, provided, that the assignee shall be subject to the same provisions as Ark;

(2) Share royalties collected on a subject invention with the inventor, including Federal employee co-inventors (but through their agency if the agency deems it appropriate) when the subject invention is assigned in accordance with 35 U.S.C. § 202(e) and 37 CFR Part 401.10;

(3) Use the balance of any royalties or income earned by Ark with respect to subject inventions, after payment of expenses (including payments to

 

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inventors) incidental to the administration of subject inventions for the support of scientific research or education; and

(4) Make efforts that are reasonable under the circumstances to attract licensees of subject inventions that are small business concerns, and give a preference to a small business concern when licensing a subject invention if Ark determines that the small business concern has a plan or proposal for marketing the invention which, if executed, is equally as likely to bring the invention to practical application as any plans or proposals from applicants that are not small business concerns; provided, that Ark is also satisfied that the small business concern has the capability and resources to carry out its plan or proposal. The decision whether to give a preference in any specific case will be at the discretion of Ark.

(5) Allow the Secretary of Commerce to review Ark’s licensing program and decisions regarding small business applicants, and negotiate changes to its licensing policies, procedures, or practices with the Secretary of Commerce when the Secretary’s review discloses that Ark could take reasonable steps to more effectively implement the requirements of paragraph (i)(4) of this clause.

(j) Communications .

For the sole purposes of fulfilling its obligations under this section, Ark shall submit communications to the Contracting Officer at the following address:

Ethan Mueller

Contracting Officer

Office of Acquisition Management, Contracts and Grants

Office of the Assistant Secretary for Preparedness and Response

United States Department of Health and Human Services

330 Independence Avenue, SW, Room G640

Washington, DC 20201

Via e-mail: Ethan.Mueller@hhs.gov

ARK shall site the following contract number in all communications with the Contracting Officer: HHSO100201000046C

(k) Subcontracts

(1) Ark shall include the substance of this clause, including this paragraph (k), in all subcontracts for experimental, developmental, or research work to be performed by a small business concern or nonprofit organization.

 

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(2) Ark shall include in all other subcontracts for experimental, developmental, or research work the substance of the patent rights clause required by FAR Subpart 27.3.

(3) At all tiers, the patent rights clause must be modified to identify the parties as follows: references to the Government are not changed, and the subcontractor has all rights and obligations of Ark in the clause. Ark shall not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor’s subject inventions.

(4) In subcontracts, at any tier, the agency, the subcontractor, and Ark agree that the mutual obligations of the parties created by this clause constitute a contract between the subcontractor and the agency with respect to the matters covered by the clause; provided, however, that nothing in this paragraph is intended to confer any jurisdiction under the Contract Disputes Act in connection with proceedings under paragraph (h) of this clause.

 

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EXHIBIT C

APPLICABLE PRIME CONTRACT PROVISIONS

This Exhibit C to the Development Services Agreement between Achaogen Inc. and ARK Diagnostics, Inc. contains the language referenced in Section 7(a), in compliance with Achaogen’s obligations to BARDA under the Prime Contract.

The following Prime Contract provisions, as they may be amended by the United States Government over time, are incorporated by reference with the same force and effect as if set forth in full text. For the purposes of this Agreement, the term “contract” shall mean this Agreement; the term “Contractor” shall mean Ark; the term “prime contractor” shall mean Achaogen; and the terms “Government” and “Contracting Officer” may mean Achaogen or the United States Government depending on the context in which the term is used. The dollar amount listed parenthetically in the titles of some referenced clauses in this Exhibit is the applicable threshold for the clause. If the total cumulative amounts invoiced by Ark under the Prime Contract are expected to exceed this amount, the clause applies.

FEDERAL ACQUISITION REGULATION

 

Clause

  

Date

  

Title

FAR 52.202-1    Jul-04    Definitions (Over $100,000)
FAR 52.203-3    Apr-84    Gratuities (Over $100,000)
FAR 52.203-5    Apr-84    Covenant Against Contingent Fees (Over $100,000)
FAR 52.203-6    Sep-06    Restrictions on Subcontractor Sales to the Government (Over $100,000)
FAR 52.203-7    Jul-95    Anti-Kickback Procedures (Over $100,000)
FAR 52.203-8    Jan-97    Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity (Over $100,000)
FAR 52.203-10    Jan-97    Price or Fee Adjustment for Illegal or Improper Activity (Over $100,000)
FAR 52.203-12    Sep-07    Limitation on Payments to Influence Certain Federal Transactions (Over $100,000)
FAR 52.203-13    Apr-10    Contractor Code of Business Ethics and Conduct (applies if Agreement is over $5,000,000 and has a performance period greater than 120 days). Insert “and Achaogen” after “Government” throughout this clause. Disclosures made under this clause shall be made directly to the government entities listed in the clause.
FAR 52.209-6    Sep-06    Protecting the Government’s Interests When Subcontracting With Contractors Debarred, Suspended, or Proposed for Debarment (Over $30,000)
FAR 52.215-2    Mar 09    Audit and Records- Negotiation (Over $100,000) Insert “and Achaogen” after “Contracting Officer” and “Comptroller General of the United States”.
FAR 52.215-10    Oct-97    Price Reduction for Defective Cost or Pricing Data (Over $650,000)
FAR 52.215-12    Oct-97    Subcontractor Cost or Pricing Data (Over $650,000)
FAR 52.215-21    Oct-97    Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data –Modifications. Substitute “Achaogen” for “Contracting Officer” throughout this clause.

 

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Clause

  

Date

  

Title

FAR 52.219-8    May-04    Utilization of Small Business Concerns (Over $100,000)
FAR 52.222-21    Feb-99    Prohibition of Segregated Facilities
FAR 52.222-26    Mar-07    Equal Opportunity (Over $10,000)
FAR 52.222-35    Sept-06    Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Over $100,000)
FAR 52.222-36    Jun-98    Affirmative Action for Workers with Disabilities (Over $10,000)
FAR 52.222-37    Sep-06    Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans (Over $100,000)
FAR 52.222-50    Feb-09    Combating Trafficking in Persons Substitute “Achaogen” for “Contracting Officer” throughout this clause. In paragraph (e), insert “and Achaogen” after “Government”.
FAR 52.222-54    Jan-09    Employment Eligibility Verification. Applicable to services and construction subcontracts that: (1) exceed $3,000; and (2) include work performed in the United States. This clause does not apply to subcontracts for commercial services that are (a) part of the purchase of a Commercially Available Off the Shelf (COTS) item (or an item that would be a COTS item, but for minor modifications) (b) performed by the COTS provider, and (c) are normally provided for that COTS item.
FAR 52.224-1    Apr-84    Privacy Act Notification (If subcontract requires design, development, or operation of a system of records)
FAR 52.224-2    Apr-84    Privacy Act (If subcontract requires design, development, or operation of a system of records)
FAR 52.225-1    Feb-09    Buy American Act- Supplies
FAR 52.225-13    Jun-08    Restrictions on Certain Foreign Purchases
FAR 52.227-1    Dec-07    Authorization and Consent, Alternate I (Apr 1984) (Over $100,000)
FAR 52.227-2    Dec-07    Notice and Assistance Regarding Patent and Copyright Infringement (Over $100,000)
FAR 52.227-11    Dec-07    Patent Rights –Ownership by the Contractor (Note: In accordance with FAR 27.303(b)(2), paragraph (e) is modified to include the requirements in FAR 27.303(b)(2)(i) through (iv). The frequency of reporting in (i) is annual
FAR 52.227-16    Jun-87    Additional Data Requirements. Insert “and Achaogen” after “Government” throughout this clause.
FAR 52.242-15    Aug-89    Stop Work Order, with Alternate I (April 1984) Substitute “Achaogen” for “Contracting Officer” throughout this clause. In paragraph (e), insert “or Achaogen” after “Government”.
FAR 52.244-5    Dec-96    Competition in Subcontracting
FAR 52.244-6    Jun-10    Subcontracts for Commercial Items
FAR 52.245-1    Aug-10    Government Property Applicable where government property involved in performance of subcontract; “Contracting Officer” means “Achaogen” except in the definition of Property Administrator and in paragraph h(1)(iii) and where it is unchanged, and in paragraphs (c) and (h)(4) where it includes Achaogen. “Government” is unchanged in the phrases “Government property” and “Government furnished property” and where elsewhere used except in paragraph (d)(1) where it means Achaogen and except in paragraphs (d)(2) and (g) where the term includes Achaogen.

 

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THE DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUPPLEMENTAL REGULATION PROVISIONS

 

Clause

  

Date

  

Title

HHSAR 352.203-70

   Jan-06    Anti-lobbying

HHSAR 352.223-70

   Jan-06    Safety and Health

HHSAR 352.224-70

   Jan-06    Privacy Act (if subcontract requires design, development, or operation of a system of records)

HHSAR 352.234-2

   Oct-08    Full Earned Value Management System (applies if subcontractor is identified in the Prime Contract as one to whom EVMS will apply).

HHSAR 325.242-73

   Jan-06    Withholding of Contract Payments

HHSAR 352.270-4

   Jan-06    Protection of Human Subjects

HHSAR 352.270-5

   Jan-06    Care of Live Vertebrate Animals

HHSAR 352.270-6

   Jan-06    Publications and Publicity

BARDA REQUIRED PROVISIONS

 

Prime Contract Provision

  

Clause

H.5: Press Releases

   Company shall clearly state, when issuing statements, press releases, requests for proposals, bid solicitations and other documents describing projects or programs funded in whole or in part with Federal money: (1) the percentage of the total costs of the program or project which will be financed with Federal money; (2) the dollar amount of Federal funds for the project or program; and (3) the percentage and dollar amount of the total costs of the project or program that will be financed by nongovernmental sources.

H.9: Publications and Publicity

  

No information related to data obtained under this contract shall be released or publicized without the prior written consent of Achaogen and the Contracting Officer Technical Representative.

 

In addition to the requirements of HHSAR 352.227-70, Publications and Publicity incorporated by reference in section I of this contract shall acknowledge the support of the Biomedical Advanced Research and Development Authority whenever publicizing the work under this contract in any media by including an acknowledgment substantially as follows:

 

“This project has been funded in whole or in part with Federal funds from the Biomedical Advanced Research and Development Authority, office of the Assistant Secretary for Preparedness and response, Office of the Secretary, Department of Health and Human Services, Under Contract No. HHSO100201000046C.”

 

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Prime Contract Provision

  

Clause

H.10: Reporting Matters Involving Fraud, Waste and Abuse   

Anyone who becomes aware of the existence or apparent existence of fraud, waste and abuse in BARDA funded programs is encouraged to report such matters to the HHS Inspector General’s Office in writing or on the Inspector General’s Hotline. The toll free number is 1-800-HHS-TIPS (1-800-447-8477). All telephone calls will be handled confidentially. The e-mail address is Htips@os.dhhs.gov and the mailing address is:

 

Office of Inspector General

Department of Health and Human Services

TIPS HOTLINE

P.O. Box 23489

Washington, D.C. 20026.

H.15: Privacy Act Applicability    Notification is hereby given that Company and its employees are subject to criminal penalties for violation of the Privacy Act to the same extent as employees of the Government.
H.16: Laboratory license requirement    Company shall comply with all applicable requirements of Section 353 of the Public Health Service Act (Clinical Laboratory Improvement Act as Amended). This requirement shall also be included in any subcontract for services under this contract.
H.17: Dissemination of Information    No information related to data obtained under this contract shall be released or publicized without the prior written consent of the Contracting officer, to be obtained through Achaogen.
H.18: Identification and Disposition of Data    Company will be required to provide certain data generated under this contract to the Department of Health and Human Services (DHHS). DHHS reserves the right to review any other data determined by DHHS to be directly related to and/or generated under this contract. Company shall keep copies of all data required by the Food and Drug Administration (FDA) relevant to this contract for the time period specified by the FDA.

 

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Prime Contract Provision

  

Clause

H.22: Registration with the Select Agent Program for Work involving the possession, use, and/or transfer of select biological agents or toxins   

Company shall not conduct work involving select agents or toxins under this contract until it and any associated subcontractor(s) comply with the following:

 

For prime or subcontract awards to domestic institutions that possess, use, and/or transfer Select Agents under this contract, the institution must comply with the provisions of 42 C.F.R. part 73, 7 C.F.R. part 331, and/or 9 C.F.R. part 121 ( http://www.aphis.usda.gov/programs/ag_selectagent/FinalRule3-18-05.pdf ) as required, before using NIH funds for work involving a Select Agent or Toxin. No government funds can be used for research involving a Select Agent or Toxin at a domestic institution without a valid registration certificate.

 

For prime or subcontract awards to foreign institutions that possess, use, and/or transfer a Select Agent or Toxin, before using NIH funds for any work directly involving a Select Agent or Toxin, the foreign institution must provide information satisfactory to the government that safety, security, and training standards equivalent to those described in 42 C.F.R. part 73, 7 C.F.R. part 331, and/or 9 C.F.R. part 121 are in place and will be administered on behalf of all Select Agent or Toxin work supported by these funds. The process for making this determination includes inspection of the foreign laboratory facility by a government representative. During this inspection, the foreign institution must provide the following information: concise summaries of safety, security, and training plans; names of individuals at the foreign institution who will have access to the Select Agents and procedures for ensuring that only approved and appropriate individuals, in accordance with institution procedures, will have access to the Select Agents under the contract; and copies of or links to any applicable laws, regulations, policies, and procedures applicable to that institution for the safe and secure possession, use, and/or transfer of select agents. No funds can be used for work involving a Select Agent or Toxin at a foreign institution without written approval from Achaogen.

 

Listings of HHS select agents and toxins, and overlap select agents or toxins as well as information about the registration process for domestic institutions, are available on the Select Agent Program Web site at http:// www.cdc.gov/od/sap/ and http://www.cdc.gov/od/sap/docs/salist.pdf.

 

Listings of USDA select agents and toxins as well as information about the registration process for domestic institutions are available on the APHIS/USDA website at: http://www.aphis.usda.gov/programs/ag_selectagent/ index.html and: http://www.aphis.usda.gov/programs/ag_selectagent/ag_bioterr_forms.html

 

For foreign institutions, see the NIAID Select Agent Award information: http://www.niaid.nih.gov/ncn/clinical/default_biodefense.htm.

H.23: EPA Energy Star Requirements    All microcomputers, including personal computers, monitors, and printers purchased with government funds in the performance of a contract shall be equipped with or meet the energy efficient low-power standby feature as defined by the EPA Energy Star program unless the equipment always satisfies Energy Star efficiency levels.

 

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Prime Contract Provision

  

Clause

H.24: Acknowledgement of Federal Funding   

(a) Section 507 of P.L. 104-208 mandates that contractors funded with Federal dollars, in whole or in part, acknowledge Federal funding when issuing statements, press releases, requests for proposals, bid solicitations and other documents. Contractors are required to state (1) the percentage and dollar amounts of the total program or project costs financed with federal money, and (2) the percentage and dollar amount of the total costs financed by nongovernmental sources. This requirement is in addition to the continuing requirement to provide an acknowledgement of support and disclaimer on any publication reporting the results of a contract funded activity.

 

(b) Publication and Publicity. The contractor shall acknowledge the support of the Department of Health and Human Service, Office of the Assistant Secretary for Preparedness and Response, Biomedical Advanced Research and Development Authority whenever publicizing the work under this contract in any media by including an acknowledgment substantially as follows: “This project has been funded in whole or in part with Federal funds from the Office of the Assistant Secretary for Preparedness and Response, Biomedical Advanced Research and Development Authority, under Contract no. HHSO100201000046C.

 

(c) Press Releases. Pursuant to Section 508 of Public Law 105-78, the contractor shall clearly state, when issuing statements, press releases, requests for proposals, bid solicitations and other documents describing projects or programs funded in whole or in part with federal money that: (1) the percentage of the total costs of the program or project which will be financed with federal money; (2) the dollar amount of Federal funds for the project or program; and (3) the percentage and dollar amount of the total costs of the project or program that will be financed by nongovernmental sources.

H.25: Manufacturing Standards   

The Current Good Manufacturing Practice Regulations (“cGMP”) (21 C.F.R. Parts 210-211) and regulations pertaining to biological products (21 C.F.R. Part 600) will be the standard to be applied for manufacturing, processing, packing, storage, and delivery of this product.

 

If at any time during the life of the contract, Company fails to comply with cGMP in the manufacturing, processing and packaging of this product and such failure results in a material adverse effect on the safety, purity or potency of this product (a material failure), the Contractor shall have thirty (30) calendar days from the time such material failure is identified to cure such material failure. If the Contractor fails to take such an action within the thirty (30) calendar day period, then the contract may be terminated for default.

H.26: Export Control Notification    Company is responsible for ensuring compliance with all export control laws and regulations that may be applicable to the export of and foreign access to their proposed technologies.

 

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Prime Contract Provision

  

Clause

H.27: Institutional responsibility Regarding Conflicting Interests of Investigators   

Company shall comply with the requirements of 45 CFR Part 94, Responsible Prospective Contractors, which promotes objectivity in research by establishing standards to ensure that investigators (defined as the principle investigator and any other person who is responsible for design, conduct, or reporting of research funded under BARDA contracts) will not be biased by any conflicting financial interest. For the purposes of this part relating to financial interest, “investigator” includes the investigator’s spouse and dependent children.

 

Company shall at a minimum:

 

(a) maintain a written, enforceable policy on conflict of interest and inform each investigator of the policy, the investigator’s reporting responsibilities, and the applicable regulations. The contractor must take reasonable steps to ensure that investigators working as collaborators or subcontractors comply with the regulations.

 

(b) Designate and official to review financial disclosure statements from each investigator participating in BARDA-funded research. Based on established guidelines consistent with the regulations, the designated official must determine whether a conflict of interest exists, and if so, determine what actions should be taken to manage, reduce, or eliminate such a conflict.

 

(c) Require updating of financial disclosure statements during the period of award.

 

(d) Maintain records taken under this provision for three years after final payment.

 

(e) Establish adequate enforcement mechanisms.

 

If a conflict of interest is identified, the Institution shall report to Achaogen the existence of the conflicting interest found. This report shall be made and the conflicting interest managed, reduced, or eliminated, at least on a temporary basis, within thirty (30) days of that identification.

 

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EXHIBIT D

ANIMAL USE PROVISIONS

This Exhibit D to the Development Services Agreement between Achaogen Inc. and ARK Diagnostics, Inc. contains the language referenced in Section 7(b), in compliance with Achaogen’s obligations to BARDA under the Prime Contract.

 

1.0 ANIMAL USES

 

  1.1 Purpose . Projects that involve the use of laboratory animals (“Animal Use”) by Ark or at Ark’s direction are subject to the terms of this section.

 

  1.2 Applicable Rules and Regulations . Ark shall adhere to all applicable rules and regulations related to the conduct and oversight of Projects that involve Animal Use, including but not limited to the following, as they may be amended or updated over time:

 

  1.2.1 Guide for the Care and Use of Laboratory Animals (NRC, 1996);

 

  1.2.2 United States Public Health Service Policy on Humane Care and Use of Laboratory Animals;

 

  1.2.3 Animal Welfare Act of 1966, as amended (7 U.S.C. 2131 et seq.) and associated regulations (9 C.F.R., subchapter A);

 

  1.2.4 Procedures set forth in NIH Policy Manual 3044-2, entitled, “Protection of NIH Personnel Who Work with Nonhuman Primates;”

 

  1.2.5 Defense Federal Acquisition Regulations Supplement (DFARS) and Health and Human Services Federal Acquisition Regulations Supplement (HHSAR) terms, including:

 

  1.2.5.1 DFARS 252.235-7002 (DEC 91) Animal Welfare; and

 

  1.2.5.2 HHSAR 352.270-9(b) (JAN 06) Care of Live Vertebrate Animals; and

 

  1.2.6 All other applicable national, state and local laws associated with the care and use of laboratory animals.

 

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  1.3 Institutional Animal Care and Use Committee (IACUC)

 

  1.3.1 Ark shall maintain an Institutional Animal Care and Use Committee or similar animal use review committee as required by the applicable rules and regulations in Section 1.2 (“IACUC”).

 

  1.3.2 Animal Use shall undergo appropriate review and approval by the IACUC prior to initiation of work under the applicable Project.

 

  1.3.3 Ark shall provide Achaogen the following within one (1) business day of its availability to Ark:

 

  1.3.3.1 IACUC approvals and any regular renewal of Animal Use and associated protocols, including without limitation any amendments; and

 

  1.3.3.2 IACUC-approved modifications, suspensions, and continuing reviews of Animal Use and associated protocols.

 

  1.3.4 Within two (2) business days of receipt of an Achaogen request, Ark shall provide Achaogen with following documentation related to the IACUC and the Project at any time during the Project or within five (5) years following completion of the Project:

 

  1.3.4.1 Any draft and final IACUC submissions or correspondence related to a Project; and

 

  1.3.4.2 IACUC policies and procedures, identified by version number, date, and all required signatories.

 

  1.3.5 Ark shall notify Achaogen within two (2) business days of any changes to the items in 20.3.4 related to a Project or, if general in nature, that have a material impact on a Project.

 

  1.3.6 Third-Party Inspections and Certifications

 

  1.3.6.1 Upon execution of this Agreement, Ark shall provide Achaogen with the following for each facility that may be involved in a Project under this Agreement:

 

  (a) Evidence of current accreditation by the Association for Assessment and Accreditation of Laboratory Animal Care (AALAC);

 

D-2


  (a) Evidence of current certification by the Office of Animal Laboratory Welfare of the United States Public Health Service (OLAW); and

 

  (b) The most recent Facility Inspection Reports issued by the United States Department of Agriculture (USDA) or other applicable national regulatory agency.

 

  1.3.7 Ark shall provide Achaogen within ten (10) business days of availability to Ark regular renewals or changes to the items in 20.4.1.

 

  1.3.8 Ark shall notify Achaogen within two (2) business days of the occurrence of any of the following:

 

  1.3.8.1 Reports to OLAW involving Animal Use regarding:

 

  (a) any serious or continuing noncompliance by Ark (regardless of Facility);

 

  (b) any serious deviation from the provisions of the Guide for the Care and Use of Laboratory Animals by Ark (regardless of Facility); or

 

  (c) any suspension of any Ark activity by the IACUC, or of any IACUC activity.

 

  1.3.8.2 USDA or OLAW regulatory noncompliance evaluations; and

 

  1.3.8.3 AAALAC, International status change (gain or loss of accreditation only).

 

  1.4 Ark Animal Use Documentation, Protocols, and Procedures

 

  1.4.1 Within two (2) business days of an Achaogen request, Ark shall provide Achaogen with following documentation related to a Project at any time during the Project or within five (5) years following completion of the Project:

 

  1.4.1.1

Animal use procedures, including, but not limited to the administration of animal observations and health status assessment, interventions and euthanasia criteria, administration of

 

D-3


  anesthesia/analgesia/tranquilization or non-pharmaceutical methods for relieving pain or distress or applying restraint; surgery; test article administration and biosampling; assessing and collecting safety data; and any other animal-use activities including in the Project and applicable protocol.

 

  1.4.1.2 Documentation related to the training and qualifications of Ark’s staff responsible for the conduct of the research including, but not limited to:

 

  (a) Name and title of individual staff members;

 

  (b) Evidence and descriptions of the required training in the protection and handling of animals received by Ark staff members;

 

  (c) Evidence and descriptions of other qualifications or applicable experience of Ark staff members;

 

  1.4.1.3 Applicable safety documentation and associated plans;

 

  1.4.1.4 Pharmacy service records on the dosing material to be used and excipients; and

 

  1.4.1.5 Any other item(s) reasonably related to Animal Use.

 

  1.4.2 Ark shall notify Achaogen within two (2) business days of any changes to the items in 20.4.1 related to a Project or, if general in nature, that have a material impact on a Project.

 

D-4


ATTACHMENT A

BACKGROUND IP

Achaogen Inc. (“Achaogen”) and Ark Diagnostics, Inc. (“Ark”) have entered into the Development Services Agreement (the “Agreement”) between them dated as of August 19, 2013. Capitalized terms used and not otherwise defined in this Attachment A shall have the meanings given to them in the Agreement. In accordance with the Agreement, each Party has identified that its Background IP includes but is not limited to the following.

Achaogen Background IP

• [***]

Ark Background IP

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Attachment A

page 1


A CHAOGEN I NC .

7000 Shoreline Court, Suite 371

South San Francisco, CA 94080

August 19, 2013

ARK Diagnostics, Inc.

48089 Fremont Boulevard

Fremont, CA 94538

Dear Johnny Valdez:

Reference is made to Section 8(d)(1) of the Development Services Agreement between Achaogen Inc. (“Achaogen”) and ARK Diagnostics, Inc. (“Ark”) dated August 19, 2013 (the “Agreement”), providing that Ark may not object to Third Party Suppliers (as defined therein) listed in a side letter between the parties provided that such Third Party Suppliers have agreed to the requirements of confidentiality and restrictions contained in the licenses provided in Section 8(d).

The parties agree that the following Third-Party Suppliers are to be those identified pursuant to Section 8(d)(1):

[***]

If the foregoing is acceptable to you, please countersign in the place indicated below.

 

Sincerely,
A CHAOGEN I NC .
By:   /s/ Dennis Hom
Name:   Dennis Hom
Title:   VP Finance & Corporate Development

 

A CCEPTED AND A GREED TO :
ARK D IAGNOSTICS , I NC .
By   /s/ Johnny Valdez
Name:   Johnny Valdez
Title:   President & CEO

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.7A

 

LOGO

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

1


PART I—THE SCHEDULE

SECTION B—SUPPLIES OR SERVICES AND PRICES/COSTS

ARTICLE B.1. BRIEF DESCRIPTION OF SUPPLIES OR SERVICES

The purpose of the contract is for the development of a novel, Broad Spectrum “Neoglycoside” Antibiotic for the treatment of Resistant Threat Agents.

ARTICLE B.2. ESTIMATED COST AND FIXED FEE

 

a. The total estimated cost of the base period of performance contract is [***].

 

b. The total fixed fee for the base period of performance contract is [***]. The fixed fee shall be paid in accordance with and subject to the withholding provisions of the clauses ALLOWABLE COST AND PAYMENT and FIXED FEE referenced in the General Clause Listing in Part II, ARTICLE I.1 of this contract. Payment of fixed fee shall not be made in less than monthly increments.

 

c. The total amount of the contract, represented by the sum of the total estimated cost plus fixed fee is $27,559,110.00.

 

d. It is estimated that the amount currently allotted will cover performance of the contract through September 18, 2012.

CONTRACT LINE ITEM NUMBERS (CLINs)

BASE PERIOD

 

CLIN

   PERIOD OF
PERFORM.
     SUPPLIES/SERVICES      TOTAL
ESTIMATED
COST
     FIXED FEE      TOTAL
ESTIMATED
COST PLUS
FIXED FEE
 

0001

    
 
9/19/2010-
9/18/2012
 
  
     [***]       $ [***]       $ [***]       $ 27,559,110.00   

ARTICLE B.3. OPTION PRICES

 

a. Unless the Government exercises its option pursuant to the option clause referenced in ARTICLE I.1 the contract consists only of the Base Period specified in the Statement of Work as defined in SECTIONS C and F, for the price set forth in ARTICLE B.2. of the contract.

 

b.

Pursuant to H.13. EXERCISE OF OPTIONS and Option for Increased Quantity — Separately Priced Line Item (FAR Clause 52.217-7) the Government may, by unilateral contract modification, require the Contractor to perform the Option(s) specified in the Statement of Work as defined in SECTIONS C and F of this contract. If the

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

2


  Government exercises this/these option(s), notice must be given before the expiration date of the contract. Specific information regarding the time frame for this notice is set forth in the OPTION CLAUSE Article in SECTION H of this contract. The estimated cost of the contract will be increased as set forth below:

CONTRACT OPTION PERIODS

Option Period 1 (CLIN 0002)

Option Period 2 (CLIN 0003)

Option Period 3 (CLIN 0004)

 

OPTION CLIN

   PERIOD
OF
PERFORM
    

SUPPLIES/SERVICES

   TOTAL
ESTIMATED
COST
     FIXED
FEE
     TOTAL
ESTIMATED
COST PLUS
FIXED FEE
 

0002

    
 
9/19/2012-
9/18/2013
 
  
   Option Period 1: [***]    $ [***]       $ [***]       $ [***]   

0003

    
 
9/19/2013-
9/18/2014
 
  
   Option Period 2: [***]    $ [***]       $ [***]       $ [***]   

0004

    
 
9/19/2014-
9/18/2015
 
  
   Option Period 3: [***]    $ [***]       $ [***]       $ [***]   

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

3


ARTICLE B.4. PROVISIONS APPLICABLE TO DIRECT COSTS

a. Items Unallowable

Notwithstanding the clause, ALLOWABLE COST AND PAYMENT, incorporated in the contract, unless authorized in writing by the Contracting Officer via a Contracting Officer Authorization (COA) Letter, the costs of the following items or activities shall be unallowable as direct costs:

1. Acquisition, by purchase or lease, of any interest in real property;

2. Special rearrangement or alteration of facilities;

3. Purchase or lease of any item of general purpose office furniture or office equipment regardless of dollar value. (General purpose equipment is defined as any items of personal property which are usable for purposes other than research, such as office equipment and furnishings, pocket calculators, etc.);

4. Travel to attend general scientific meetings;

5. Foreign travel—See subparagraph b. below;

6. Consultant costs; Any cost reimbursement contracts for Consultant services and any firm fixed price (FFP) contract for Consultant services that exceed $100,000;

7. Subcontracts; Any cost reimbursement subcontracts and FFP subcontracts that exceed $[***];

8. Research patient care costs — See Attachment 1;

9. Accountable Government property (defined as both real and personal property with an acquisition cost of $[***] or more and a life expectancy of more than two years) and “sensitive items” (defined and listed in the Contractor’s Guide for Control of Government Property, see Article G.10), regardless of acquisition value.

10. Printing Costs (as defined in the Government Printing and Binding Regulations).

11. Light Refreshment and Meal Expenditures. Requests to use contract funds to provide light refreshments and/or meals to either federal or nonfederal employees must be submitted to the Project Officer, with a copy to the Contracting Officer, at least six (6) weeks in advance of the event. The request shall contain the following information: (a) name, date, and location of the event at which the light refreshments and/or meals will be provided; (b) a brief description of the purpose of the event; (c) a cost breakdown of the estimated light refreshment and/or meal costs; and (d) the number of nonfederal and federal attendees receiving light refreshments and/or meals. It is unlikely that BARDA will approve these requests since circumstances are very limited under which appropriated funds can be used for these costs.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

4


b. Travel Costs

 

  1. Domestic Travel

 

  a. Total expenditures for domestic travel (transportation, lodging, subsistence, and incidental expenses) incurred in direct performance of this contract shall not exceed $[***] during the base period (9/19/2010-9/18/2012) without the prior written approval of the Contracting Officer via a Contracting Officer Authorization (COA) Letter.

 

  b. Subject to the annual dollar limitation specified under B.4.b. 1 .a. above the Contractor shall invoice and be reimbursed for all travel costs in accordance with FAR Subpart 31.2 contracts with Commercial Organizations and FAR § 31.205-46 Travel Costs

 

  2. Foreign Travel

Requests for foreign travel must be submitted at least six weeks in advance and shall contain the following: (a) meeting(s) and place(s) to be visited, with costs and dates; (b) name(s) and title(s) of Contractor personnel to travel and their functions in the contract project; (c) contract purposes to be served by the travel; (d) how travel of Contractor personnel will benefit and contribute to accomplishing the contract project, or will otherwise justify the expenditure of AMCG contract funds; (e) how such advantages justify the costs for travel and absence from the project of more than one person if such are suggested; and (f) what additional functions may be performed by the travelers to accomplish other purposes of the contract and thus further benefit the project.

ARTICLE B.5. ADVANCE UNDERSTANDINGS

 

a. Man-in-Plant

With 7 days advance notice to the Contractor via in writing from the Contracting Officer, the Government may place a man-in-plant in the Contractor’s facility, who shall be subject to the Contractor’s policies and procedures regarding security and facility access at all times while in the Contractor’s facility.

 

b. Security Plan

The Contractor agrees to provide an updated Security Plan, if requested by the Contracting Officer, and within fifteen (15) working days after receipt of the request. The Contractor agrees to provide data generated from this contract that is related to security at the Contractor’s facility to the Contracting Officer upon request either in the form of an email attachment or via delivery to a secured Government eRoom.

 

c. Subcontracts and Consultants

Award of any FFP subcontract or FFP consulting agreement in excess of $[***] or any cost reimbursement subcontract or consulting agreement shall not proceed without the prior written consent of the Contracting Officer via a Contracting Officer Authorization (COA) Letter upon review of the supporting documentation required by FAR Clause

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

5


52.244-2, Subcontracts. After receiving written consent of the subcontract by the Contracting Officer, a copy of the signed, executed subcontract and consulting agreement shall be provided to the Contracting Officer.

 

d. Site Visits and Inspections

At the discretion of the U.S. Government and independent of activities conducted by the Contractor, within ten (10) business days notice to the Contractor via written notification from the Contracting Officer, the U.S. Government reserves the right to conduct site visits and inspections on an as needed basis, including collection of samples limited to [***] held at the Contractor’s or Subcontractor’s site, provided that the Government’s collection of such samples should not frustrate the Contractor’s ability to perform under the contract.

 

e. Invoices—Cost and Personnel Reporting, and Variances from the Negotiated Budget

The Contractor agrees to provide a detailed breakdown on invoices of the following cost categories:

 

  a. Direct Labor—List individuals by name, title/position, hourly/annual rate, level of effort, and amount claimed.

 

  b. Fringe Benefits—Cite rate and amount

 

  c. Overhead—Cite rate and amount

 

  d. Materials & Supplies—Include detailed breakdown when total amount is over $1,000.

 

  e. Travel—Identify travelers, dates, destination, purpose of trip, and amount. Cite COA, if appropriate. List separately, domestic travel, general scientific meeting travel, and foreign travel.

 

  f. Consultant Fees—Identify individuals and amounts.

 

  g. Subcontracts—Attach sub-Contractor invoice(s).

 

  h. Equipment—Cite authorization and amount.

 

  i. G&A—Cite rate and amount.

 

  j. Total Cost

 

  k. Fixed Fee

 

  1. Total CPFF

Monthly invoices must include the cumulative total expenses to date, adjusted (as applicable) to show any amounts suspended by the Government.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

6


f. Confidential Treatment of Sensitive Information

The Contractor shall guarantee strict confidentiality of any information/data of a sensitive nature that is provided to the Contractor by the Government during the performance of the contract. The Government has determined that the information/data that the Contractor will be provided during the performance of the contract is of a sensitive nature.

Disclosure of information/data that is sensitive in nature, in whole or in part, by the Contractor can only be made after the Contractor receives prior written approval from the Contracting Officer. Whenever the Contractor is uncertain with regard to the proper handling of information/data under the contract, the Contractor shall obtain a written determination from the Contracting Officer. (See also HHSAR clause 352.224-70).

Notwithstanding the foregoing, such information/data shall not be deemed of a sensitive nature with respect to the Contractor for purposes of this contract if such information/data: (a) was already known to the Contractor; (b) was generally available or known, or was otherwise part of the public domain, at the time of its disclosure to the Contractor; (c) became generally available or known, or otherwise became part of the public domain, after its disclosure to, or, with respect to the information/data by, the Contractor through no fault of the Contractor; (d) was disclosed to the Contractor, other than under an obligation of confidentiality or non-use, by a third party who had no obligation to the Government that controls such information/data not to disclose such information/data to others; or (e) was independently discovered or developed by the Contractor, as evidenced by its written records, without the use of information/data belonging to the Government.

Contractor may disclose information/data of a sensitive nature provided by the Government to the extent that such disclosure is: (a) made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial or local governmental or regulatory body of competent jurisdiction; provided , however , that the Contractor shall first have given notice to the Government and give the Government a reasonable opportunity to quash such order and to obtain a protective order requiring that the information/data of a sensitive nature that is the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the information/data disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order; (b) otherwise required by law, in the opinion of legal counsel to the Contractor as expressed in an opinion letter in form and substance reasonably satisfactory to the Government, which shall be provided to the Government at least two (2) business days prior to the Contractor’s disclosure of the information/data; or (c) made by the Contractor to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided , however , that reasonable measures shall be taken to assure confidential treatment of such information/data.

 

7


g. Clinical and Non-Clinical Studies require Contracting Officer Authorization (COA) Letter

Draft protocols for each clinical and non-clinical study will be submitted to the BARDA Contracting Officer’s Technical Representative (COTR) for evaluation and comment. BARDA COTR comments will be incorporated into the draft proposal prior to submission to the FDA for comment, if required. BARDA COTR comments will be forwarded to the Contractor within two weeks (10 business days) of receipt of the above information. The Contractor must address in writing all study design, safety, regulatory, ethical, and conflict of interest concerns raised by the BARDA COTR. After receiving the corrected documentation that satisfies the BARDA COTR, the Contracting Officer will provide a written Contracting Officer Authorization (COA) Letter to the Contractor to authorize the study(ies). (Reference: Attachment 9: Non Clinical and Clinical Terms of Award set forth in SECTION J-List of Attachments)

 

h. Sharing of contract deliverables within United States Government (USG)

In an effort to build a robust medical countermeasure pipeline through increased collaboration, BARDA may share technical deliverables with USG entities responsible for Medical Countermeasure Development. In accordance with recommendations from the Public Health Emergency Medical Countermeasure Enterprise Review, agreements established in the Integrated Portfolio’s Portfolio Advisory Committee (PAC) Charter, Technology Transfer Agreements (TTA) between BARDA and the Defense Threat Reduction Agency and the National Institute of Allergies and Infectious Diseases (NIAID), BARDA may share technical deliverables set forth in Article F.2 with colleagues within the Integrated Portfolio. This advance understanding does not authorize BARDA to share financial information outside HHS. The Contractor is advised to review the terms of FAR Clause 52.227-14 regarding the Government’s rights to deliverables submitted during performance as well as the Government’s rights to data contained within those deliverables.

 

i. Development of a Medical Countermeasure

The Government enters into this contract with the purpose of supporting the advance research and development of ACHN-490, a broad spectrum antimicrobial for the treatment of bacterial threat agent infections, including. F. tularensis and Y. pestis or as determined by BARDA. BARDA seeks to support the preparedness mission of the HHS Public Health Emergency Medical Countermeasures Enterprise (PHEMCE), as articulated in the PHEMCE Implementation Plan ( http://wvvw.hhs.gov/aspr/barda/phemce/index.html ).”

 

j. List of Limited Data Rights.

Attachment 10, List of Limited Data Rights in SECTION J-List of Attachments contains a list of items that the Government will have limited rights to in accordance with FAR Clause 52.227-14 Rights in Data — General, Alternate II (Dec 2007). The Contractor and the Government have agreed that the list of items that are contained in Attachment 10 are all items that have been completed with the Contractor’s private funds and are not paid for by the Government under this contract. If delivered to the Government under this contract, the data contained in Attachment 10 must be separated from any other data that is paid for by the Government under this contract

 

8


and by which the Government has unlimited rights to and marked in accordance with FAR Clause 52.227-14 Rights in Data — General, Alternate II (Dec 2007).

SECTION C—DESCRIPTION/SPECIFICATIONS/WORK STATEMENT

ARTICLE C.1. STATEMENT OF WORK

Independently and not as an agent of the Government, the Contractor shall furnish all the necessary services, qualified personnel, material, equipment, and facilities not otherwise provided by the Government as needed to perform the Statement of Work dated 29 July 2010 set forth in SECTION J-List of Attachments, attached hereto and made a part of the contract.

ARTICLE C.2. REPORTING REQUIREMENTS

Technical Reports

In addition to those reports required by the other terms of this contract, the Contractor shall prepare and submit the following reports in the manner stated below and in accordance with the DELIVERIES Article in SECTION F of this contract and in SECTION J-List of Attachments, attached hereto and made a part of the contract.

A. Monthly Progress Report

This report shall include a description of the activities during the reporting period, and the activities planned for the ensuing reporting period. The first reporting period consists of the first full month of performance plus any fractional part of the initial month. Thereafter, the reporting period shall consist of each calendar month.

The Contractor shall submit a Monthly Progress Report on or before the 15 th calendar day following the last day of each reporting period and shall include the following:

A cover page that includes the contract number and title; the type of report and period that it covers; the Contractor’s name, address, telephone number, fax number, and e-mail address; and the date of submission; The progress report shall include a Table of Contents and Executive summary in accordance with the DELIVERIES Article in SECTION F of this contract.

SECTION I-An introduction covering the purpose and scope of the contract effort;

SECTION II-PROGRESS

SECTION II Part A: OVERALL PROGRESS-A description of overall progress;

SECTION II Part B: MANAGEMENT AND ADMINISTRATIVE UPDATE-A description of all meetings, conference calls, etc. that have taken place during the reporting period. Include progress on administration and management issues (e.g. evaluating, and managing subcontractor performance, and personnel changes);

SECTION II Part C: TECHNICAL PROGRESS-For each activity related to Gantt chart, document the results of work completed and cost incurred during the period covered in relation to proposed progress, effort and budget. The report shall be in sufficient detail to explain comprehensively the results achieved. The description shall include pertinent data and/or graphs in sufficient detail to explain any significant results achieved and

 

9


preliminary conclusions resulting from analysis and scientific evaluation of data accumulated to date under the contract. The report shall include a description of problems encountered and proposed corrective action; differences between planned and actual progress, why the differences have occurred and what corrective actions are planned; preliminary conclusions resulting from analysis and scientific evaluation of data accumulated to date under the project;

SECTION II Part D; PROPOSED WORK-A summary of work proposed related to Gantt chart for the next reporting period and preprints/reprints of papers and abstracts.

A Monthly Progress Report will not be required in the same month that the Quarterly or Annual Technical Progress Report is submitted.

B. Quarterly Progress Report

This report shall include a description of the activities during the reporting period, and the activities planned for the ensuing reporting period. The first reporting period consists of the first full quarter of performance plus any fractional part of the initial quarter. Thereafter, the reporting period shall consist of each calendar quarter.

The Contractor shall submit a Quarterly Progress Report on or before the 15 th calendar day following the last day of each reporting period and shall include the following: A cover page that includes the contract number and title; the type of report and period that it covers; the Contractor’s name, address, telephone number, fax number, and e-mail address; and the date of submission;

SECTION I-An introduction covering the purpose and scope of the contract effort. The progress report shall include a Table of Contents and Executive summary in accordance with the DELIVERIES Article in SECTION F of this contract.

SECTION II-PROGRESS

SECTION II Part A: OVERALL PROGRESS-A description of overall progress;

SECTION II Part B: MANAGEMENT AND ADMINISTRATIVE UPDATE-A description of all meetings, conference calls, etc. that have taken place during the reporting period. Include progress on administration and management issues (e.g. evaluating, managing subcontractor performance and personnel changes);

SECTION II Part C: TECHNICAL PROGRESS-For each activity related to Gantt chart, document the results of work completed and cost incurred during the period covered in relation to proposed progress, effort and budget. The report shall be in sufficient detail to explain comprehensively the results achieved. The description shall include pertinent data and/or graphs in sufficient detail to explain any significant results achieved and preliminary conclusions resulting from analysis and scientific evaluation of data accumulated to date under the contract. The report shall include a description of problems encountered and proposed corrective action; differences between planned and actual progress, why the differences have occurred and what corrective actions are planned; preliminary conclusions resulting from analysis and scientific evaluation of data accumulated to date under the project;

SECTION II Part D; PROPOSED WORK- A summary of work proposed for the next reporting period; and preprints/reprints of papers, abstracts and a current/updated Gantt chart. A Quarterly Progress Report will not be required in the same month that the

 

10


Annual Progress Report is submitted.

SECTION III Part A: Earned Value Management Reporting: Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS and a Variance Analysis Report. EVMS shall be applied to all Cost Plus Fixed Fee CLINs as part of the Integrated Master Project Plan following the Seven Principles of Earned Value Management. BARDA may request, on a quarterly or ad hoc basis that the Contractor provide raw data. BARDA may request additional data at a reporting level or at lower levels, as BARDA deems necessary

C. Annual Progress Report

This report shall include a summation of the results of the entire contract work for the period covered. An Annual Technical Progress Report will not be required for the period when the Final Technical Progress Report is due. Monthly and Quarterly Progress Reports shall not be submitted in the same month when an Annual Progress Report is due.

The first Annual Progress Report shall be due on or before the 15 th Calendar day following the last day of the reporting period. Each Annual Progress Report shall include:

A Cover page that includes the contract number and title; the type of report and period that it covers; the Contractor’s name, address, telephone number, fax number, and email address; and the date of submission; The progress report shall include a Table of Contents in accordance with the DELIVERIES Article in SECTION F of this contract.

SECTION I: EXECUTIVE SUMMARY—A brief overview of the work completed, and the major accomplishments achieved during the reporting period;

SECTION II: PROGRESS

SECTION II Part A: OVERALL PROGRESS-A description of overall progress;

SECTION II Part B: MANAGEMENT AND ADMINISTRATIVE UPDATE-A description of all meetings, conference calls, etc. that have taken place during the reporting period. Include progress on administration and management issues (e.g. evaluating, and managing subcontractor performance; regulatory compliance audits, and personnel changes);

SECTION II Part C: TECHNICAL PROGRESS—A detailed description of the work performed structured to follow the activities and decision gates outlined at the Integrated Baseline Review and as described in the approved Integrated Master Plan. The Report should include a description of any problems (technical or financial) that occurred or were identified during the reporting period, and how these problems were resolved;

SECTION II Part D; PROPOSED WORK-A summary of work proposed for the next year period to include an updated Gantt Chart.

SECTION III Part A: Earned Value Management Reporting: Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS and a Variance Analysis Report. EVMS shall be applied to all Cost Plus Fixed Fee CLINs as part of the Integrated Master Project Plan following the Seven Principles of Earned Value Management. BARDA may request, on a quarterly or ad hoc basis that the Contractor provide raw data. BARDA may request additional data at a reporting level or at lower levels, as BARDA deems necessary

 

11


  1. Copies of manuscripts (published and unpublished), abstracts, and any protocols or methods developed specifically under the contract during the reporting period; and

 

  2. A summary of any Subject Inventions per the requirements under FAR Clause 52.227-11

D. Draft Final Technical Progress Report and Final Technical Progress Report

These reports are to include a summation of the work performed and results obtained for the entire contract period of performance. This report shall be in sufficient detail to describe comprehensively the results achieved. The Draft Final Report and Final Report shall be submitted in accordance with the DELIVERIES Article in SECTION F of the contract. An Annual Technical Progress Report will not be required for the period when the Final Technical Progress Report is due. The Draft Final Technical Progress Report shall be submitted one hundred twenty (120) calendar days before completion date of the contract and the Final Technical Progress Report shall be submitted on or before the completion date of the contract. The report shall conform to the following format:

 

  1. Cover page to include the contract number, contract title, performance period covered, Contractor’s name and address, telephone number, fax number, email address and submission date; The progress report shall include a Table of Contents in accordance with the DELIVERIES Article in SECTION F of this contract.

 

  2. SECTION I: EXECUTIVE SUMMARY-Summarize the purpose and scope of the contract effort including a summary of the major accomplishments relative to the specific activities set forth in the Statement of Work.

 

  3. SECTION II: RESULTS-A detailed description of the work performed related to the Gantt chart, the results obtained, and the impact of the results on the scientific and/or public health community, including a listing of all manuscripts (published and in preparation) and abstracts presented during the entire period of performance, and a summary of all inventions.

Draft Technical Progress Report : The Contractor is required to submit the Draft Final Technical Progress Report to the Contracting Officer’s Technical Representative and Contracting Officer. This draft report is due 30 calendar days before the completion date of the contract. The Contracting Officer’s Technical Representative and Contracting Officer will review the Draft Final Technical Progress Report and provide the Contractor with comments within 15 calendar days after receipt.

Final Technical Progress Report : The Contractor will deliver the final version of the Final Technical Progress Report on or before the completion date of the contract. The final version shall include or address the Contracting Officer’s Technical Representative comments and Contracting Officer comments on the draft report. The final report is due 15 calendar days before the completion date of the contract.

 

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E. Summary of Salient Results

The Contractor shall submit, with the Final Technical Progress Report, a summary (not to exceed 200 words) of salient results achieved during the performance of the contract.

F Other Technical Progress Reports

 

  1. Draft Report for Clinical and Non-Clinical Studies and Final Report for Clinical and Non-Clinical Studies

 

    The non-clinical and clinical trial reports shall follow the format of International Conference on Harmonization document ICH E3 “Guidelines on Structure and Content of Clinical Study Reports”
( http://www.pharmacontract.ch/support/su_ich_liste.htm ).

 

    Draft Final Report for Clinical and Non-Clinical Studies will be submitted to the Contracting Officer’s Technical Representative and Contracting Officer (CO) for review and comment within 20 business days (draft) or 40 business days (final) after completion of analysis of Pre-Clinical/Non Clinical/Clinical data and 15 business days prior to submission to FDA. Subcontractor prepared reports shall be submitted to the Contracting Officer’s Technical Representative and Contracting Officer (CO) for review and comment no later than 5 business days after receipt by the prime contractor.

 

    The Contracting Officer shall provide written comments within 20 business days after the submission of the Draft Final Report for Clinical and Non-Clinical Studies.

 

    The comprehensive Final Report for Clinical and Non-Clinical Studies will be submitted to the Contracting Officer and the Contracting Officer’s Technical Representative within 20 business days after receiving comments on the Draft Final Report for Clinical and Non- Clinical Studies from the Contracting Officer. The final version shall include or address the Contracting Officer’s Technical Representative comments and Contracting Officer comments on the draft report

 

    See section ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES for additional clarification and deliverable requirements.

G. Audit Reports

Within three (3) calendar days of an audit related to conformance to FDA regulations and guidance, including adherence to GLP, GMP, or GCP guidelines, as it relates to performance under this contract where the results will adversely impact contract performance, the Contractor shall provide the Contracting Officer’s Technical Representative and the Contracting Officer with copies of the audit report. Within fifteen (15) calendar days of audit report Contractor shall provide a plan for addressing areas of nonconformance to FDA regulations and guidance for GLP, GMP or GCP guidelines as identified in the final audit report. See section ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES for additional clarification and deliverable requirements.

 

13


H. Clinical and Non-Clinical Protocols

BARDA has a responsibility to ensure that mechanisms and procedures are in place to protect the safety of participants and animals in BARDA funded clinical trials and non-clinical studies. Therefore, as described in Article B.5., the Contractor shall develop a protocol for each clinical trial and non-clinical study and submit all protocols and protocol amendments to the BARDA Contracting Officer’s Technical Representative (COTR) for review and final approval by the Contracting Officer. Important information regarding performing human subject research is available at http://www3.niaid.nih.gov/healthscience/clinicalstudies/ . The Contractor shall obtain a Contracting Officer Authorization (COA) Letter authorizing the specific clinical or non-clinical study(ies), prior to commencing the study(ies). For additional information contractor shall review the Attachment 9: Non-Clinical and Clinical Terms of Award set forth in SECTION J-List of Attachments and ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES.

Any updates to technical reports are to be addressed in the Monthly, Quarterly and Annual Progress Reports. The Contractor shall advise the Contracting Officer’s Technical Representative or designee in writing and via electronic communication in a timely manner of any issues potentially affecting contract performance.

I. Other Reports/Deliverables

The Contractor shall provide all deliverables as outlined in the table under ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES section of this document.

ARTICLE C.3. SUBJECT INVENTION REPORTING REQUIREMENT

All reports and documentation required by FAR Clause 52.227-11, including, but not limited to, the invention disclosure report, the confirmatory license, and the Government support certification, shall be directed to the Extramural Inventions and Technology Resources Branch, OPERA, NIH, 6705 Rockledge Drive, Room 2207, MSC 7987, Bethesda, Maryland 20892-7987 (Telephone: 301-435-1986). In addition, one copy of an annual utilization report, and a copy of the final invention statement, shall be submitted to the Contracting Officer. The final invention statement (see FAR 27.303(b)(2)(ii)) shall be submitted to the Contracting Officer on the expiration date of the contract. See also FAR clause 52.227-11 (Patent Rights-Ownership by the Contractor).

Reports and documentation submitted to the Contracting Officer shall be sent to the following address:

Contracting Officer

Ethan J. Mueller

Office of Acquisitions Management, Contracts, and Grants (AMCG)

330 Independence Avenue, S.W.

Room G640

Washington, D.C. 20201

 

14


If no invention is disclosed or no activity has occurred on a previously disclosed invention during the applicable reporting period, a negative report shall be submitted to the Contracting Officer at the address listed above.

To assist contractors in complying with invention reporting requirements of the clause, “Interagency Edison,” an electronic invention reporting system has been developed. Use of Interagency Edison is encouraged as it streamlines the reporting process and greatly reduces paperwork. Access to the system is through a secure interactive Web site to ensure that all information submitted is protected. Interagency Edison and information relating to the capabilities of the system can be obtained from the Web ( http://www.iedison.gov ), or by contacting the Extramural Inventions and Technology Resources Branch, OPERA, NIH.

ARTICLE C.4. TWICE MONTHLY CONFERENCE CALLS

A conference call between the Contracting Officer’s Technical Representative and the principal investigator shall occur bi-monthly or as directed by the Contracting Officer’s Technical Representative. During this call the principal investigator will discuss the activities during the reporting period, any problems that have arisen and the activities planned for the ensuing reporting period. The first reporting period consists of the first full month of performance plus any fractional part of the initial month. Thereafter, the reporting period shall consist of each calendar month. The principal investigator may choose to include other key personnel on the conference call to give detailed updates on specific projects or this may be requested by the Contracting Officer’s Technical Representative.

ARTICLE C.5. PROJECT MEETINGS

The Contractor shall participate in Project Meetings to coordinate the performance of the contract, as requested by the Contracting Officer’s Technical Representative. These meetings may include face-to-face meetings with BARDA/AMCG in Washington, D.C. and at work sites of the Contractor and its subcontractors. Such meetings may include, but are not limited to, meetings of the Contractor (and subcontractors invited by the Contractor) to discuss study designs, site visits to the Contractor’s and subcontractor’s facilities, and meetings with the Contractor and HHS officials to discuss the technical, regulatory, and ethical aspects of the program. The Contractor must provide data, reports, and presentations to groups of outside experts and USG personnel as required by the Contracting Officer’s Technical Representative in order to facilitate review of contract activities. Subject to other provisions specified in this contract (See for example Article F.2), the Contractor shall provide the COTR with a minimum of 48 hours notice of both formal and informal meetings and communications with the Food and Drug Administration (FDA) including anticipated telephone communications. In the event that the COTR or other authorized BARDA representative is unable to participate in a meeting or telephone conference the Contractor shall provide the COTR with a written summary of all subjects discussed no later than three (3) calendar days following the meeting or conference.

SECTION D—PACKAGING, MARKING AND SHIPPING

All deliverables required under this contract shall be packaged, marked and shipped in accordance with Government specifications. At a minimum, all deliverables shall be marked

 

15


with the contract number and Contractor name. The Contractor shall guarantee that all required materials shall be delivered in immediate usable and acceptable condition.

Report Deliverables

Unless otherwise specified by the Contracting Officer, delivery of reports to be furnished to the Government under this contract (including invoices), shall be delivered to BARDA electronically along with a concurrent email notification to the Contracting Officer, Contract Specialist, and COTR summarizing the electronic delivery.

In addition, a physical hard copy, will be sent unless otherwise specified by the Contracting Officer, delivery of reports to be furnished to the Government under this contract (including invoices), shall be addressed as follows:

Joseph Larsen, Ph.D., Contracting Officer’s Technical Representative (COTR)

DHHS/OS/ASPR/BARDA

330 Independence Avenue, S.W.

Room G644

Washington, D.C. 20201

E-mail: Joseph.Larsen@hhs.gov

Ethan J. Mueller, Contracting Officer and Contract Specialist

DHHS/OS/ASPR/AMCG

330 Independence Avenue, S.W.

Room 640G

Washington, D.C. 20201

E-mail: Ethan.Mueller@hhs.gov

SECTION E—INSPECTION AND ACCEPTANCE

 

a. The Contracting Officer or the duly authorized representative will perform inspection and acceptance of materials and services to be provided under this contract.

 

b. For the purpose of this SECTION, the designated Contracting Officer’s Technical Representative (COTR) is the authorized representative of the Contracting Officer.

 

c. Inspection and acceptance will be performed at:

Biomedical Advanced Research and Development Authority

Office of the Assistant Secretary for Preparedness and Response

U.S. Department of Health and Human Services

330 Independence Avenue, S.W., Room G644

Washington, D.C. 20201

 

d. The contract incorporates the following clause by reference with the same force and effect as if it were given in full text. Upon request, the Contracting Officer will make its full text available.

 

16


FAR Clause 52.246-8, Inspection of Research and Development—Cost Reimbursement (May 2001)

SECTION F—DELIVERIES OR PERFORMANCE

Deliveries and performance under these Contract Line Item Numbers (CLINs) and Option CLINs shall be as follows:

ARTICLE F.1. PERIOD OF PERFORMANCE

 

a. Under CLIN 0001, the base period of performance of this contract shall be from 9/19/2010-9/18/2012.

b. If the Government exercises its options pursuant to the OPTION CLAUSE Article in Section H of the contract, the period of performance will be increased as listed below:

 

OPTION CLIN

   PERIOD OF
PERFORM.
    

SUPPLIES/SERVICES

0002

    
 
9/19/2012-
9/18/2013
 
  
   Option Period 1: [***]

0003

    
 
9/19/2013-
9/18/2014
 
  
   Option Period 2: [***]

0004

    
 
9/19/2014-
9/18/2015
 
  
   Option Period 3: [***]

ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES

Successful performance of the final contract shall be deemed to occur upon performance of the work set forth in the Statement of Work dated 29 July 2010 set forth in SECTION J-List of Attachments of this contract and upon delivery and acceptance, as required by the Statement of Work, by the Contracting Officer, or the duly authorized representative, of the following items in accordance with the stated delivery schedule:

The items specified below as described in the REPORTING REQUIREMENTS Article in SECTION C of this contract and the Statement of Work dated 29 July 2010 set forth in SECTION J-List of Attachments will be required to be delivered F.O.B. Destination as set forth in FAR 52.247-35, F.O.B. DESTINATION, WITHIN CONSIGNEES PREMISES (APRIL 1984), and in accordance with and by the date(s) specified below and any specifications stated in SECTION D, PACKAGING, MARKING AND SHIPPING, of this contract:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

17


1. Other Contract Deliverables

 

#

  

Type of Deliverable

  

Frequency/time
periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

1.    Project Meeting    Bi-Weekly or as amended by CO and PO    The Contractor shall participate in bi-weekly teleconferences with BARDA to discuss the performance of the contract. The Contractor prepares a proposed agenda and shall record maintain and provide, draft-meeting minutes to the Project Officer (PO) for approval. The PO will approve the draft version and distribute the fmal version to the Contract Officer (CO) and Contractor.   

•        Contractor provides agenda 48hrs in advance of meeting to the PO

 

•        PO approves (with CO concurrence) and distributes agenda

 

•        Contractor provides meeting minutes within 48hr of the meeting

 

•        PO reviews, comments and approves minutes

   1 Electronic Copy to PO and CO
2.    Monthly, Quarterly and Annual Project Status Report/ Meeting    Monthly reports are due on the 15th of each month, except on months when Quarterly/Annual Technical Progress Reports are due   

The Monthly/Quarterly Project/Annual Status Report shall address the items listed below and cross-referenced to the Work Breakdown Structure (WBS), Scope of Work (SOW), Integrated Master Schedule(IMS), Integrated Baseline Review (IBR) report, Earned Value Management (EVM) Cost Performance Reports (CPR), and approval strategy.

 

1.      A Executive Summary in MS PowerPoint (.ppt) format, highlighting the progress, issues, and relevant activities in manufacturing, non-clinical, clinical, and regulatory. The Executive Summary should be limited to 2-3 pages and highlight critical issues for that reporting period. The Monthly, Quarterly, and Annual Technical Progress Report shall address each

  

Monthly Reports:

 

•        Contractor provides Monthly Status Report deliverables on the 15th of each month via email/CD

 

•        PO and CO will review Monthly Reports with the Contractor and provide feedback

 

Quarterly Meeting:

 

•        Contractor provides Quarterly Status Report five business days prior to meeting. This report is an expanded version of the Monthly Status Report

 

•        Contractor shall identify itinerary for the quarterly site visits

 

•        Contractor provides agenda to the PO 48hr in advance of meeting

 

•        PO approves (with CO concurrence) and distributes agenda

 

•        Contractor provides

   1 Electronic Copy to PO and CO

 

18


        

of the items below and be cross-referenced to the Critical Path, Integrated Master Schedule (IMS), EVM, WBS/Project Plan and the Risk Mitigation Plan.

 

2.      Progress in meeting contract milestones—broken out by subtasks within each milestone, overall project assessment, problems encountered and recommended solutions. The reports shall detail the planned progress and actual progress during the period covered, explaining occurrences of any differences between the two, and the corrective steps.

 

3.      Provide EVM CPR (quarterly) and Updated Risk Management Plan/Register (quarterly)

 

4.      The reports shall also include a three-month rolling forecast of key planned activities, referencing the WBS/IPDP.

 

5.      A tracking log of progress on regulatory submissions with the FDA submission number, description of submission, date of submission, status of submission, and next steps shall be updated continuously upon submission for all Biodefense and Non-Biodefense activities supported in part or whole with BARDA funding

  

meeting minutes within 48hr of the meeting

 

•        PO reviews, comments and approves minutes

 

Annual Meeting:

 

•        Contractor provides AnnualProject Status Report deliverables five business days prior to meeting. The annual report should also include information from the annual meeting due 15 business days after the meeting. A draft report including .ppt slides should be provided 5 business days prior to the meeting.

 

•        Contractor shall ensure that the board of directors is available to meet with BARDA. BARDA reserves the right to meet with the Contractor’s board of directors once a year to discuss the contract

 

•        PO approves (with CO concurrence) and distributes agenda

 

•        PO approves (with CO concurrence) all meeting material

 

•        Contractor provides meeting minutes within 48hr

 

•        PO reviews, comments and approves minutes

 

•        Contractor provides a FINAL annual report within 15 business days after the conclusion of the annual meeting. PO (with CO concurrence)

  

 

19


        

6.      Estimated and Actual Expenses: This report shall also contain a narrative statement or in table form as to whether there is any discrepancy at this time between the % of work completed and the cumulative costs incurred to date. This section of the report shall also contain estimates for the subcontractors’ expenses from the previous month if the subcontractor did not submit a bill in the previous month. Estimates shall be listed for each subcontractor. If the subcontractor(s) was not working or did not incur any costs in the previous month, then a statement to this effect should be included in this report for those respective subcontractors. This section should also include a summary of any cost savings identified by the contractor as part of the 5% cost savings initiative.

 

7.      Contractor shall identify the itinerary for the quarterly site visits (quarterly)

  

reviews, comments and approves FINAL Annual Report

 

•        BARDA and Contractor shall participate in an in-process review

  
3.    Integrated Baseline Review (IBR) award    Within 90 days of contract   

The IBR Report shall address each of the items listed below and be cross-referenced to the WBS, SOW, IMS and approval strategy.

 

1.      Contractor provides baseline proposal and PowerPoint brief

 

2.      A description of the work scope through control

  

•        Contractor provides baseline proposal, .ppt briefing, 10 business days prior to meeting

 

•        Contractor provides agenda to the PO 48hr in advance of meeting

 

•        PO approves (with CO concurrence) and distributes agenda

   1 Electronic Copy to PO and CO

 

20


        

account Work Authorization Documents (WADs)

 

3.      Template for Work Packages

 

4.      Integrated Master Schedule (IMS) with the inclusion of agreed major milestones and control account plans (CAP) for all control accounts

 

5.      Baseline revision documentation and program logs (s) risk register.

  

•        PO approves (with CO concurrence) all meeting material

 

•        Contractor provides minutes within 48hr of the meeting

 

•        PO reviews and approves minutes

 

•        BARDA will review documentation and provide written comments and questions to Contractor

 

•        Contractor shall address BARDA’s comments and resubmit IBR for BARDA approval within 10 business days

  
4.    Integrated Master Plan    30 days following contract award and updated quarterly    Integrated Master Plan (aka Integrated Product Development Plan) including WBS, critical path milestones and Earned Value Management Plan   

•        Contractor shall provide all the Integrated Master Plan deliverables 30 days following contract award, and thereafter on the 15th of each month. Deliverable should be included in the Quarterly or Annual Project Status Reports,

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Integrated Master Plan, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  
5.    Risk Manage-ment Plan    90 days following contract award and    The Contractor will provide a Risk Management Plan that outlines the impacts of each risk in relation to the cost,   

•        Contractor shall provide a Risk Management Plan 90 days following contract award and

   1 Electronic Copy to PO and CO

 

21


      updated quarterly (additional submissions as requested by CO or PO)    schedule and performance objectives. The Risk Management Plan will include risk mitigation strategies. Each risk mitigation strategy will capture how the corrective action will reduce impacts on cost, schedule and performance.   

update on the 15th of each Quarter in their Quarterly or Annual Project Status Reports

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Risk Management Plan, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  
6.    Program Integrated Master Schedule and Narrative Project Plan    The 15th of each quarter (additional submissions as requested by CO or PO)    The Contractor will provide Program Integrated Master Schedule (IMS) and Narrative Project Plans with quarterly status updates to reflect changes in schedule, performance, and critical path   

•        Contractor shall provide an Integrated Master Schedule on the 15th of each quarter in their quarterly or annual Project Status Reports

 

•        Integrated Master Schedule shall be in both PDF and Microsoft Project Form

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted IMS, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

   1 Electronic Copy (PDF and Microsoft Project Schedule (.mmp) format to PO and CO
7.    EVM / Contract Performance Report    The 30th day of the month after each calendar quarter (additional submissions    Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS and a Variance Analysis Report. Contractor will report    Contractor shall provide a CPR and Variance Analysis Report on the 30th day of the month after the end of each calendar quarter in their Quarterly or Annual    1 Electronic Copy to PO and CO

 

22


      as requested by CO or PO)    EVM data on all Cost Plus CLINs   

Project Status Reports

Contractor shall provide and changes in baseline cost as a result of anticipated cost savings or risks

 

•        Contractor shall provide a PDF of deliverables. BARDA may request, on a quarterly or ad hoc basis that the Contractor provide raw data. BARDA may request additional data at a reporting level or at lower levels, as BARDA deems necessary

 

•        The Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA

  
8.    Incident Report    Within 24 or 48 hrs of activity or incident   

The Contractor shall communicate and document all critical programmatic concerns, risks or potential risks with BARDA within 48 hours. The Contractor shall communicate via email or telephone.

 

The Contractor shall report to the government any activity or incident that is in violation of established security standards or indicates the loss or theft of government products within 24 hrs of activity or incident.

 

The Contractor shall communicate via email, oral or written communication.

 

  

•        Email, Letter to CO Telephone (w/ written follow-up)

 

•        Written communication with BARDA PO and CO within 48 hrs of Contractor identifying a project risk or potential risk and 24 hrs for Security activities or incident

 

•        Additional updates within 48 hrs of additional developments, additional information and/or understanding

 

•        Contractor shall submit within 5 business days a Corrective Action Plan (if necessary) to address any potential security issues

   1 Electronic Copy PO and CO

 

23


           

•        If corrective action is required, the Contractor must address concerns raised by BARDA

 

•        Contractor shall address BARDA’s concerns in writing within 5 business days

  
9.    Deviation Request    TBD    Process for changing study protocols and/or the Integrated Master Plan (a.k.a Integrated Product Development Plan)   

•        Contractor shall submit a Deviation Request as soon as the Contractor has sufficient data to support the need for a change from the approved study protocols and/or Integrated Master Plan

 

•        The BARDA CO will review and provide a written response to the Deviation Request.

 

•        Contractor shall address BARDA’s comments and resubmit the deviation request that addresses BARDA’s comments within 5 business days

 

•        Contractor shall not proceed with the deviation until BARDA gives its approval

   1 Electronic Copy to PO and CO
10.    Draft and Final Technical Progress Report    Draft 20 business days before and Final 10 business days after completion of the POP   

A draft of Final Technical Progress Report containing a summation of the work performed and the results obtained for the entire contract period of performance. The draft report shall be duly marked as ‘Draft’.

 

The Final Technical Progress Report incorporating the feedback received from BARDA and containing a summation of the work performed and the results

  

•        Contractor shall provide a draft report 20 business days and final 10 business days before completion of the contract period

 

•        PO provides edits and additional feedback, which Contractor will incorporate into the Final Technical Progress Report

 

•        The Contractor shall submit one (1) copy of

   1 Electronic Copy to PO and CO

 

24


         obtained for the entire contract period of performance. This final report shall detail, document and summarize the results of the entire contract. This report shall be in sufficient detail to fully describe the progress achieved under all milestones. The final report shall be duly marked as ‘Final’.   

a comprehensive final report to the CO and two (2) copies (one electronically on a CD) to the PO

  
11.    Product Transition Strategy    90 days prior to end of the (base/option) POP   

Contractor shall provide a Product Transition Strategy to support transition of the product(s) prior to end of the base and/or option(s) POP. The Product Transition Strategy should provide a strategic plan for further development and/or stockpiling of the product

The transition strategy shall provide options and/or a specific approach for the transition of MCM product for further development, procurement, approval and/or stockpile

  

•        Contractor shall provide a Product Transaction Strategy to support transition of product(s) 90 days prior to end of the (base/option) POP as an addendum to that Quarter’s Quarterly Project Status Report.

   1 Electronic Copy to PO and CO
12.    Decision Gate Presentation    Event Driven Review following completion of a pre-defined stage of product development and prior to initiation of a new stage    Contractor shall provide a presentation following a prescribed template provided by BARDA prior to the Decision Gate Review   

•        Contractor shall provide an update to technical progress made towards completion of the Decision Gate and provide the presentation, 10 business days prior to the Decision Gate Review

 

•        Contractor shall submit written justification of progress towards satisfying Decision Gate criteria

 

•        After reviewing, the BARDA PO and CO will provide a written

   1 Electronic Copy to PO and CO

 

25


           

response

  
13.    Standard Operating Procedures    As requested by PO and CO    Contractor shall provide Standard Operating Procedures (SOPs) to BARDA for review, as they are completed and updated   

•        Contractor shall submit the Standard Operating Procedures (SOPs) in the form requested by the PO and CO within 15 calendar days of request

   1 Electronic Copy to PO and CO
14.    Approval Strategy    Within 90 days of contract award and updated as part of the quarterly report    Contractor shall provide overview of the approval strategy to include all clinical and non-clinical studies   

•        Contractor will submit proposed clinical and non-clinical strategy to support approval

 

•        If corrective action is required, the Contractor must address concerns raised by BARDA

   1 Electronic Copy to PO and CO
15.    Study Protocols    At least 10 business days prior to FDA Submission   

Contractor shall provide Pre-Clinical/Non-Clinical/ Clinical Trial Protocols to BARDA for evaluation, prior to FDA submission

(The CO and PO reserves the right to request within the period of performance a non-proprietary Study Protocol for distribution within the United States Government(USG))

  

•        Contractor will submit proposed protocols to BARDA at least 10 business days prior to FDA submission. If corrective action is required, the Contractor must address in writing all safety, regulatory, ethical, and conflict of interest concerns raised by BARDA to the satisfaction of BARDA before study execution

 

•        After receiving the corrected documentation, that satisfies BARDA the CO will provide a written Contract Officer Authorization (COA) Letter to the Contractor. This COA provides authorization to the Contractor to execute the specific clinical study funded in part or in whole by BARDA

 

•        Contractor shall not proceed with any study

   1 Electronic Copy to PO and CO

 

26


           

protocol until BARDA gives its approval

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one calendar day after its submission to CDER

  
16.    Study Reports    Within 30 (draft) or 60(final) calendar days after completion of analysis and 15 business days prior to submission to FDA   

Contractor shall provide Draft and Final Pre-Clinical/Non-Clinical Study Reports to BARDA for review and edits within 30 (draft) or 60 (final) calendar days after completion of analysis of Pre-Clinical/Non-Clinical/ Clinical data and 21 business days prior to submission to FDA

(The CO and PO reserves the right to request within the period of performance a non-proprietary Study Report for distribution within the USG)

  

•        Contractor shall provide Draft and Final Pre- Clinical/Non-Clinical Study Reports to BARDA within 30 (draft) or 60 (final) calendar days after completion of each report

 

•        Contractor will submit proposed Pre-Clinical/Non-Clinical Study Report to BARDA at least 15 business days prior to FDA Submission

 

•        If corrective action is required, The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

•        Contractor shall not proceed with any study report until BARDA gives its approval

 

•        Final FDA submissions shall be provided to BARDA concurrently or no later than 1 calendar day of its submission to CDER

   1 Electronic Copy to PO and CO
17.    Manufacturing Campaign Reports    Within 30 calendar days after receipt of batch    Contractor shall provide Manufacturing Campaign Reports to BARDA for review and edits prior to submission   

•        Contractor will submit proposed Analysis Reports and Manufacturing

   1 Electronic Copy to PO and CO

 

27


      records and 15 business days prior to submission to FDA   

to FDA

(The CO and PO reserve the right to request within the period of performance a non- proprietary Manufacturing Campaign Reports for distribution within the USG)

  

Campaign Reports to BARDA at least 15 business days prior to FDA Submission.

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

•        Contractor shall not proceed with any FDA submission until BARDA gives its approval

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day after its submission to CDER

  
18.    FDA Meeting Notification    No later than 10 business days prior to the scheduled meeting    The contractor shall forward the dates and times of any meeting with the FDA to BARDA and arrange for appropriate BARDA staff to attend the FDA meetings. BARDA staff shall include up to a maximum of four people (PO, CO, and up to two (2) Subject Matter Experts (SME(s)).   

•        Contractor must notify BARDA of an upcoming meeting with the FDA within 24 hours of scheduling the meeting with the FDA and no later than 10 business days prior to the scheduled meeting

   1 Electronic Copy to PO and CO
19.    FDA Correspondence and Meeting Minutes    Within three (3) calendar days of receiving correspondence from the FDA    The contractor shall forward initial Contractor and CDER-issued draft minutes and final minutes of any meeting with the FDA to BARDA. All documents shall be duly marked as either ‘Draft’ or ‘Final’.   

•        Contractor provides FDA correspondence and meeting minutes within three (3) calendar days of the meeting or correspondence

   1 Electronic Copy to PO and CO
20.    FDA Submissions    At least 15 business days prior to submission to FDA    The Contractor shall provide BARDA the opportunity to review and comment upon all draft regulatory documents before submission to the FDA.   

•        Contractor will submit proposed FDA Meeting Briefing Packets to BARDA at least 15 business days prior to

   1 Electronic Copy to PO and CO

 

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Contractors shall provide BARDA with an electronic copy of the final FDA submission. All documents shall be duly marked as either ‘Draft’ or ‘Final’.

 

The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA submission.

  

FDA submission

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA before FDA submission

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission to CDER

  
21.    FDA Audits    Within 10 business days of a scheduled audit or within 24 hours of an ad hoc site visits/audits if the FDA did not provide advanced notification    The Contractor shall notify the PO and CO within 24 hours of FDA’s arrival to conduct site visits/audits by any regulatory agency. In the event of an FDA inspection which occurs as a result of this contract and for this product, or for any other FDA inspection that has the reasonable potential to impact the performance of this contract, the Contractor shall provide the BARDA with an exact copy (non-redacted of the FDA Form 483, and the Establishment Inspection Report (EIR). The contractor shall provide the PO and CO copies of the plan for addressing areas of non- conformance to FDA regulations for GLP, GMP, or GCP guidelines as identified in the audit report within 10 business days, status updates during the plans execution, and a copy of all final responses to the FDA. The Contractor shall also provide redacted copies of any FDA audit report received from subcontractors that occur as a   

•        The Contractor shall notify the PO and CO within 24 hours of all FDA arrivals to conduct site visits/audits by any regulatory agency

 

•        Contractor provides QA Audit Reports within 15 calendar days of the audit

 

•        The Contractor shall also Provide copies of any FDA audit report received from subcontractors that occur as a result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party.

   1 Electronic Copy to PO and CO

 

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         result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party. The Contractor shall make arrangements for a BARDA representative(s) to be present during the final debrief by the regulatory inspector.      
22.    QA Audit Reports    5 business days before report completion    The Contractor shall inform the PO and CO in advance of upcoming audits/site visits of subcontractors as part of the weekly communications, including goals and agenda. BARDA reserves the right to participate in the audit. Upon completion of the audit/site visit the Contractor shall provide a report capturing the findings, results and next steps in proceeding with the subcontractor. If action is requested of the subcontractor, details addressing areas of non-conformance to FDA regulations for GLP, GMP, or GCP guidelines, as identified in the audit report, must be provided to BARDA. The Contractor shall provide responses from the subcontractors to address these concerns and plans for corrective action execution   

•        The Contractor shall inform the PO and CO 10 days in advance of upcoming audits/site visits of subcontractors

 

•        The Contractor shall notify the PO and CO within 5 business days of report completion

   l Electronic Copy to PO and CO
23.    BARDA Audit    Ad Hoc    The contractor shall accommodate for periodic or ad hoc site visits by BARDA. If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA.   

•        If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA within 10 business days.

   1 Electronic Copy to PO and CO

 

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•        The PO and CO will review the deliverable and provide a response to the Contractor.

 

•        Once corrective action, approved by the CO, is completed, the Contractor will provide a final report to BARDA

  
24.    Technical Documents    Within 10 business days upon request by CO/PO   

Contractor shall provide PO and CO upon request with deliverables from the following contract funded activities: Process Development Reports, Assay Qualification Plan/Report, Assay Validation Plan/Report, Assay Technology Transfer Report, Batch Records, SOPs, Master Production Records, Certificate of Analysis

(The CO and PO reserves the right to request within the period of performance a non-proprietary Technical Documents for distribution within the USG)

  

•        Contractor provides deliverables within 15 calendar days of the completion of activities

 

•        If additional time is required, Contractor shall request additional time from BARDA on a per deliverable basis

 

•        If corrective action is required, the Contractor must address in writing concerns raised by BARDA

 

•        Contractor will submit proposed FDA Technical Documents to BARDA at least 15 business days prior to FDA submission

 

•        If corrective action is required the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

  

For Final Documents:

1 Electronic Copy to PO and CO

25.    Animal Model or Other Technology Transfer Package    Within 10 business days of request by CO/PO    Contractor shall provide Animal Model or Other Technology Transfer Package relevant data   

•        Contractor shall provide Animal Model or other Technology Transfer Package within 10 business days of request by CO/PO

   1 Electronic Copy to PO and CO
26.    Raw Data or Data Analysis    Within 20 business days after receipt    Contractor shall provide Raw Data or Data Analysis for review by BARDA if   

•        Contractor shall provide Raw Data or Data Analysis within 20

   1 Electronic Copy to PO and CO

 

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      of request by CO/PO    requested   

business days of request by CO/PO

  
27.    Samples of Therapeutics    Within 20 business days of request by CO/PO    Contractor shall provide samples of non-GMP candidate therapeutics and GMP material manufactured with contract funding to include raw material, Bulk Drug Substance (BDS), Final Drug Product (FDP) and/or labeled and packaged treatment courses. The request will state the type of material and the amount but it is not to exceed the equivalent of 250 treatment courses or its individual manufacturing equivalent. The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped. It is acceptable to label material “Not for Clinical Use”. BARDA reserves the right to request samples throughout the period of performance.   

•        Contractor must submit samples of therapeutics within 20 business days of request by CO/PO.

 

•        The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped.

   CO will provide details upon request
28.    Publications    20 business days for manuscripts and 10 business days for abstracts    Any manuscript or scientific meeting abstract containing data generated under this contract must be submitted to BARDA for review prior to submission   

•        Contractor must submit all manuscript or scientific meeting abstract to PO and CO within 20 business days for manuscripts and 10 business days for abstracts

 

•        The CO will respond with written comments within 10 business days for manuscripts and 5 business days for abstracts.

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the

   1 Electronic Copy to PO and CO

 

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satisfaction of BARDA before Submission.

 

•        Any Final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission

  
29.    Press Releases    5 business days prior to release    The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases   

•        The Contractor shall ensure that the CO has received and approved an advanced copy of any press release to this contract not less than 5 business days prior to the issuance of the press release

 

•        If corrective action is required, the Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases

 

•        Any final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission.

   1 Electronic Copy to PO and CO
30.    Contract financing Report    No later than the 30th business day after the end of the reporting period    The Financial Report shall be submitted by the Contractor in accordance with the instructions set forth in section G.4 of this contract.    The Contractor shall provide the contract financing report no later than the 30th business day after the end of the reporting period in accordance with the instructions set forth in section G.4 of this contract.   

 

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[***]

Unless otherwise specified by the Contracting Officer, delivery of reports to be furnished to the Government under this contract (including invoices), shall be delivered electronically along with a concurrent email notification to the Contracting Officer, Contract Specialist, and COTR summarizing the electronic delivery.

In addition, a physical hard copy, unless otherwise specified by the Contracting Officer, delivery of reports to be furnished to the Government under this contract (including invoices), shall be addressed as follows:

 

Contracting Officer’s and Contracting Specialist’s address:   

AMCG

330 Independence Avenue, S.W.

Room G640

Washington, D.C. 20201

E-mail: Ethan.Mueller@hhs.gov

Contracting Officer’s Technical Representative’s address:   

BARDA

330 Independence Avenue, S.W.

Room G644

Washington, D.C. 20201

E-mail: Joseph.Larsen@hhs.gov

ARTICLE F.3. CLAUSES INCORPORATED BY REFERENCE, FAR 52.252-2 (FEBRUARY 1998)

The contract incorporates the following clause(s) by reference, with the same force and effect as if it were given in full text. Upon request, the Contracting Officer will make its full text available. Also, the full text of a clause may be accessed electronically at this address: http://www.acquisition.gov/comp/far/index.html

FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSE:

52.242-15, Stop Work Order (August 1989) with Alternate I (April 1984).

SECTION G—CONTRACT ADMINISTRATION DATA

ARTICLE G.1. CONTRACTING OFFICER

The following Contracting Officer will represent the Government for the purpose of this contract:

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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Ethan J. Mueller, Contracting Officer

DHHS/OS/ASPR/AMCG

330 Independence Avenue, S.W.

Room 640G

Washington, D.C. 2020

E-mail: Ethan.Mueller@hhs.gov

 

1) The Contracting Officer is the only individual who can legally commit the Government to the expenditure of public funds. No person other than the Contracting Officer can make any changes to the terms, conditions, general provisions, or other stipulations of this contract.

 

2) The Contracting Officer is the only person with the authority to act as agent of the Government under this contract. Only the Contracting Officer has authority to (1) direct or negotiate any changes in the statement of work; (2) modify or extend the period of performance; (3) change the delivery schedule; (4) authorize reimburse to the Contractor of any costs incurred during the performance of this contract; (5) otherwise change any terms and conditions of this contract.

 

3) No information other than that which may be contained in an authorized modification to this contract, duly issued by the Contracting Officer, which may be received from any person employed by the US Government, other otherwise, shall be considered grounds for deviation from any stipulation of this contract.

 

4) The Government may unilaterally change its COTR designation.

ARTICLE G.2. CONTRACTING OFFICER’S TECHNICAL REPRESENTATIVE (COTR)

The following COTR will represent the Government for the purpose of this contract:

 

  1. Joseph Larsen, Ph.D., COTR
       DI-11-1S/OS/ASPR/BARDA
       330 Independence Avenue, S.W.
       Room 640G
       Washington, D.C. 20201
       E-mail: Joseph.Larsen@hhs.gov

The COTR is responsible for: (1) monitoring the Contractor’s technical progress, including the surveillance and assessment of performance and recommending to the Contracting Officer changes in requirements; (2) assisting the contracting Officer in interpreting the statement of work and any other technical performance requirements; (3) performing technical evaluation as required; (4) performing technical inspections and acceptances required by this contract; and (5) assisting in the resolution of technical problems encountered during performance.

 

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ARTICLE G.3. KEY PERSONNEL

Pursuant to the Key Personnel clause incorporated in Section I of this contract, the following individuals are considered to be essential to the work being performed hereunder:

 

#

  

NAME

  

ORGANIZATION

  

TITLE

  

B55 SCALE-UP ROLE

1

   [***]    [***]    [***]    [***]

2

   [***]    [***]    [***]    [***]

The key personnel specified in this contract are considered to be essential to work performance. At least 30 business days prior to diverting any of the specified individuals to other programs or contracts, including an instance when an individual must be replaced as a result of leaving the employ of the Contractor, the Contractor shall notify the Contracting Officer and shall submit comprehensive justification for the diversion or replacement request (including proposed substitutions for key personnel) to permit evaluation by the Government of the impact on performance under this contract. The Contractor shall not divert or otherwise replace any key personnel without the written consent of the Contracting Officer. The Government may modify the contract to add or delete key personnel at the request of the Contractor or Government.

ARTICLE G.4. CONTRACT FINANCIAL REPORT

a. Financial reports on the attached Financial Report of Individual Project/Contract (see Attachments 2 and 3) shall be submitted by the Contractor in accordance with the instructions for completing this form, which accompany the form, in an original and two copies, not later than the 30th business day after the close of the reporting period. The line entries for subdivisions of work and elements of cost (expenditure categories) which shall be reported within the total contract are discussed in paragraph e., below. Subsequent changes and/or additions in the line entries shall be made in writing.

b. Unless otherwise stated in that part of the instructions for completing this form, entitled “PREPARATION INSTRUCTIONS,” (see Attachment 4) all columns A through J, shall be completed for each report submitted.

c. The first financial report shall cover the period consisting of the first full three calendar months following the date of the contract, in addition to any fractional part of the initial month. Thereafter, reports will be on a quarterly basis.

d. The Contracting Officer may require the Contractor to submit detailed support for costs contained in one or more interim financial reports. This clause does not supersede the record retention requirements in FAR Part 4.7.

e. The listing of expenditure categories to be reported is incorporated within the Attachment entitled, “Financial Report of Individual Project/Contract,” located in SECTION J and made a part of this contract.

f. The Government may unilaterally revise the “Financial Report of Individual Project/Contract” to reflect the allotment of additional funds.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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ARTICLE G.5. INVOICE/FINANCING REQUEST AND CONTRACT FINANCIAL REPORTING

 

1) The Contractor shall submit an electronic copy of monthly contract invoices/financial reports to the address shown below:

DHHS/OS/ASPR/AMCG

Attn: Ethan J. Mueller, Contracting Officer

330 Independence Ave., S.W.

Room G640

Washington, D.C. 20201

 

2) Contractor invoices/financial reports shall conform to the form, format, and content requirements of the instructions for Invoice/Financing requests and Contract Financial Reporting made a part of the contract in Section J (See also Attachment 2).

 

3) Monthly invoices must include the cumulative total expenses to date, adjusted (as applicable) to show any amounts suspended by the Government.

 

4) The Contractor agrees to immediately notify the Contracting Officer in writing if there is an anticipated overrun (any amount) or unexpended balance (greater than 10 percent) of the amount allotted to the contract, and the reasons for the variance. Also refer to the requirements of the Limitation of Cost FAR 52.232-20 clause in the contract.

 

5) All invoice submissions shall be in accordance with FAR. Clause 52.232-25 (c) in Section I of this contract.

ARTICLE G.6. REIMBURSEMENT OF COST

 

1) The Government shall reimburse the Contractor the cost determined by the Contracting Officer to be allowable (hereinafter referred to as allowable cost) in accordance with the clause entitled Allowable Cost and Payment in Section I, Contract Clauses, and FAR Subpart 31.2. Examples of allowable costs include, but are not limited to, the following:

 

  a) All direct materials and supplies that are used in the performing of the work provided for under the contract, including those purchased for subcontracts and purchase orders.

 

  b) All direct labor, including supervisory, that is properly chargeable directly to the contract, plus fringe benefits.

 

  c) All other items of cost budgeted for and accepted in the negotiation of this basic contract or modifications thereto.

 

  d) Special expenditures which, upon request from the Contractor, the Contracting Officer approves as being an allowable cost under this contract, such as purchase or lease of office furniture or equipment, etc.

 

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  e) Travel costs including per diem or actual subsistence for personnel while in an actual travel status in direct performance of the work and services required under this contract subject to the following:

 

  (i) Air travel shall be by the most direct route using “air coach” or “air tourist” (less than first class) unless it is clearly unreasonable or impractical (e.g., not available for reasons other than avoidable delay in making reservations, would require circuitous routing or entail additional expense offsetting the savings on fare, or would not make necessary connections).

 

  (ii) Rail travel shall be by the most direct route, first class with lower berth or nearest equivalent.

 

  (iii) Costs incurred for lodging, meals, and incidental expenses shall be considered reasonable and allowable to the extent that they do not exceed on a daily basis the per diem rates set forth in the Federal Travel Regulation (FTR).

 

  (iv) Travel via privately owned automobile shall be reimbursed at not more than the current General Services Administration (GSA) FTR established mileage rate.

ARTICLE G.7. INDIRECT COST RATES

The following rates will be utilized for billing purposes during the base period. [***]. The billing rates for each option period will be based on [***]. Final rate proposals must be sent to the Contracting Officer, within 6 months subsequent to the fiscal year end. (see also FAR Clause 52.216-7 incorporated herein)

ARTICLE G.8. POST AWARD EVALUATION OF CONTRACTOR PERFORMANCE

1. Contractor Performance Evaluations

Interim and final evaluations of Contractor performance will be prepared on this contract in accordance with FAR Subpart 42.15. The final performance evaluation will be prepared at the time of completion of work. In addition to the final evaluation, an interim evaluation shall be submitted June 29, 2012.

Interim and final evaluations will be provided to the Contractor as soon as practicable after completion of the evaluation. The Contractor will be permitted thirty days to review the document and to submit additional information or a rebutting statement. If agreement cannot be reached between the parties, the matter will be referred to an individual one level above the Contracting Officer whose decision will be final.

Copies of the evaluations, Contractor responses, and review comments, if any, will be retained as part of the contract file, and may be used to support future award decisions.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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2. Electronic Access to Contractor Performance Evaluations

Contractors that have Internet capability may access evaluations through a secure Web site for review and comment by completing the registration form that can be obtained at the following address:

http://oamp.od.nih.gov/OD/CPS/cps.asp

The registration process requires the Contractor to identify an individual that will serve as a primary contact and who will be authorized access to the evaluation for review and comment. In addition, the Contractor will be required to identify an alternate contact who will be responsible for notifying the cognizant contracting official in the event the primary contact is unavailable to process the evaluation within the required 30-day time frame.

ARTICLE G.9. CONTRACT COMMUNICATIONS/CORRESPONDENCE (JULY 1999)

The Contractor shall identify all correspondence, reports, and other data pertinent to this contract by imprinting the contract number from Page 1 of the contract.

ARTICLE G.10. GOVERNMENT PROPERTY

1. In addition to the requirements of the clause, GOVERNMENT PROPERTY, incorporated in SECTION I of this contract, the Contractor shall comply with the provisions of HHS Publication, “Contractor’s Guide for Control of Government Property,” which is incorporated into this contract by reference. This document can be accessed at:

http://www.hhs.gov/oamp/policies/contractors_guide_for_control_of_gov_property.pdf . Among other issues, this publication provides a summary of the Contractor’s responsibilities regarding purchasing authorizations and inventory and reporting requirements under the contract.

2. Notwithstanding the provisions outlined in the HHS Publication, “Contractor’s Guide for Control of Government Property,” which is incorporated in this contract in paragraph a. above, the Contractor shall use the form entitled, “Report of Government Owned, Contractor Held Property” for submitting summary reports required under this contract, as directed by the Contracting Officer or his/her designee. This form is included as an attachment in SECTION J of this contract.

3. Title will vest in the Government for equipment purchased as a direct cost.

SECTION H—SPECIAL CONTRACT REQUIREMENTS

ARTICLE H.1. PROTECTION OF HUMAN SUBJECTS, HHSAR 352.270-4 (January 2006)

(a) The Contractor agrees that the rights and welfare of human subjects involved in research under this contract shall be protected in accordance with 45 CFR Part 46 and with the Contractor’s current Assurance of Compliance on file with the Office for Human Research

 

39


Protections (OHRP), Department of Health and Human Services. The Contractor further agrees to provide certification at least annually that the Institutional Review Board has reviewed and approved the procedures, which involve human subjects in accordance with 45 CFR Part 46 and the Assurance of Compliance.

(b) The Contractor shall bear full responsibility for the performance of all work and services involving the use of human subjects under this contract and shall ensure that work is conducted in a proper manner and as safely as is feasible. The parties hereto agree that the Contractor retains the right to control and direct the performance of all work under this contract. The Contractor shall not deem anything in this contract to constitute the Contractor or any subcontractor, agent or employee of the Contractor, or any other person, organization, institution, or group of any kind whatsoever, as the agent or employee of the Government. The Contractor agrees that it has entered into this contract and will discharge its obligations, duties, and undertakings and the work pursuant thereto, whether requiring professional judgment or otherwise, as an independent contractor without imputing liability on the part of the Government for the acts of the Contractor or its employees.

(c) If at any time during the performance of this contract, the Contracting Officer determines, in consultation with OHRP that the Contractor is not in compliance with any of the requirements and/or standards stated in paragraphs (a) and (b) above, the Contracting Officer may immediately suspend, in whole or in part, work and further payments under this contract until the Contractor corrects the noncompliance. The Contracting Officer may communicate the notice of suspension by telephone with confirmation in writing. If the Contractor fails to complete corrective action within the period of time designated in the Contracting Officer’s written notice of suspension, the Contracting Officer may, after consultation with OHRP, terminate this contract in whole or in part, and the Contractor’s name may be removed from the list of those contractors with approved Human Subject Assurances.

ARTICLE H.2. HUMAN MATERIALS (ASSURANCE OF OHRP COMPLIANCE)

The acquisition and supply of all human specimen material (including fetal material) used under this contract shall be obtained by the Contractor in full compliance with applicable Federal, State and Local laws and the provisions of the Uniform Anatomical Gift Act in the United States, and no undue inducements, monetary or otherwise, will be offered to any person to influence their donation of human material.

The Contractor shall provide written documentation that all human materials obtained as a result of research involving human subjects conducted under this contract, by collaborating sites, or by subcontractors identified under this contract, were obtained with prior approval by the Office for Human Research Protections (OHRP) of an Assurance to comply with the requirements of 45 CFR 46 to protect human research subjects. This restriction applies to all collaborating sites without OHRP-approved Assurances, whether domestic or foreign, and compliance must be ensured by the Contractor.

Provision by the Contractor to the Contracting Officer of a properly completed “Protection of Human Subjects Assurance Identification/IRB Certification/Declaration of Exemption”, Form OMB No. 0990-0263(formerly Optional Form 310), certifying IRB review and approval of the

 

40


protocol from which the human materials were obtained constitutes the written documentation required. The human subject certification can be met by submission of a self designated form provided that it contains the information required by the “Protection of Human Subjects Assurance Identification/IRB Certification/Declaration of Exemption”, Form OMB No. 0990-0263(formerly Optional Form 310).

ARTICLE H.3. RESEARCH INVOLVING HUMAN FETAL TISSUE

All research involving human fetal tissue shall be conducted in accordance with the Public Health Service Act, 42 U.S.C. 289g-1 and 289g-2. Implementing regulations and guidance for conducting research on human fetal tissue may be found at 45 CFR 46, Subpart B and http://grants1.nih.gov/grants/guide/notice-files/not93-235.html and any subsequent revisions to this NIH Guide to Grants and Contracts (“Guide”) Notice.

The Contractor shall make available, for audit by the Secretary, HHS, the physician statements and informed consents required by 42 USC 289g-1(b) and (c), or ensure HHS access to those records, if maintained by an entity other than the Contractor.

ARTICLE H.4. NEEDLE EXCHANGE

The Contractor shall not use contract funds to carry out any program of distributing sterile needles or syringes for the hypodermic injection of any illegal drug.

ARTICLE H.5. PRESS RELEASES

The Contractor shall clearly state, when issuing statements, press releases, requests for proposals, bid solicitations and other documents describing projects or programs funded in whole or in part with Federal money: (1) the percentage of the total costs of the program or project which will be financed with Federal money; (2) the dollar amount of Federal funds for the project or program; and (3) the percentage and dollar amount of the total costs of the project or program that will be financed by nongovernmental sources.

ARTICLE H.6. CARE OF LIVE VERTEBRATE ANIMALS, HHSAR 352.270-5 (October 2009)

(a) Before undertaking performance of any contract involving animal-related activities where the species is regulated by USDA, the Contractor shall register with the Secretary of Agriculture of the United States in accordance with 7 U.S.C. 2136 and 9 CFR sections 2.25 through 2.28. The Contractor shall furnish evidence of the registration to the Contracting Officer.

(b) The Contractor shall acquire vertebrate animals used in research from a dealer licensed by the Secretary of Agriculture under 7 U.S.C. 2133 and 9 CFR Sections 2.1-2.11, or from a source that is exempt from licensing under those sections.

(c) The Contractor agrees that the care, use and intended use of any live vertebrate animals in the performance of this contract shall conform with the Public Health Service (PHS) Policy on Humane Care of Use of Laboratory Animals (PHS Policy), the current Animal Welfare Assurance (Assurance), the Guide for the Care and Use of Laboratory Animals (National

 

41


Academy Press, Washington, DC) and the pertinent laws and regulations of the United States Department of Agriculture (see 7 U.S.C. 2131 et seq. and 9 CFR Subchapter A, Parts 1-4). In case of conflict between standards, the more stringent standard shall govern.

(d) If at any time during performance of this contract, the Contracting Officer determines, in consultation with the Office of Laboratory Animal Welfare (OLAW), National Institutes of Health (NIH), that the Contractor is not in compliance with any of the requirements and standards stated in paragraphs (a) through (c) above, the Contracting Officer may immediately suspend, in whole or in part, work and further payments under this contract until the Contractor corrects the noncompliance. Notice of the suspension may be communicated by telephone and confirmed in writing. If the Contractor fails to complete corrective action within the period of time designated in the Contracting Officer’s written notice of suspension, the Contracting Officer may, in consultation with OLAW, NIH, terminate this contract in whole or in part, and the Contractor’s name may be removed from the list of those contractors with approved Assurances.

Note: The Contractor may request registration of its facility and a current listing of licensed dealers from the Regional Office of the Animal and Plant Health Inspection Service (APHIS), USDA, for the region in which its research facility is located. The location of the appropriate APHIS Regional Office, as well as information concerning this program may be obtained by contacting the Animal Care Staff, USDA/APHIS, 4700 River Road, Riverdale, Maryland 20737 (E-mail: ace@aphis.usda.gov ; Web site: ( http://www.aphis.usda.gov/animal_welfare ).

ARTICLE H.7. ANIMAL WELFARE

All research involving live, vertebrate animals shall be conducted in accordance with the Public Health Service Policy on Humane Care and Use of Laboratory Animals. This policy may be accessed at:

http://grants1.nih.gov/grants/olaw/references/phspol.htm

ARTICLE H.8. PROTECTION OF PERSONNEL WHO WORK WITH NONHUMAN PRIMATES

All Contractor personnel who work with nonhuman primates or enter rooms or areas containing nonhuman primates shall comply with the procedures set forth in NIH Policy Manual 3044-2, entitled, “Protection of NIH Personnel Who Work with Nonhuman Primates,” located at the following URL:

http://www1.od.nih.gov/oma/manualchapters/intramural/3044-2/

ARTICLE H.9. PUBLICATION AND PUBLICITY

No information related to data obtained under this contract shall be released or publicized without the prior written consent of the Contracting Officer Technical Representative.

In addition to the requirements set forth in HHSAR Clause 352.227-70, Publications and Publicity incorporated by reference in SECTION I of this contract, the Contractor shall acknowledge the support of the Biomedical Advanced Research and Development Authority

 

42


whenever publicizing the work under this contract in any media by including an acknowledgment substantially as follows:

“This project has been funded in whole or in part with Federal funds from the Biomedical Advanced Research and Development Authority, Office of the Assistant Secretary for Preparedness and Response, Office of the Secretary, Department of Health and Human Services, under Contract No.                     

ARTICLE H.10. REPORTING MATTERS INVOLVING FRAUD, WASTE AND ABUSE

Anyone who becomes aware of the existence or apparent existence of fraud, waste and abuse in BARDA funded programs is encouraged to report such matters to the HHS Inspector General’s Office in writing or on the Inspector General’s Hotline. The toll free number is 1-800-HHS-TIPS (1-800-447-8477). All telephone calls will be handled confidentially. The e-mail address is Htips@os.dhhs.gov and the mailing address is:

Office of Inspector General

Department of Health and Human Services

TIPS HOTLINE

P.O. Box 23489

Washington, D.C. 20026

ARTICLE 11.11. PROHIBITION ON CONTRACTOR INVOLVEMENT WITH TERRORIST ACTIVITIES

The Contractor acknowledges that U.S. Executive Orders and Laws, including but not limited to E.O. 13224 and P.L. 107-56, prohibit transactions with, and the provision of resources and support to, individuals and organizations associated with terrorism. It is the legal responsibility of the Contractor to ensure compliance with these Executive Orders and Laws. This clause must be included in all subcontracts issued under this contract.

ARTICLE H.12. CONFLICT OF INTEREST

The Contractor represents and warrants that, to the best of the Contractor’s knowledge and belief, there are no relevant facts or circumstances which could give rise to an organizational conflict of interest, as defined in FAR Subpart 9.5, or that the Contractor has disclosed all such relevant information. Prior to commencement of any work, the Contractor agrees to notify the Contracting Officer promptly that, to the best of its knowledge and belief, no actual or potential conflict of interest exists or to identify to the Contracting Officer any actual or potential conflict of interest the firm may have. In emergency situations, however, work may begin but notification shall be made within five (5) working days. The Contractor agrees that if an actual or potential organizational conflict of interest is identified during performance, the Contractor shall promptly make a full disclosure in writing to the Contracting Officer. This disclosure shall include a description of actions, which the Contractor has taken or proposes to take, after consultation with the Contracting Officer, to avoid, mitigate, or neutralize the actual or potential conflict of interest. The Contractor shall continue performance until notified by the Contracting Officer of any contrary action to be taken. Remedies include termination of this contract for convenience, in whole or in part, if the Contracting Officer deems such termination necessary to

 

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avoid an organizational conflict of interest. If the Contractor was aware of a potential organizational conflict of interest prior to award or discovered an actual or potential conflict after award and did not disclose it or misrepresented relevant information to the Contracting Officer, the Government may terminate the contract for default, debar the Contractor from Government contracting, or pursue such other remedies as may be permitted by law or this contract.

ARTICLE H.13. EXERCISE OF OPTIONS

Unless the Government exercises its option pursuant to the Option Clause set forth in Section I, Article I.1, the contract will consist only of CLIN 0001 of the Statement of Work, Deliverables and Requirements as defined in Sections C, F and J of the contract. Pursuant to FAR Clause 52.217-7 (Option for Increased Quantity–Separately Priced Line Item) set forth in Section I of this contract, under Article I.1., the Government may, by unilateral contract modification, require the Contractor to perform any of the additional CLINslisted in Section B, Article B.3. , and as also defined in Sections C, F and J of this contract. If the Government exercises an option, notice must be given at least 60 days prior to the expiration date of the Period of Performance (PoP) applicable to the base period or the PoP applicable to any option period. The amount of the contract will then be increased as set forth in Section B, Article B.3.

ARTICLE H.14. PROHIBITION ON THE USE OF APPROPRIATED FUNDS FOR LOBBYING ACTIVITIES AND HHSAR 352.203-70 ANTI-LOBBYING (Jan 2006)

The Contractor is hereby notified of the restrictions on the use of Department of Health and Human Service’s funding for lobbying of Federal, State and Local legislative bodies.

Section 1352 of Title 10, United Stated Code (Public Law 101-121, effective 12/23/89), among other things, prohibits a recipient (and their subcontractors) of a Federal contract, grant, loan, or cooperative agreement from using appropriated funds (other than profits from a federal contract) to pay any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with any of the following covered Federal actions; the awarding of any Federal contract; the making of any Federal grant; the making of any Federal loan; the entering into of any cooperative agreement; or the modification of any Federal contract, grant, loan, or cooperative agreement. For additional information of prohibitions against lobbying activities, see FAR Subpart 3.8 and FAR Clause 52.203-12.

In addition, as set forth in HHSAR 352.203-70 “Anti-Lobbying” (January 2006), the current Department of Health and Human Services Appropriations Act provides that no part of any appropriation contained in this Act shall be used, other than for normal and recognized executive- legislative relationships, for publicity or propaganda purposes, for the preparation, distribution, or use of any kit, pamphlet, booklet, publication, radio, television, or video presentation designed to support, or defeat legislation pending before the Congress, or any State or Local legislature except in presentation to the Congress, or any State or Local legislative body itself.

The current Department of Health and Human Services Appropriations Act also provides that no part of any appropriation contained in this Act shall be used to pay the salary or expenses of any

 

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contract or grant recipient, or agent acting for such recipient, related to any activity designed to influence legislation or appropriations pending before the Congress, or any State or Local legislature.

ARTICLE H.15. PRIVACY ACT APPLICABILITY (Apr 2000)

 

1) Notification is hereby given that the Contractor and its employees are subject to criminal penalties for violation of the Privacy Act to the same extent as employees of the Government. The Contractor shall assure that each of its employees knows the prescribed rules of conduct and that each is aware that he or she can be subjected to criminal penalty for violation of the Act. A copy of 45 CFR Part 5b, Privacy Act Regulations, may be obtained at http://www.gpoaccess.gov/cfr/index.html

 

2) The Project Officer is hereby designated as the official who is responsible for monitoring contractor compliance with the Privacy Act.

 

3) The Contractor shall follow the Privacy Act guidance as contained in the Privacy Act System of Records number 09-25-0200. This document may be obtained at the following link: http://oma.od.nih.gov/ms/privacy/pa-files/0200.htm

Note: Clinical trials cannot be initiated until the System Notice has been published and the Contracting Officer notifies the Contractor.

ARTICLE H.16. LABORATORY LICENSE REQUIREMENTS (May 1998)

The Contractor shall comply with all applicable requirements of Section 353 of the Public Health Service Act (Clinical Laboratory Improvement Act as amended). This requirement shall also be included in any subcontract for services under the contract.

ARTICLE H.17. DISSEMINATION OF INFORMATION (May 1998)

No information related to data obtained under this contract shall be released or publicized without the prior written consent of the Contracting Officer.

ARTICLE H.18. IDENTIFICATION AND DISPOSITION OF DATA

The Contractor will be required to provide certain data generated under this contract to the Department of Health and Human Services (DHHS). DHHS reserves the right to review any other data determined by DHHS to be directly related to and/or generated under this contract. The Contractor shall keep copies of all data required by the Food and Drug Administration (FDA) relevant to this contract for the time specified by the FDA.

ARTICLE H.19. INFORMATION ON COMPLIANCE WITH ANIMAL CARE REQUIREMENTS

Registration with the U.S. Dept. of Agriculture (USDA) is required to use regulated species of animals for biomedical purposes. USDA is responsible for the enforcement of the Animal Welfare Act (7 U.S.C. 2131 et. seq.), http://www.nal.usda.gov/awic/legislat/awa.htm .

 

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The Public Health Service (PHS) Policy is administered by the Office of Laboratory Animal Welfare (OLAW) http://grants2.nih.gov/grants/olaw/olaw.htm . An essential requirement of the PHS Policy http://grants2.nih.gov/grants/olaw/references/phspol.htm is that every institution using live vertebrate animals must obtain an approved assurance from OLAW before they can receive funding from any component of the U.S. Public Health Service.

The PHS Policy requires that Assured institutions base their programs of animal care and use on the Guide for the Care and Use of Laboratory Animals http://www.nap.edu/readingroom/books/labrats/ and that they comply with the regulations (9 CFR, Subchapter A) http://www.nal.usda.gov/awic/legislat/usdalegl.htm issued by the U.S. Department of Agriculture (USDA) under the Animal Welfare Act. The Guide may differ from USDA regulations in some respects. Compliance with the USDA regulations is an absolute requirement of this Policy.

The Association for Assessment and Accreditation of Laboratory Animal Care International (AAALAC) http://www.aaalac.org is a professional organization that inspects and evaluates programs of animal care for institutions at their request. Those that meet the high standards are given the accredited status. As of the 2002 revision of the PHS Policy, the only accrediting body recognized by PHS is the AAALAC. While AAALAC Accreditation is not required to conduct biomedical research, it is highly desirable. AAALAC uses the Guide as their primary evaluation tool. They also use the Guide for the Care and Use of Agricultural Animals in Agricultural Research and Teaching . It is published by the Federated of Animal Science Societies http://www.fass.org .

ARTICLE H.20. REQUIREMENTS FOR ADEQUATE ASSURANCE OF PROTECTION OF VERTEBRATE ANIMAL SUBJECTS

The PHS Policy on Humane Care and Use of Laboratory Animals requires that applicant organizations proposing to use vertebrate animals file a written Animal Welfare Assurance with the Office for Laboratory Animal Welfare (OLAW), establishing appropriate policies and procedures to ensure the humane care and use of live vertebrate animals involved in research activities supported by the PHS. The PHS Policy stipulates that an applicant organization, whether domestic or foreign, bears responsibility for the humane care and use of animals in PHS-supported research activities. Also, the PHS policy defines “animal” as “any live, vertebrate animal used, or intended for use, in research, research training, experimentation, biological testing or for related purposes.” This Policy implements and supplements the U.S. Government Principles for the Utilization and Care of Vertebrate Animals Used in Testing, Research, and Training, and requires that institutions use the Guide for the Care and Use of Laboratory Animals as a basis for developing and implementing an institutional animal care and use program. This Policy does not affect applicable State or local laws or regulations that impose more stringent standards for the care and use of laboratory animals. All institutions are required to comply, as applicable, with the Animal Welfare Act as amended (7 USC 2131 et. seq.) and other Federal statutes and regulations relating to animals. These documents are available from the Office of Laboratory Animal Welfare, National Institutes of Health, Bethesda, MD 20892, (301) 496-7163. See http://grants.nih.gov/grants/olaw/olaw.htm .

 

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No PHS supported work for research involving vertebrate animals will be conducted by an organization, unless that organization is operating in accordance with an approved Animal Welfare Assurance and provides verification that the Institutional Animal Care and Use Committee (IACUC) has reviewed and approved the proposed activity in accordance with the PHS policy. Applications may be referred by the PHS back to the institution for further review in the case of apparent or potential violations of the PHS Policy. No award to an individual will be made unless that individual is affiliated with an assured organization that accepts responsibility for compliance with the PHS Policy. Foreign applicant organizations applying for PHS awards for activities involving vertebrate animals are required to comply with PHS Policy or provide evidence that acceptable standards for the humane care and use of animals will be met. Foreign applicant organizations are not required to submit IACUC approval, but should provide information that is satisfactory to the Government to provide assurances for the humane care of such animals.

ARTICLE H.21. APPROVAL OF REQUIRED ASSURANCE BY OLAW

Under governing regulations, federal funds which are administered by the Department of Health and Human Services, Office of Biomedical Advanced Research and Development Authority (BARDA) shall not be expended by the Contractor for research involving live vertebrate animals, nor shall live vertebrate animals be involved in research activities by the Contractor under this award unless a satisfactory assurance of compliance with 7 U.S.C. 2316 and 9 CFR Sections 2.25-2.28 is submitted within 30 days of the date of this award and approved by the Office of Laboratory Animal Welfare (OLAW). Each performance site (if any) must also assure compliance with 7 U.S.C. 2316 and 9 CFR Sections 2.25-2.28 with the following restriction: Only activities which do not directly involve live vertebrate animals (i.e. are clearly severable and independent from those activities that do involve live vertebrate animals) may be conducted by the Contractor or individual performance sites pending OLAW approval of their respective assurance of compliance with 7 U.S.C. 2316 and 9 CFR Sections 2.25-2.28. Additional information regarding OLAW may be obtained via the Internet at http://grants2.nih.gov/grants/olaw/references/phspol.htm

ARTICLE H.22. REGISTRATION WITH THE SELECT AGENT PROGRAM FOR WORK INVOLVING THE POSSESSION, USE, AND/OR TRANSFER OF SELECT BIOLOGICAL AGENTS OR TOXINS

Work involving select biological agents or toxins shall not be conducted under this contract until the Contractor and any affected subcontractor(s) are granted a certificate of registration or are authorized to work with the applicable select agents.

For prime or subcontract awards to domestic institutions who possess, use, and/or transfer Select Agents under this contract, the institution must complete registration with the Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (DHHS) or the Animal and Plant Health Inspection Services (APHIS), U.S. Department of Agriculture (USDA), as applicable, before performing work involving Select Agents, in accordance with 42 CFR 73. No Government funds can be used for work involving Select Agents, as defined in 42 CFR 73, if the final registration certificate is denied.

 

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For prime or subcontract awards to foreign institutions who possess, use, and/or transfer Select Agents under this contract, the institution must provide information satisfactory to the Government that a process equivalent to that described in 42 CFR 73 ( http://www.cdc.gov/od/sap/docs/42cfr73.pdf ) for U.S. institutions is in place and will be administered on behalf of all Select Agent work sponsored by these funds before using these funds for any work directly involving the Select Agents. The Contractor must provide information addressing the following key elements appropriate for the foreign institution: safety, security, training, procedures for ensuring that only approved/appropriate individuals have access to the Select Agents, and any applicable laws, regulations and policies equivalent to 42 CFR 73 . The Government will assess the policies and procedures for comparability to the U.S. requirements described in 42 CFR Part 73 . When requested by the contracting officer, the Contractor shall provide key information delineating any laws, regulations, policies, and procedures applicable to the foreign institution for the safe and secure possession, use, and transfer of Select Agents. This includes summaries of safety, security, and training plans, and applicable laws, regulations, and policies. For the purpose of security risk assessments, the Contractor must provide the names of all individuals at the foreign institution who will have access to the Select Agents and procedures for ensuring that only approved and appropriate individuals have access to Select Agents under the contract.

Listings of HHS select agents and toxins, biologic agents and toxins, and overlap agents or toxins as well as information about the registration process, can be obtained on the Select Agent Program Web site at htt://www.cdc.gov/od/sap/.

ARTICLE H.23. EPA ENERGY STAR REQUIREMENTS

In compliance with Executive Order 12845 (requiring Agencies to purchase energy efficient computer equipment) all microcomputers, including personal computers, monitors, and printers that are purchased using Government funds in performance of a contract shall be equipped with or meet the energy efficient low-power standby feature as defined by the EPA Energy Star program unless the equipment always meets EPA Energy Star efficiency levels. The microcomputer, as configured with all components, must be Energy Star compliant.

This low-power feature must already be activated when the computer equipment is delivered to the agency and be of equivalent functionality of similar power managed models. If the equipment will be used on a local area network, the vendor must provide equipment that is fully compatible with the network environment. In addition, the equipment will run commercial off-the-shelf software both before and after recovery from its energy conservation mode.

ARTICLE H.24. ACKNOWLEDGMENT OF FEDERAL FUNDING

 

A. Section 507 of P.L. 104-208 mandates that Contractors funded with Federal dollars, in whole or in part, acknowledge Federal funding when issuing statements, press releases, requests for proposals, bid solicitations and other documents. Contractors are required to state (1) the percentage and dollar amounts of the total program or project costs financed with Federal money, and (2) the percentage and dollar amount of the total costs financed by nongovernmental sources.

 

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This requirement is in addition to the continuing requirement to provide an acknowledgment of support and disclaimer on any publication reporting the results of a contract funded activity.

 

B. Publication and Publicity

Publications: Any manuscript or scientific meeting abstract containing data generated under this contract must be submitted for BARDA Project Officer review no less than thirty (30) calendar days for manuscripts and fifteen (15) calendar days for abstracts before submission for public presentation or publication. Contract support shall be acknowledged in all such publications. A “publication” is defined as an issue of printed material offered for distribution or any communication or oral presentation of information.

The Contractor shall acknowledge the support of the Department of Health and Human Service, Office of the Assistant Secretary for Preparedness and Response, Biomedical Advanced Research and Development Authority, whenever publicizing the work under this contract in any media by including an acknowledgment substantially as follows:

“This project has been funded in whole or in part with Federal funds from the Office of the Assistant Secretary for Preparedness and Response, Biomedical Advanced Research and Development Authority, under Contract No. HHSO100201000046C.”

 

C. Press Releases

 

  (a) Pursuant to Section 508 of Public Law 105-78, the Contractor shall clearly state, when issuing statements, press releases, requests for proposals, bid solicitations and other documents describing projects or programs funded in whole or in part with Federal money that: (1) the percentage of the total costs of the program or project which will be financed with Federal money; (2) the dollar amount of Federal funds for the project or program; and (3) the percentage and dollar amount of the total costs of the project or program that will be financed by nongovernmental sources.

 

  (b) The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases. Misrepresenting contract results or releasing information that is injurious to the integrity of BARDA may be construed as improper conduct. Press releases shall be considered to include the public release of information to any medium, excluding peer- reviewed scientific publications. The Contractor shall ensure that the Project Officer has received an advance copy of any press release related to this contract not less than four (4) working days prior to the issuance of the press release.

ARTICLE H.25. MANUFACTURING STANDARDS

The Good Manufacturing Practice Regulations (GMP)(21 CFR Parts 210-211) and regulations pertaining to biological products (21 CFR Part 600) and regulations pertaining to diagnostic

 

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products (21 CFR Part 860) will be the standard to be applied for manufacturing, processing, packaging, storage and delivery of this product.

If at any time during the life of the contract, the Contractor fails to comply with GMP in the manufacturing, processing, packaging, storage, stability and other testing of the manufactured drug substance or product and delivery of this product and such failure results in a material adverse effect on the safety, purity or potency of the product (a material failure) as identified by the FDA, the Contractor shall have thirty (30) calendar days from the time such material failure is identified to cure such material failure. If, within the thirty (30) calendar day period, the Contractor fails to take such an action to the satisfaction of the USG Project Officer, or fails to provide a remediation plan that is acceptable to the Project Officer, then the contract may be terminated.

ARTICLE H.26. EXPORT CONTROL NOTIFICATION

Offerors are responsible for ensuring compliance with all export control laws and regulations that may be applicable to the export of and foreign access to their proposed technologies. Offerors may consult with the Department of State with any questions regarding the International Traffic in Arms Regulation (ITAR) (22 CRF Parts 120-130) and /or the Department of Commerce regarding the Export Administration Regulations (15 CRF Parts 730-774).

ARTICLE H.27. INSTITUTIONAL RESPONSIBILITY REGARDING CONFLICTING INTERESTS OF INVESTIGATORS

The Contractor shall comply with the requirements of 45 CFR Part 94, Responsible Prospective Contractors, which promotes objectivity in research by establishing standards to ensure that investigators (defined as the principal investigator and any other person who is responsible for the design, conduct, or reporting of research funded under BARDA contracts) will not be biased by any conflicting financial interest. For the purposes of this part relating to financial interests, “Investigator” includes the Investigator’s spouse and dependent children. 45 CFR Part 94 is available at the following Web site:

http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr;sid=9f130b6d2d48bb73803ca91ce943be3a;rgn=div5;view=text;node=45%3A1.0.1.1.53;idno=45;cc=ecfr

As required by 45 CFR Part 94, the Contractor shall, at a minimum:

a. Maintain a written, enforceable policy on conflict of interest that complies with 45 CFR Part 94 and inform each investigator of the policy, the investigator’s reporting responsibilities, and the applicable regulations. The Contractor must take reasonable steps to ensure that investigators working as collaborators or subcontractors comply with the regulations.

b. Designate an official(s) to solicit and review financial disclosure statements from each investigator participating in BARDA-funded research. Based on established guidelines consistent with the regulations, the designated official(s) must determine whether a conflict of interest exists, and if so, determine what actions should be taken to manage, reduce, or eliminate such conflict. A conflict of interest exists when the designated official(s) reasonably determines

 

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that a Significant Financial Interest could directly and significantly affect the design, conduct, or reporting of the BARDA-funded research. The Contractor may require the management of other conflicting financial interests in addition to those described in this paragraph, as it deems appropriate. Examples of conditions or restrictions that might be imposed to manage actual or potential conflicts of interests are included in 45 CFR Part 94, under Management of Conflicting Interests.

c. Require all financial disclosures to be updated during the period of the award, either on an annual basis or as new reportable Significant Financial Interests are obtained.

d. Maintain records, identifiable to each award, of all financial disclosures and all actions taken by the Contractor with respect to each conflicting interest 3 years after final payment or, where applicable, for the other time periods specified in 48 CFR Part 4, subpart 4.7, Contract Records Retention.

e. Establish adequate enforcement mechanisms and provide for sanctions where appropriate.

If a conflict of interest is identified, the Contractor shall report to the Contracting Officer the existence of the conflicting interest found. This report shall be made and the conflicting interest managed, reduced, or eliminated, at least on a temporary basis, within sixty (60) days of that identification.

If the failure of an investigator to comply with the conflict of interest policy has biased the design, conduct, or reporting of the BARDA-funded research, the Contractor must promptly notify the Contracting Officer of the corrective action taken or to be taken. The Contracting Officer will take appropriate action or refer the matter to the Contractor for further action which may include directions to the Contractor on how to maintain appropriate objectivity in the funded research.

The Contracting Officer may at any time inquire into the Contractor’s procedures and actions regarding conflicts of interests in BARDA-funded research including a review of all records pertinent to compliance with 45 CFR Part 94. The Contracting Officer may require submission of the records or review them on site. On the basis of this review, the Contracting Officer may decide that a particular conflict of interest will bias the objectivity of the BARDA-funded research to such an extent that further corrective action is needed or that the Contractor has not managed, reduced, or eliminated the conflict of interest. The issuance of a Stop Work Order by the Contracting Officer may be necessary until the matter is resolved.

If the Contracting Officer determines that BARDA-funded clinical research, whose purpose is to evaluate the safety or effectiveness of a drug, medical device, or treatment, has been designed, conducted, or reported by an investigator with a conflict of interest that was not disclosed or managed, the Contractor must require disclosure of the conflict of interest in each public presentation of the results of the research.

 

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ARTICLE H.28. HUMAN MATERIALS

It is understood that the acquisition and supply of all human specimen material (including fetal material) used under this contract will be obtained by the Contractor in full compliance with applicable State and Local laws and the provisions of the Uniform Anatomical Gift Act in the United States and that no undue inducements, monetary or otherwise, will be offered to any person to influence their donation of human material.

ARTICLE H.29. REGISTRATION WITH THE SELECT AGENT PROGRAM FOR WORK INVOLVING THE POSSESSION, USE, AND/OR TRANSFER OF SELECT BIOLOGICAL AGENTS OR TOXINS

Work involving select biological agents or toxins shall not be conducted under this contract until the Contractor and any affected subcontractor(s) are granted a certificate of registration or are authorized to work with the applicable select agents.

For prime or subcontract awards to domestic institutions who possess, use, and/or transfer Select Agents under this contract, the institution must complete registration with the Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (DHHS) or the Animal and Plant Health Inspection Services (APHIS), U.S. Department of Agriculture (USDA), as applicable, before performing work involving Select Agents, in accordance with 42 CFR 73. No Government funds can be used for work involving Select Agents, as defined in 42 CFR 73, if the final registration certificate is denied.

For prime or subcontract awards to foreign institutions who possess, use, and/or transfer Select Agents under this contract, the institution must provide information satisfactory to the Government that a process equivalent to that described in 42 CFR 73 (http:// www.cdc.gov/od/sap/docs/42cfr73.pdf ) for U.S. institutions is in place and will be administered on behalf of all Select Agent work sponsored by these funds before using these funds for any work directly involving the Select Agents. The Contractor must provide information addressing the following key elements appropriate for the foreign institution: safety, security, training, procedures for ensuring that only approved/appropriate individuals have access to the Select Agents, and any applicable laws, regulations and policies equivalent to 42 CFR 73 . The Government will assess the policies and procedures for comparability to the U.S. requirements described in 42 CFR Part 73 . When requested by the contracting officer, the Contractor shall provide key information delineating any laws, regulations, policies, and procedures applicable to the foreign institution for the safe and secure possession, use, and transfer of Select Agents. This includes summaries of safety, security, and training plans, and applicable laws, regulations, and policies. For the purpose of security risk assessments, the Contractor must provide the names of all individuals at the foreign institution who will have access to the Select Agents and procedures for ensuring that only approved and appropriate individuals have access to Select Agents under the contract.

Listings of HHS select agents and toxins, biologic agents and toxins, and overlap agents or toxins as well as information about the registration process, can be obtained on the Select Agent Program Web site at http://www.cdc.gov/od/sap/ .

 

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PART II—CONTRACT CLAUSES

SECTION I—CONTRACT CLAUSES

ARTICLE I.1. FAR 52.252-2, CLAUSES INCORPORATED BY REFERENCE (FEBRUARY 1998)

This contract incorporates the following clauses by reference, with the same force and effect as if they were given in full text. Upon request, the Contracting Officer will make their full text available. Also, the full text of a clause may be accessed electronically at these addresses: http://www.arnet.gov

General Clauses for Cost-Reimbursement Research and Development

 

(1) FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES:

 

FAR    

CLAUSE NO.    

  

            DATE             

  

TITLE

52.202-1    Jul 2004    Definitions
52.203-3    Apr 1984    Gratuities (Over $100,000)
52.203-5    Apr 1984    Covenant Against Contingent Fees (Over $100,000)
52.203-6    Sep 2006    Restrictions on Subcontractor Sales to the Government (Over $100,000)
52.203-7    Jul 1995    Anti-Kickback Procedures (Over $100,000)
52.203-8    Jan 1997    Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity (Over $100,000)
52.203-10    Jan 1997    Price or Fee Adjustment for Illegal or Improper Activity (Over $100,000)
52.203-12    Sep 2007    Limitation on Payments to Influence Certain Federal Transactions (Over $100,000)
52.203-13    Apr 2010    Contractor Code of Business Ethics and Conduct
52.203-14    Dec 2007    Display of Hotline Poster
52.204-4    Aug 2000    Printed or Copied Double-Sided on Recycled Paper (Over $100,000)
52.204-7    Apr 2008    Central Contractor Registration
52.209-6    Sep 2006    Protecting the Government’s Interests When Subcontracting With Contractors Debarred, Suspended, or Proposed for Debarment (Over $25,000)
52.215-2    Mar 2009    Audit and Records—Negotiation (Over $100,000)
52.215-8    Oct 1997    Order of Precedence—Uniform Contract Format
52.215-10    Oct 1997    Price Reduction for Defective Cost or Pricing Data
52.215-12    Oct 1997    Subcontractor Cost or Pricing Data (Over $500,000)

 

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52.215-14    Oct 1997    Integrity of Unit Prices (Over $100,000)
52.215-15    Oct 2004    Pension Adjustments and Asset Reversions
52.215-18    Jul 2005    Reversion or Adjustment of Plans for Post-Retirement Benefits (PRB) other than Pensions
52.215-19    Oct 1997    Notification of Ownership Changes
52.215-21    Oct 1997    Requirements for Cost or Pricing Data or Information Other Than Cost or Pricing Data – Modifications
52.216-7    Dec 2002    Allowable Cost and Payment (Note: the following language is included in this clause – “(3) The designated payment office will make interim payments for contract financing on the 30th day after the designated billing office receives a proper payment request...”
52.216-8    Mar 1997    Fixed Fee
52.217-7    Mar 1989    Option for Increased Quantity – Separately Priced Line Item
52.219-8    May 2004    Utilization of Small Business Concerns (Over $100,000)
52.219-9    Jul 2010    Small Business Subcontracting Plan (Over $500,000)
52.219-16    Jan 1999    Liquidated Damages—Subcontracting Plan (Over $500,000)
52.222-3    Jun 2003    Convict Labor
52.222-19    Jul 2010    Child Labor — Cooperation with Authorities and Remedies
52.222-21    Feb 1999    Prohibition of Segregated Facilities
52.222-26    Mar 2007    Equal Opportunity
52.222-35    Sep 2006    Equal Opportunity for Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans
52.222-36    Jun 1998    Affirmative Action for Workers with Disabilities
52.222-37    Sep 2006    Employment Reports on Special Disabled Veterans, Veterans of the Vietnam Era, and Other Eligible Veterans
52.222-50    Feb 2009    Combating Trafficking in Persons
52.222-54    Jan 2009    Employment Eligibility Verification
52.223-6    May 2001    Drug-Free Workplace
52.223-14    Aug 2003    Toxic Chemical Release Reporting (Over $100,000)
52.224-1    April 1984    Privacy Act Notification
52.224-2    April 1984    Privacy Act
52.225-1    Feb 2009    Buy American Act – Supplies
52.225-13    Jun 2008    Restrictions on Certain Foreign Purchases
52.227-1    Dec 2007    Authorization and Consent, Alternate I (Apr 1984)
52.227-2    Dec 2007    Notice and Assistance Regarding Patent and Copyright Infringement (Over $100,000)
52.227-11    Dec 2007    Patent Rights—Ownership by the Contractor

 

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52.227-14    Dec 2007    Rights in Data – General, Alternate II (Dec 2007)
52.232-9    Apr 1984    Limitation on Withholding of Payments
52.232-17    Oct 2008    Interest (Over $100,000)
52.232-20    Apr 1984    Limitation of Cost
52.232-23    Jan 1986    Assignment of Claims
52.232-25    Oct 2008    Prompt Payment
52.232-33    Oct 2003    Payment by Electronic Funds Transfer—Central Contractor Registration
52.233-1    Jul 2002    Disputes
52.233-3    Aug 1996    Protest After Award, Alternate I (June 1985)
52.233-4    Oct 2004    Applicable Law for Breach of Contract Claim
52.242-1    Apr 1984    Notice of Intent to Disallow Costs
52.242-3    May 2001    Penalties for Unallowable Costs (Over $500,000)
52.242-4    Jan 1997    Certification of Final Indirect Costs
52.242-13    Jul 1995    Bankruptcy (Over $100,000)
52.242-15    Apr 1989    Stop Work Order. Alt I (Aug 1984)
52.243-2    Aug 1987    Changes—Cost Reimbursement, Alternate V (Apr 1984)
52.244-2    June 2007    Subcontracts
52.244-5    Dec 1996    Competition in Subcontracting (Over $100,000)
52.244-6    Jun 2010    Subcontracts for Commercial Items
52.245-1    Aug 2010    Government Property
52.245-9    Aug 2010    Use and Charges
52.246-23    Feb 1997    Limitation of Liability (Over $100,000)
52.249-6    May 2004    Termination (Cost-Reimbursement)
52-249-14    Apr 1984    Excusable Delays
52.253-1    Jan 1991    Computer Generated Forms

 

(2) DEPARTMENT OF HEALTH AND HUMAN SERVICES ACQUISITION REGULATION (HHSAR) (48 CFR CHAPTER 3) CLAUSES:

 

HHSAR    

CLAUSE NO.    

  

            DATE             

  

TITLE

352.202-1    Jan 2006    Definitions—with Alternate paragraph (h) (Jan 2001)
352.203-70    Jan 2006    Anti-Lobbying
352.216-70    Jan 2006    Additional Cost Principles
352.227-70    Jan 2006    Publications and Publicity

 

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352.228-7    Dec 1991    Insurance—Liability to Third Persons
352.231-71    Jan. 2001    Pricing of adjustments.
352.233-71    Jan 2006    Litigation and Claims
352.234-3    Oct 2008    Full Earned Value Management System
352.242-70    Jan 2006    Key Personnel
352.242-73    Jan 2006    Withholding of Contract Payments
352.242-74    Apr 1984    Final Decisions on Audit Findings

ARTICLE 1.2. ADDITIONAL CONTRACT CLAUSES

This contract incorporates the following clauses by reference, with the same force and effect, as if they were given in full text. Upon request, the Contracting Officer will make their full text available.

a. FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES

 

  1. FAR Clause 52.215-17, Waiver of Facilities Capital Cost of Money (October 1997).

 

  2. FAR Clause 52.219-25, Small Disadvantaged Business Participation Program— Disadvantaged Status and Reporting (April 2008).

 

  3. FAR Clause 52.227-16, Additional Data Requirements (June 1987).

b. DEPARTMENT OF HEALTH AND HUMAN SERVICES ACQUISITION REGULATION (HHSAR) (48 CHAPTER 3) CLAUSES:

 

  1. HHSAR Clause 352.223-70, Safety and Health (January 2006).

 

  2. HHSAR Clause 352.224-70, Privacy Act (January 2006).

 

  3. HHSAR Clause 352.201-70, Paperwork Reduction Act (January 2006).

ARTICLE 1.3. ADDITIONAL FAR CONTRACT CLAUSES INCLUDED IN FULL TEXT

This contract incorporates the following clauses in full text.

FEDERAL ACQUISITION REGULATION (FAR)(48 CFR CHAPTER 1)CLAUSES:

 

a. FAR Clause 52.219-28, Post-Award Small Business Program Representation (April 2009).

 

  (a) Definitions . As used in this clause—

Long-term contract means a contract of more than five years in duration, including options. However, the term does not include contracts that exceed five years in duration

 

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because the period of performance has been extended for a cumulative period not to exceed six months under the clause at 52.217-8, Option to Extend Services, or other appropriate authority.

Small business concern means a concern, including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on Government contracts, and qualified as a small business under the criteria in 13 CFR part 121 and the size standard in paragraph (c) of this clause. Such a concern is “not dominant in its field of operation” when it does not exercise a controlling or major influence on a national basis in a kind of business activity in which a number of business concerns are primarily engaged. In determining whether dominance exists, consideration shall be given to all appropriate factors, including volume of business, number of employees, financial resources, competitive status or position, ownership or control of materials, processes, patents, license agreements, facilities, sales territory, and nature of business activity.

 

(b) If the Contractor represented that it was a small business concern prior to award of this contract, the Contractor shall represent its size status according to paragraph (e) of this clause or, if applicable, paragraph (g) of this clause, upon the occurrence of any of the following:

(1) Within 30 days after execution of a novation agreement or within 30 days after modification of the contract to include this clause, if the novation agreement was executed prior to inclusion of this clause in the contract.

(2) Within 30 days after a merger or acquisition that does not require a novation or within 30 days after modification of the contract to include this clause, if the merger or acquisition occurred prior to inclusion of this clause in the contract.

(3) For long-term contracts—

(i) Within 60 to 120 days prior to the end of the fifth year of the contract; and

(ii) Within 60 to 120 days prior to the date specified in the contract for exercising any option thereafter.

 

(c) The Contractor shall represent its size status in accordance with the size standard in effect at the time of this representation that corresponds to the North American Industry Classification System (NAICS) code assigned to this contract. The small business size standard corresponding to this NAICS code can be found at http://www.sba.gov/contractingopportunities/officials/size/index.html .

 

(d) The small business size standard for a Contractor providing a product which it does not manufacture itself, for a contract other than a construction or service contract, is 500 employees.

 

(e)

Except as provided in paragraph (g) of this clause, the Contractor shall make the representation required by paragraph (b) of this clause by validating or updating all its representations in the Online Representations and Certifications Application and its data

 

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  in the Central Contractor Registration, as necessary, to ensure that they reflect the Contractor’s current status. The Contractor shall notify the contracting office in writing within the timeframes specified in paragraph (b) of this clause that the data have been validated or updated, and provide the date of the validation or update.

 

(f) If the Contractor represented that it was other than a small business concern prior to award of this contract, the Contractor may, but is not required to, take the actions required by paragraphs (e) or (g) of this clause.

 

(g) If the Contractor does not have representations and certifications in ORCA, or does not have a representation in ORCA for the NAICS code applicable to this contract, the Contractor is required to complete the following representation and submit it to the contracting office, along with the contract number and the date on which the representation was completed:

The Contractor represents that it [X] is, [ ] is not a small business concern under NAICS Code assigned to contract number.

[Contractor to sign and date and insert authorized signer’s name and title].

PART III—LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

SECTION J—LIST OF ATTACHMENTS

The following documents are attached and incorporated in this contract:

1. Statement of Work

Statement of Work, dated 29 July 2010.

2. Invoice/Financing Request Instructions and Contract Financial Reporting Instructions for BARDA Cost-Reimbursement Type Contracts,

Invoice/Financing Request Instructions and Contract Financial Reporting Instructions for BARDA Cost-Reimbursement Type Contracts, 5 pages.

3. Financial Report of Individual Project/Contract, 1 page

4. Instructions for Completing Financial Report of Individual Project/Contract, 3 pages

5. Inclusion Enrollment Report

Inclusion Enrollment Report, 5/01 (Modified OAMP: 10/01), 1 page.

6. Research Patient Care Costs

Research Patient Care Costs, 1 page.

 

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7. Report of Government Owned, Contractor Held Property

Report of Government Owned, Contractor Held Property, dated 12/2/09, 1 page. Located at:
http://rcb.eancer.gov/rcb-internet/forms/Govt-Owned-Prop.pdf (Not Attached)

8. Communication Management Plan, dated 29 July 2010.

9. Non Clinical and Clinical Terms of Award, dated 29 July 2010.

10. List of Limited Data Rights, 9 Pages.

 

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PART IV—REPRESENTATIONS AND INSTRUCTIONS

SECTION K—REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS

The following documents are incorporated by reference in this contract:

 

1) Annual Representations and Certifications completed at the Online Representations Applications (ORCA) website.

 

2) Representations & Certifications dated 22 April 2010.

 

3) Human Subjects Assurance Identification Number: To be Determined (TBD).

 

4) Animal Welfare Assurance Numbers:

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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[***]

1 of 10 Pages.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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BAA BARDA-09-34

Advanced Research and Development of Chemical, Biological, Radiological, and

Nuclear Medical Countermeasures

ACHN-490: A NOVEL, BROAD SPRECTRUM “NEOGLYCOSIDE”

ANTIBIOTIC FOR THE TREATMENT OF RESISTANT THREAT AGENTS

Contractual Statement of Work

1. Preamble

Independently and not as an agency of the Government, the Contractor shall be required to furnish all the necessary services, qualified personnel, material, equipment, and facilities, not otherwise provided by the Government, as needed to perform the Statement of Work submitted in response to the Broad Agency Announcement (BAA) BARDA 09- 34.

Government reserves the right to modify the milestones, progress, schedule, budget, or product to add or delete products, process, or schedules as need may arise. Because of the nature of this (R&D) contract and complexities inherent in this and prior programs, at designated milestones the Government will evaluate whether work should be redirected, removed, or whether schedule or budget adjustments should be made. The Government reserves the right to change product, process, schedule, or events to add or delete part or all of these elements as the need arises.

1.1 Overall Objectives and Scope

The overall objective of this contract is to [***], as directed by BARDA. The scope of work for this contract includes preclinical, clinical and manufacturing development activities that fall into the following areas: [***]; and all associated [***] activities.

2. INTEGRATED PRODUCT DEVELOPMENT PLAN

The contractor shall carry out the following tasks and subtasks, by stage, and in accordance with an agreed upon Integrated Product Development Plan (IPDP) which shall further detail the conduct of the specific tasks and subtasks.

2.1. Stage One

    [***]

2.4 Project Management . The Contractor shall provide for the following as outlined below and in the contract deliverables list (reference),:

2.4.1 The overall management, integration and coordination of all contract activities, including a technical and administrative infrastructure to ensure the efficient planning, initiation, implementation, and direction of all contract activities;

2.4.2 A Principal Investigator (PI) responsible for project management, communication, tracking, monitoring and reporting on status and progress, and recommending modification to

 

[***] 4 pages in this document have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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the project requirements and timelines, including projects undertaken by subcontractors; The contract deliverables list (reference), identifies all contract deliverables and reporting requirements for this contract

2.4.3 Project Manager(s) with responsibility for monitoring and tracking day-to-day progress and timelines, coordinating communication and project activities; costs incurred; and program management; The contract deliverables list (reference), identifies all contract deliverables and reporting requirements for this contract

2.4.4 A BARDA Liaison with responsibility for effective communication with the Project Officer and Contracting Officer.

2.4.5 Administrative and legal staff to provide development of compliant subcontracts, consulting, and other legal agreements, and ensure timely acquisition of all proprietary rights, including IP rights, and reporting all inventions made in the performance of the project; and

2.4.6 Administrative staff with responsibility for financial management and reporting on all activities conducted by the Contractor and any subcontractors.

2.4.7 Integrated Master Plan: The Contractor provided an Integrated Master Project Plan (including tabular and Gantt forms) to BARDA that clearly indicates the critical path. The Integrated Master Project Plan shall be incorporated into the contract, and will be used to monitor performance of the contract.

2.4.8 Critical Path Milestones: The Integrated Master Project Plan outlines key, critical path milestones, with “go/no go” decision criteria (entrance and exit criteria for each phase of the project). The project plan should include, but not be limited to, milestones in manufacturing, non-clinical and clinical studies, and regulatory submissions.

2.4.9 Work Breakdown Structure: The Contractor shall delineate the Contract Work Breakdown Structure (CWBS) to Level 5 as part of their Integrated Master Project Plan. The CWBS shall be discernable and consistent. BARDA may require Contractor to furnish WBS data at the work package level or at a lower level if there is significant complexity and risk associated with the task.

2.4.10 Risk Management Plan: The Contractor shall develop a risk management plan highlighting potential problems and/or issues that may arise during the life of the contract, their impact on cost, schedule and performance, and appropriate remediation plans. This plan should reference relevant WBS elements where appropriate.

2.4.11 Earned Value Management System Plan: Subject to the requirements under HHSAR Clause 352.234-3, the Contractor shall use principles of Earned Value Management System (EVMS) in the management of this contract. The Seven Principles are:

 

  I. Plan all work scope for the program to completion.

 

  II. Break down the program work scope into finite pieces that can be assigned to a responsible person or organization for control of technical, schedule, and cost objectives.

 

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  III. Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments may be measured. Control Changes to the baseline.

 

  IV. Use actual cost incurred and recorded in accomplishing the work performed.

 

  V. Objectively assess accomplishments at the work performance level.

 

  VI. Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed.

 

  VII. Use earned value information in the company’s management processes.

Elements of EVMS shall be applied to all Cost Plus Fixed Fee CLINs as part of the Integrated Master Project Plan, the Contractor shall submit a written summary of the management procedures that it will establish, maintain and use to comply with EVMS requirements to include the following topics:

2.4.12 Integrated Baseline Review: The Contractor shall submit a plan for an Integrated Baseline Review (IBR) to occur within 90 days of contract award. At the IBR, the Contractor and BARDA shall mutually agree upon the budget, schedule and technical plan baselines (Performance Measurement Baseline). These baselines shall be the basis for monitoring and reporting progress throughout the life of the contract. The IBR is conducted to achieve confidence that the baselines accurately capture the entire technical scope of work, are consistent with contract schedule requirements, are reasonably and logically planned, and have adequate resources assigned. The goals of the IBR are as follows:

 

  i. Jointly assess areas such as the Contractor’s planning for complete coverage of the SOW, logical scheduling of the work activities, adequate resources, and identification of inherent risks

 

  ii. Confirm the integrity of the Performance Measurement Baseline (PMB)

 

  iii. Foster the use of EVM as a means of communication

 

  iv. Provide confidence in the validity of Contractor reporting

 

  v. Identify risks associated with the PMB

 

  vi. Present any revised PMBs for approval

2.4.13 Integrated Master Schedule: The Contractor shall deliver an initial program level Integrated Master Schedule (IMS) that rolls up all time-phased WBS elements down to the activity level. This IMS shall include the dependencies that exist between tasks. This IMS will be agreed to and finalized at the IBR. DI-MGMT-81650 may be referenced as guidance in creation of the IMS (see http://www.acq.osd.mil/pm/ ).

2.4.14 Quarterly Performance Metrics Report: The Contractor shall deliver an Earned Value Contract Performance Report on a Quarterly basis. Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA

 

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provided WBS and a Variance Analysis Report. Contractor will report EVM data on all Cost Plus CLINs. EV Variance thresholds will be negotiated with the Contractor post-award but for planning purposes will likely be (+/-10%). In conjunction with the CPR, the Contractor shall provide a quarterly update to the IMS with up to date performance data and should include actual start/finish and projected start/finish dates.

2.5 Regulatory Compliance. The Contractor shall manage the ACHN-490 IND and shall be responsible for:

2.5.1 Preparing materials for and requesting, scheduling and participating in all meetings with the FDA, including meetings to review IND, EUA and/or all other data packages;

2.5.2 Providing the dates and times of any meeting with the FDA to BARDA and make arrangements for appropriate BARDA staff to attend FDA meetings;

2.5.3 Providing BARDA with (i) the initial draft minutes and final draft minutes of any formal meeting with the FDA; (ii) final draft minutes of any informal meeting with the FDA; and (iii) five business days to review and comment upon any documents to be submitted to the FDA;

2.5.4 Submitting all documentation to the FDA in a timely manner, consistent with timelines set out in the contract and by the FDA.

2.6 Quality Assurance. The Contractor shall:

2.6.1 Provide any relevant SOPs upon request from Project Officer/Contracting Officer;

2.6.2 Ensure strict adherence to FDA regulations and guidance, including requirements for the conduct of animal studies and assays under GLP, the manufacturing of the therapeutic candidate under cGMP, and the conduct of clinical trials under GCP standards (as defined by 21 CFR §312 and ICH Guidelines document E6). The Contractor shall maintain quality assurance documentation of support adherence in these areas; and

2.6.3 Arrange for independent audits, as needed or as requested by the Project Officer. Audits may be requested to assure that Contractor and/or subcontractor facilities and all planned procedures meet FDA regulations and guidance required for GLP, cGMP and GCP standards. In addition, the Contractor shall provide interim and final audit reports to the Project Office and the Contracting Officer within thirty (30) calendar days of the completion of the audit. The Contractor agrees that BARDA may conduct independent audits of the Contractor and its subcontractors as needed to evaluate compliance with the FDA regulations and guidance, including those required to meet GLP, cGMP or GCP standards.

2.7 Facilities, Equipment and Other Resources. The Contractor shall provide equipment, facilities and other resources required for the implementation of the IPDP, such as the equipment and facilities, training and resources to comply with all Federal and HHS regulations in:

2.7.1 The humane care and use of vertebrate animals;

 

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2.7.2 The handling, storage and shipping of potentially dangerous biological and chemical agents, including Select agents under biosafety levels required for working with the biological agents under study;

2.7.3 The production, characterization, and release testing of active pharmaceutical ingredient and final drug product under cGMP;

2.7.4 The design and conduct of NDA-enabling non-clinical studies under GLP; and 2.7.5 The design and conduct of clinical trials in humans under GCP.

2.8 Security. The contractor shall provide for:

2.8.1 The establishment of a comprehensive security program that provides a security plan for the overall protection of personnel, information, data, and facilities;

2.8.2 Security administration, as an element of the security program that addresses threat and risk assessments and related policies and procedures for personnel security, physical security, information security, information technology; and

2.8.3 Security management, as an element of the security program that describes each element of security: physical, operations, personnel, information, information technology, transportation; and related training, auditing, and reporting requirements.

2.9 Data Management. The Contractor shall:

2.9.1 Be responsible for the development and implementation of data management and quality control systems/procedures, including transmission, storage, confidentiality, and retrieval of all contract data;

2.9.2 Provide for the statistical design and analysis of data resulting from the research;

2.9.3 Provide raw data or specific analyses of data generated with contract funding to the Project Officer upon request.

2.10 Requirements for Implementing the Integrated Product Development Plan.

2.10.1 Within 14 calendar days of the effective date of the contract, the Contractor shall submit an updated Integrated Product Development Plan (IPDP) to the Project Officer and the Contracting Officer for approval prior to the initiation of any activities related to the implementation of these plans.

2.10.2 Stage Gate Reporting . On completion of a stage of the product development, as defined in the approved IPDP, the Contractor shall prepare and submit to the Project Officer and the Contracting Officer a Stage Gate Report that contains (i) sufficient detail, documentation and analysis to support successful completion of the stage according to the predetermined qualitative and quantitative criteria that were established for Go/No Go decision making; and (ii) a description of the next stage of product development to be initiated and a request for approval to proceed to the next stage of product development.

 

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2.10.3 Deviations to Integrated Product Development Plan . During the course of contract performance, in response to a need to change the IPDP, the Contractor shall submit a Deviation Report. This report shall request a change in the agreed-upon IPDP and timelines. This report shall include: (i) discussion of the justification/rationale for the proposed change; (ii) options for addressing the needed changes from the approved timelines, including a cost-benefit analysis of each option; and (iii) recommendations for the preferred option that includes a full analysis and discussion of the effect of the change on the entire product development program, timelines, and budget.

3. Other Items

3.1 Contract Review Meetings. The Contractor shall participate in regular meetings to coordinate and oversee the contract effort as directed by the Contracting and Project Officers. Such meetings may include, but are not limited to, meeting of the Contractors and subcontractors to discuss clinical manufacturing progress, product development, product assay development, scale up manufacturing development, clinical sample assays development, preclinical/clinical study designs and regulatory issues; meetings with individual contractors and other HHS officials to discuss the technical, regulatory, and ethical aspects of the program; and meeting with technical consultants to discuss technical data provided by the Contractor.

The Contractor shall participate in bi-weekly teleconferences between the Contractor and subcontractors and BARDA to review technical progress. Teleconferences or additional face-to-face meetings shall be more frequent at the request of BARDA.

3.2 Publications. The Contractor shall submit to the Project Officer for review any manuscript or scientific meeting abstract containing data generated under this contract no less than thirty (30) calendar days for manuscripts and fifteen (15) calendar days before abstract submission for public presentation or publication. The Contractor shall acknowledge contract support in all such publications.

3.3 Press Releases. Press releases shall be considered to include the public release of information to any medium, excluding peer-reviewed scientific publications. The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases. The contractor shall ensure that the Project Officer has received an advance copy of any press release related to this contract not less than four (4) working days prior to the issuance of the press release.

 

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ATTACHMENT 2

INVOICE/FINANCING REQUEST AND CONTRACT FINANCIAL REPORTING

INSTRUCTIONS FOR BARDA COST-REIMBURSEMENT TYPE CONTRACTS

Format: Payment requests shall be submitted on the Contractor’s self-generated form in the manner and format prescribed herein and as illustrated in the Sample Invoice/Financing Request. Standard Form 1034, Public Voucher for Purchases and Services Other Than Personal, may be used in lieu of the Contractor’s self-generated form provided it contains all of the information shown on the Sample Invoice/Financing Request. DO NOT include a cover letter with the payment request.

Number of Copies: Payment requests shall be submitted in the quantity specified in the Invoice Submission Instructions in Section G of the Contract Schedule.

Frequency: Payment requests shall not be submitted more frequently than once every two weeks in accordance with the Allowable Cost and Payment Clause incorporated into this contract. Small business concerns may submit invoices/financing requests more frequently than every two weeks when authorized by the Contracting Officer.

Cost Incurrence Period: Costs incurred must be within the contract performance period or covered by precontract cost provisions.

Billing of Costs Incurred: If billed costs include (1) costs of a prior billing period, but not previously billed, or (2) costs incurred during the contract period and claimed after the contract period has expired, the Contractor shall cite the amount(s) and month(s) in which it incurred such costs.

Contractor’s Fiscal Year: Payment requests shall be prepared in such a manner that the Government can identify costs claimed with the Contractor’s fiscal year.

Currency: All BARDA contracts are expressed in United States dollars. When the Government pays in a currency other than United States dollars, billings shall be expressed, and payment by the Government shall be made, in that other currency at amounts coincident with actual costs incurred. Currency fluctuations may not be a basis of gain or loss to the Contractor. Notwithstanding the above, the total of all invoices paid under this contract may not exceed the United States dollars authorized.

Costs Requiring Prior Approval: Costs requiring the Contracting Officer’s approval, which are not set forth in an Advance Understanding in the contract, shall be identified and reference the Contracting Officer’s Authorization (COA) Number. In addition, the Contractor shall show any cost set forth in an Advance Understanding as a separate line item on the payment request.

Invoice/Financing Request Identification: Each payment request shall be identified as either:

 

(a) Interim Invoice/Contract Financing Request: These are interim payment requests submitted during the contract performance period.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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(b) Completion Invoice: The completion invoice shall be submitted promptly upon completion of the work, but no later than one year from the contract completion date, or within 120 days after settlement of the final indirect cost rates covering the year in which the contract is physically complete (whichever date is later). The Contractor shall submit the completion invoice when all costs have been assigned to the contract and it completes all performance provisions.

 

(c) Final Invoice: A final invoice may be required after the amounts owed have been settled between the Government and the Contractor (e.g., resolution of all suspensions and audit exceptions).

Preparation and Itemization of the Invoice/Financing Request: The Contractor shall furnish the information set forth in the instructions below. The instructions are keyed to the entries on the Sample Invoice/Financing Request.

 

(a) Designated Billing Office Name and Address: Enter the designated billing office name and address, as identified in the Invoice Submission Instructions in Section G of the Contract Schedule.

 

(b) Contractor’s Name, Address, Point of Contact, VIN, and DUNS or DUNS+4 Number: Show the Contractor’s name and address exactly as they appear in the contract, along with the name, title, phone number, and e-mail address of the person to notify in the event of an improper invoice or, in the case of payment by method other than Electronic Funds Transfer, to whom payment is to be sent. Provide the Contractor’s Vendor Identification Number (VIN), and Data Universal Numbering System (DUNS) number or DUNS+4. The DUNS number must identify the Contractor’s name and address exactly as stated on the face page of the contract. When an approved assignment has been made by the Contractor, or a different payee has been designated, provide the same information for the payee as is required for the Contractor (i.e., name, address, point of contact, VIN, and DUNS).

 

(c) Invoice/Financing Request Number: Insert the appropriate serial number of the payment request.

 

(d) Date Invoice/Financing Request Prepared: Insert the date the payment request is prepared.

 

(e) Contract Number and Order Number (if applicable): Insert the contract number and order number (if applicable).

 

(f) Effective Date: Insert the effective date of the contract or if billing under an order, the effective date of the order.

 

(g) Total Estimated Cost of Contract/Order: Insert the total estimated cost of the contract, exclusive of fixed-fee. If billing under an order, insert the total estimated cost of the order, exclusive of fixed-fee. For incrementally funded contracts/orders, enter the amount currently obligated and available for payment.

 

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(h) Total Fixed-Fee: Insert the total fixed-fee (where applicable). For incrementally funded contracts/orders, enter the amount currently obligated and available for payment.

 

(i) Two-Way/Three-Way Match: Identify whether payment is to be made using a two-way or three-way match. To determine required payment method, refer to the Invoice Submission Instructions in Section G of the Contract Schedule.

 

(j) Office of Acquisitions: Insert the name of the Office of Acquisitions, as identified in the Invoice Submission Instructions in Section G of the Contract Schedule.

 

(k) Central Point of Distribution: Insert the Central Point of Distribution, as identified in the Invoice Submission Instructions in Section G of the Contract Schedule.

 

(l) Billing Period: Insert the beginning and ending dates (month, day, and year) of the period in which costs were incurred and for which reimbursement is claimed.

 

(m) Amount Billed—Current Period: Insert the amount claimed for the current billing period by major cost element, including any adjustments and fixed-fee. If the Contract Schedule contains separately priced line items, identify the contract line item(s) on the payment request and include a separate breakdown (by major cost element) for each line item.

 

(n) Amount Billed—Cumulative: Insert the cumulative amounts claimed by major cost element, including any adjustments and fixed-fee. If the Contract Schedule contains separately priced line items, identify the contract line item(s) on the payment request and include a separate breakdown (by major cost element) for each line item.

 

(o) Direct Costs: Insert the major cost elements. For each element, consider the application of the paragraph entitled “Costs Requiring Prior Approval” on page 1 of these instructions.

 

  (1) Direct Labor: Include salaries and wages paid (or accrued) for direct performance of the contract.

For Level of Effort contracts only, the Contractor shall provide the following information on a separate sheet of paper attached to the payment request:

- hours or percentage of effort and cost by labor category (as specified in the Level of Effort Article in Section F of the contract) for the current billing period, and

- hours or percentage of effort and cost by labor category from contract inception through the current billing period. (NOTE: The Contracting Officer may require the Contractor to provide additional breakdown for direct labor, such as position title, employee name, and salary or hourly rate.)

 

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  (2) Fringe Benefits: List any fringe benefits applicable to direct labor and billed as a direct cost. Do not include in this category fringe benefits that are included in indirect costs.

 

  (3) Accountable Personal Property: Include permanent research equipment and general purpose equipment having a unit acquisition cost of $1,000 or more, with a life expectancy of more than two years, and sensitive property regardless of cost (see the HHS Contractor’s Guide for Control of Government Property ). Show permanent research equipment separate from general purpose equipment.

On a separate sheet of paper attached to the payment request, list each item for which reimbursement is requested. An asterisk (*) shall precede the item if the equipment is below the $1,000 approval level. Include reference to the following (as applicable):

- item number for the specific piece of equipment listed in the Property Schedule, and

- COA number, if the equipment is not covered by the Property Schedule.

The Contracting Officer may require the Contractor to provide further itemization of property having specific limitations set forth in the contract.

 

  (4) Materials and Supplies: Include equipment with unit costs of less than $1,000 or an expected service life of two years or less, and consumable material and supplies regardless of amount.

 

  (5) Premium Pay: List remuneration in excess of the basic hourly rate.

 

  (6) Consultant Fee: List fees paid to consultants. Identify consultant by name or category as set forth in the contract or COA, as well as the effort (i.e., number of hours, days, etc.) and rate billed.

 

  (7) Travel: Include domestic and foreign travel. Foreign travel is travel outside of Canada, the United States and its territories and possessions. However, for an organization located outside Canada, the United States and its territories and possessions, foreign travel means travel outside that country. Foreign travel must be billed separately from domestic travel.

 

  (8) Subcontract Costs: List subcontractor(s) by name and amount billed.

 

  (9) Other: List all other direct costs in total unless exceeding $1,000 in amount. If over $1,000, list cost elements and dollar amounts separately. If the contract contains restrictions on any cost element, that cost element must be listed separately.

 

(p) Cost of Money (COM): Cite the COM factor and base in effect during the time the cost was incurred and for which reimbursement is claimed.

 

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(q) Indirect Costs: Identify the indirect cost base (IDC), indirect cost rate, and amount billed for each indirect cost category.

 

(r) Fixed-Fee: Cite the formula or method of computation for fixed-fee, if applicable. The fixed-fee must be claimed as provided for by the contract.

 

(s) Total Amounts Claimed: Insert the total amounts claimed for the current and cumulative periods.

 

(t) Adjustments: Include amounts conceded by the Contractor, outstanding suspensions, and/or disapprovals subject to appeal.

 

(u) Grand Totals

 

(v) Certification of Salary Rate Limitation: If required by the contract (see Invoice Submission Instructions in Section G of the Contract Schedule), the Contractor shall include the following certification at the bottom of the payment request:

“I hereby certify that the salaries billed in this payment request are in compliance with the Salary Rate Limitation Provisions in Section H of the contract.”

The Contracting Officer may require the Contractor to submit detailed support for costs claimed on one or more interim payment requests.

FINANCIAL REPORTING INSTRUCTIONS:

These instructions are keyed to the Columns on the sample invoice/financing request.

Column A—Expenditure Category: Enter the expenditure categories required by the contract.

Column B—Cumulative Percentage of Effort/Hrs.—Negotiated: Enter the percentage of effort or number of hours agreed to for each employee or labor category listed in Column A.

Column C—Cumulative Percentage of Effort/Hrs.—Actual: Enter the percentage of effort or number of hours worked by each employee or labor category listed in Column A.

Column D—Amount Billed—Current: Enter amounts billed during the current period.

Column E—Amount Billed—Cumulative: Enter the cumulative amounts to date.

Column F—Cost at Completion: Enter data only when the Contractor estimates that a particular expenditure category will vary from the amount negotiated. Realistic estimates are essential.

Column G—Contract Amount: Enter the costs agreed to for all expenditure categories listed in Column A.

Column H—Variance (Over or Under): Show the difference between the estimated costs at completion (Column F) and negotiated costs (Column G) when entries have been made in

 

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Column F. This column need not be filled in when Column F is blank. When a line item varies by plus or minus 10 percent, i.e., the percentage arrived at by dividing Column F by Column G, an explanation of the variance should be submitted. In the case of an overrun (net negative variance), this submission shall not be deemed as notice under the Limitation of Cost (Funds) Clause of the contract.

Modifications: Any modification in the amount negotiated for an item since the preceding report should be listed in the appropriate cost category.

Expenditures Not Negotiated: An expenditure for an item for which no amount was negotiated (e.g., at the discretion of the Contractor in performance of its contract) should be listed in the appropriate cost category and all columns filled in, except for G. Column H will of course show a 100 percent variance and will be explained along with those identified under H above.

 

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SAMPLE INVOICE/FINANCING REQUEST AND CONTRACT FINANCIAL REPORT

 

(a) Designated Billing Office Name and Address:

DHHS/OS/ASPR/BARDA

Attn: Contracting Officer

330 Independence Ave., S.W.

Room G644

Washington, D.C. 20201

 

(b) Contractor’s Name, Address, Point of Contact, VIN, and   DUNS or DUNS+4 Number:

ABC CORPORATION

100 Main Street

Anywhere, USA Zip Code

Name, Title, Phone Number, and E-mail Address of person to notify in the event of an improper invoice or, in the case of payment by method other than Electronic Funds Transfer, to whom payment is to be sent.

VIN:

DUNS or DUNS+4:

(c) Invoice/Financing Request No.:

 

(d) Date Invoice Prepared:

 

(e) Contract No. and Order No. (if applicable):                    

 

(f) Effective Date:

 

(g) Total Estimated Cost of Contract/Order:

 

(h) Total Fixed-Fee (if applicable):

 

(i) ¨ Two-Way Match:

¨ Three-Way Match:

 

(j) Office of Acquisitions:

 

(k) Central Point of Distribution:

 

 

 

(l) This invoice/financing request represents reimbursable costs for the period from              to            

 

Expenditure Category*

                     A

   Cumulative Percentage of
Effort/Hrs
   Amount Billed    Cost at
Completion
F
   Contract
Amount
G
   Variance
H
   Negotiated
B
   Actual
C
   (m)
Current
D
   (n)
Cumulative
E
        

(o) Direct Costs:

                    

(1) Direct Labor

                    

(2) Fringe Benefits

                    

(3) Accountable Property

                    

(4) Materials & Supplies

                    

(5) Premium Pay

                    

(6) Consultant Fees

                    

(7) Travel

                    

(8) Subcontracts

                    

(9) Other

                    

Total Direct Costs

                    

(p) Cost of Money

                    

(q) Indirect Costs

                    

(r) Fixed Fee

                    

(s) Total Amount Claimed

                    

(t) Adjustments

                    

(u) Grand Totals

                    

I certify that all payments are for appropriate purposes and in accordance with the contract.

 

     

 

  
(Name of Official)       (Title)   

 

* Attach details as specified in the contract

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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ATTACHMENT 3

 

FINANCIAL REPORT OF INDIVIDUAL
PROJECT/CONTRACT

Note: Complete this Form in Accordance with
Accompanying Instructions.
   Project Task:    Contract No.:    Date of Report:    0990-0134

0990-0131

   Reporting Period:    Contractor Name and Address:
Expenditure Category    Percentage of Effort/Hours    Cumulative
Incurred Cost at
End of Prior
Period
   Incurred
Cost—
Current
Period
   Cumulative Cost
to Date (D + E)
   Estimated
Cost to
Complete
   Estimated
Cost at
Completion
(F + G)
   Negotiated
Contract
Amount
   Variance
(Over or
Under)
(I—H)
   Negotiated    Actual                     

A

   B    C    D    E    F    G    H    I    J

 

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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ATTACHMENT 4

INSTRUCTIONS FOR COMPLETING

“FINANCIAL REPORT OF INDIVIDUAL PROJECT/CONTRACT”

GENERAL INFORMATION

Purpose. This Quarterly Financial Report is designed to: (1) provide a management tool for use by be BARDA in monitoring the application of financial and personnel resources to the BARDA contracts; (2) provide contractors with financial and personnel management data which is usable in their management processes; (3) promptly indicate potential areas of contract underruns or overruns by making possible comparisons of actual performance and projections with prior estimates on individual elements of cost and personnel; and (4) obtain contractor’s analyses of cause and effect of significant variations between actual and prior estimates of financial and personnel performance.

REPORTING REQUIREMENTS

Scope. The specific cost and personnel elements to be reported shall be established by mutual agreement prior to award. The Government may require the contractor to provide detailed documentation to support any element(s) on one or more financial reports.

Number of Copies and Mailing Address. An original and two (2) copies of the report(s) shall be sent to the contracting officer at the address shown on the face page of the contract, no later than 30 working days after the end of the period reported. However, the contract may provide for one of the copies to be sent directly to the Contracting Officer’s Technical Representative.

REPORTING STATISTICS

A modification which extends the period of performance of an existing contract will not require reporting on a separate quarterly report, except where it is determined by the contracting officer that separate reporting is necessary. Furthermore, when incrementally funded contracts are involved, each separate allotment is not considered a separate contract entity (only a funding action). Therefore, the statistics under incrementally funded contracts should be reported cumulatively from the inception of the contract through completion.

Definitions and Instructions for Completing the Quarterly Report. For the purpose of establishing expenditure categories in Column A, the following definitions and instructions will be utilized. Each contract will specify the categories to be reported.

 

(1) Key Personnel . Include key personnel regardless of annual salary rates. All such individuals should be listed by names and job titles on a separate line including those whose salary is not directly charged to the contract but whose effort is directly associated with the contract. The listing must be kept up to date.

 

(2) Personnel—Other . List as one amount unless otherwise required by the contract.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

76


(3) Fringe Benefits . Include allowances and services provided by the contractor to employees as compensation in addition to regular salaries and wages. If a fringe benefit rate(s) has been established, identify the base, rate, and amount billed for each category. If a rate has not been established, the various fringe benefit costs may be required to be shown separately. Fringe benefits which are included in the indirect cost rate should not be shown here.

 

(4) Accountable Personal Property . Include nonexpendable personal property with an acquisition cost of $1,000 or more and with an expected useful life of two or more years, and sensitive items regardless of cost. Form HHS 565, “Report of Accountable Property,” must accompany the contractor’s public voucher (SF 1034/SF 1035) or this report if not previously submitted. See “Contractor’s Guide for Control of Government Property.”

 

(5) Supplies . Include the cost of supplies and material and equipment charged directly to the contract, but excludes the cost of nonexpendable equipment as defined in (4) above.

 

(6) Inpatient Care . Include costs associated with a subject while occupying a bed in a patient care setting. It normally includes both routine and ancillary costs.

 

(7) Outpatient Care . Include costs associated with a subject while not occupying a bed. It normally includes ancillary costs only.

 

(8) Travel . Include all direct costs of travel, including transportation, subsistence and miscellaneous expenses. Travel for staff and consultants shall be shown separately. Identify foreign and domestic travel separately. If required by the contract, the following information shall be submitted: (i) Name of traveler and purpose of trip; (ii) Place of departure, destination and return, including time and dates; and (iii) Total cost of trip.

 

(9) Consultant Fee . Include fees paid to consultant(s). Identify each consultant with effort expended, billing rate, and amount billed.

 

(10) Premium Pay . Include the amount of salaries and wages over and above the basic rate of pay.

 

(11) Subcontracts . List each subcontract by name and amount billed.

 

(12) Other Costs . Include any expenditure categories for which the Government does not require individual line item reporting. It may include some of the above categories.

 

(13) Overhead/Indirect Costs . Identify the cost base, indirect cost rate, and amount billed for each indirect cost category.

 

(14) General and Administrative Expense . Cite the rate and the base. In the case of nonprofit organizations, this item will usually be included in the indirect cost.

 

(15) Fee . Cite the fee earned, if any.

 

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(16) Total Costs to the Government.

PREPARATION INSTRUCTIONS

These instructions are keyed to the Columns on the Quarterly Report.

Column A—Expenditure Category. Enter the expenditure categories required by the contract.

Column B—Percentage of Effort/Hours Negotiated. Enter the percentage of effort or number of hours agreed to during contract negotiations for each labor category listed in Column A.

Column C—Percentage of Effort/Hours-Actual. Enter the cumulative percentage of effort or number of hours worked by each employee or group of employees listed in Column A.

Column D—Cumulative Incurred Cost at End of Prior Period. Enter the cumulative incurred costs up to the end of the prior reporting period. This column will be blank at the time of the submission of the initial report.

Column E—Incurred Cost-Current Period. Enter the costs which were incurred during the current period.

Column F—Cumulative Incurred Cost to Date. Enter the combined total of Columns D and E.

Column G—Estimated Cost to Complete. Make entries only when the contractor estimates that a particular expenditure category will vary from the amount negotiated. Realistic estimates are essential.

Column H—Estimated Costs at Completion. Complete only if an entry is made in Column G.

Column I—Negotiated Contract Amount. Enter in this column the costs agreed to during contract negotiations for all expenditure categories listed in Column A.

Column J—Variance (Over or Under). Complete only if an entry is made in Column H. When entries have been made in Column H, this column should show the difference between the estimated costs at completion (Column H) and negotiated costs (Column I). When a line item varies by plus or minus 10 percent, i.e., the percentage arrived at by dividing Column J by Column I, an explanation of the variance should be submitted. In the case of an overrun (net negative variance), this submission shall not be deemed as notice under the Limitation of Cost (Funds) Clause of the contract.

Modifications. List any modification in the amount negotiated for an item since the preceding report in the appropriate cost category.

Expenditures Not Negotiated. List any expenditure for an item for which no amount was negotiated (e.g., at the discretion of the contractor in performance of its contract) in the appropriate cost category and complete all columns except for I. Column J will of course show a 100 percent variance and will be explained along with those identified under J above.

 

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Attachment 5

INCLUSION ENROLLMENT REPORT

This report format should NOT be used for data collection from study participants

 

Study Title:
Total Enrollment:    Protocol Number:
Contract Number:   
PART A. TOTAL ENROLLMENT REPORT: Number of Subjects Enrolled to Date (Cumulative) by Ethnicity and Race

 

Ethnic Category

   Sex/Gender
   Females    Males    Unknown or Not Reported    Total

Hispanic or Latino

           

Not Hispanic or Latino

           

Unknown (Individuals not reporting ethnicity)

           

Ethnic Category: Total of All Subjects*

           

Racial Categories

           

American Indian/Alaska Native

           

Asian

           

Native Hawaiian or Other Pacific Islander

           

Black or African American

           

White

           

More than one race

           

Unknown or not reported

           

Racial Categories: Total of All Subjects*

           

 

PART B. HISPANIC ENROLLMENT REPORT Number of Hispanics or Latinos Enrolled to Date (Cumulative)

 

Racial Categories

   Females    Males    Unknown or Not Reported    Total

American Indian or Alaska Native

           

Asian

           

Native Hawaiian or Other Pacific Islander

           

Black or African American

           

White

           

More Than One Race

           

Unknown or not reported

           

Racial Categories: Total of Hispanics or Latinos**

           

 

* These totals must agree
** These totals must agree

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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ATTACHMENT 6

Research Patient Care Costs

(a) Research patient care costs are the costs of routine and ancillary services provided to patients participating in research programs described in this contract.

(b) Research patient care costs shall be computed in a manner consistent with the principles and procedures used by the Medicare Program for determining the part of Medicare reimbursement based on reasonable costs. The Diagnostic Related Group (DRG) prospective reimbursement method used to determine the remaining portion of Medicare reimbursement shall not be used to determine research patient care costs. Research patient care rates or amounts shall be established by the Secretary of HHS or his/her duly authorized representative.

(c) Prior to submitting an invoice for research patient care costs under this contract, the contractor must make every reasonable effort to obtain third party payment, where third party payors (including Government agencies) are authorized or are under a legal obligation to pay all or a portion of the charges incurred under this contract for research patient care.

(d) The contractor must maintain adequate procedures to identify those research patients participating in this contract who are eligible for third party reimbursement.

(e) Only those charges not recoverable from third party payors or patients and which are consistent with the terms and conditions of the contract are chargeable to this contract.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

80


Communication Management Plan

Biomedical Advanced Research and Development Authority

(BARDA)

Broad Spectrum Antimicrobial Program

Achaogen Contract

##

330 Independence Ave. SW

Washington, DC 20201

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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BSA Communications Management Plan

Introduction:

The purpose of the Broad Spectrum Antimicrobial (BSA) communications management plan is to define the communication requirements for the project and outline how BARDA and the Contractor will distribute information. The communications management plan defines the following:

 

    Communication requirements based on roles,

 

    What information will be communicated,

 

    How the information will be communicated,

 

    When will information be distributed,

 

    Who does the communication,

 

    Who receives the communication,

This BSA communications management plan sets the communications framework for this project. It will serve as a guide for communications throughout the period of performance and will be updated, as communication needs change. This plan identifies and defines the roles of persons involved in the project. The BSA communications management plan provides an in-depth guide on how the program plans to conduct meetings between stakeholders to ensure a successful outcome. A project team directory is below to provide contact information for all stakeholders directly involved in the project.

Communications Management Approach

The BARDA Project Officer (PO) and Contracting Officer (CO) and Contractor’s Program Manager will take a proactive role in ensuring effective communication between all parties on this contract. The goal of all parties is to maintain a transparent communicative relationship that fosters the sharing of information to relevant Stakeholders in a timely and efficient manor to facilitate the successful outcome of the programs mutual objectives, the development of ACHN-490 as a novel broad spectrum antibiotic for the therapeutic treatment of individuals exposed to biodefense threat agents. This communication plan documents the communication requirements for all parties that will support the implementation of this contract. The Communications Matrix will provide a guide for the communication process, including:

 

    What type of information Stakeholders will communicate,

 

    Who is responsible for communicating relevant information,

 

    When should stakeholders communicate program relevant information,

Roles

Project Sponsor: BSA Branch Chief

The project sponsor is responsible for overseeing the BSA contracts and the champion of the project and has authorized the project by signing the project charter. This person is responsible for the funding of the project and is ultimately responsible for its success. Since the Project Sponsor is at the executive level, communications should be presented in summary format unless

 

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the Project Sponsor requests more detailed communications. Communication from the Contractor to the Project Sponsor should flow through the BARDA Contracting Officer or Project Officer through the appropriate chain of command to the Project Sponsor, unless otherwise indicated by the Project Sponsor.

Contract Officer

The BARDA Contract Officer (CO) oversees the project at the program level and is responsible for all contract related issues. The CO is the United State Government’s representative that has the legal authority to bind BARDA to a contract with the Contractor. The CO will communicate directly with the Contractor and shall be included on all communications between the Contractor and BARDA staff. At any time, if the Contractor shall have contractual or programmatic concerns regarding the contract, scope of work, or any other issues, the Contractor should immediately address all concerns directly to the CO.

Project Officer

The BARDA Project Officer (PO) and/or Contracting Officer’s Technical Representative (COTR) oversees the project at the program level and is responsible for the technical implementation of the BSA contract. The PO is responsible for managing the cost, schedule, and performance parameters for the contract. The PO will be in regular communication with Contractor’s POC to ensure the contract is maintaining cost, schedule, and performance objectives.

The PO manages day-to-day resources, provides project guidance, monitors, and reports on the projects metrics as defined in the Project Management Plan. The PO is responsible for the execution of the project and is the primary communicator for the project.

The PO is responsible for briefing the Project Sponsor and subsequent leadership levels. The PO is the individual responsible for communicating program progress, program risk, and contract relevant issues raised by the Product Coordination Team charter, stakeholders, and/or Contractor.

Key Stakeholders and the Product Coordination Team

The BARDA Branch Chief responsible for overseeing the BSA contract signed a Product Coordination Team (PCT) Charter, identifying internal and external BARDA program members and stakeholders supporting this contract. The BARDA BSA PCT will meet regularly to review the project. The PO will chair the PCT. Based on their technical or program management expertise, each stakeholder and PCT member will play a key role. All BARDA and USG Team members will work to communicate all activities through the PO.

Members of the PCT may at times work directly with other stakeholders and/or the Contractor with consent of the CO and PO. In such situations, the CO, PO, and Contractor POC shall be included on all communications. It is important to note that the intent of this communication is to provide information and is not to be taken as a directive by the Contractor. If the recipient(s) believe(s) the information provided herein may be construed as a directive, the recipient(s) should disregard that portion of the communication and contact the BARDA BSA Contracting Officer.

 

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Contractor Liaison

The Contractor has identified a BARDA Liaison (BL) as a primary POC and alternative POC (in the advent that the primary POC is unavailable) to communicate directly with the BARDA CO and PO. The Contractor BL will work closely with the CO and BARDA PO to manage the implementation of this contract. This communication shall be transparent and informative for all entities. Communication from the Contractor to BARDA should flow through the Contractor BL to the CO and PO to ensure proper coordination within BARDA and the Contractor’s organization.

The Contractor’s BL is responsible for the implementation of the scope of work agreed to under the contract. The Contractor’s BL will provide reports on the project’s metrics as defined in the Project Management Plan. As the person responsible for the implementation of the project, the Contractor’s BL is the primary communicator for the Contractor and responsible for distributing information according to the Communications Management Plan.

Food and Drug Administration

The Food and Drug Administrations’, Center for Drug Evaluation and Research (CDER) is the regulatory authority overseeing the development of the BSA Medical Countermeasure. CDER plays a critical role in the success of this contract between BARDA and the Contractor. In an effort to provide open communication, the communications management plan encourages the sharing of communications between the FDA, BARDA, and the Contractor. The communication management plan does not prevent either BARDA or the Contractor from engaging CDER.

Project Team Directory

 

Role

  

Name

   Email    Phone
Project Sponsor    Dr. Joe Larsen    Joseph.Larsen@hhs.gov    202-260-0050
Contracting Officer    Ethan Mueller    Ethan.Mueller@hhs.gov    202-205-4657
Project Officer/PCT Chair    TBD    TBD    TBD
Contractor POC/BARDA Liaison    [***]    [***]    [***]
Alternative Contractor POC    [***]    [***]    [***]

Communication Deliverables and Procedures

The Contract Deliverables List (reference) outlines the communication requirements and expectations for various types of meetings and program deliverables.

GUIDELINES FOR MEETINGS

Meeting Agenda

The Contractor will send the meeting agenda to the PO in advance of the meeting as outlined in the Contract Deliverables List. The agenda will include ongoing action items, requested

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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participants and provide a brief agenda for the meeting. The BARDA PO will review and finalize the meeting agenda and distribute accordingly.

Meeting Minutes

The Contractor will draft meeting minutes and forward to the PO within a specific amount of time as outlined in Contract Deliverables List. The meeting minutes will provide a synopsis of the meeting, list of participants, highlight decisions made, reference supportive material and include the status of all open and closed action items and a parking lot list. The BARDA PO will review and finalize meeting minutes.

Action Items

The meeting agenda and minutes will record action items. Action items will include the action item, owner of the action item, and the anticipated date of completion. Meetings will start with a review of the status of all action items from previous meetings and end with a review of all new action items resulting from the meeting. The review of the new action items will include identifying the owner for each action item and setting a date for completing the action item.

Meeting Chair—BARDA Project Officer

The meeting chair is responsible for distributing the meeting agenda, facilitating the meeting and distributing the meeting minutes. As the meeting chair, the BARDA Project Officer, will ensure that the meeting starts and ends on time and that all presenters adhere to their allocated time frames. The Contractor will be responsible for developing the initial agenda, drafting the minutes, capturing action items, and following up on meeting outcomes.

Note Taker: Contractor

The Contractor is the note taker responsible for documenting the status of all meeting items, maintaining a parking lot item list and taking notes of anything else of importance during the meeting. The note taker will give a copy of their minutes to the BARDA CO for final approval of meeting minutes.

Parking Lot

The parking lot is a tool used by the facilitator to record and defer items which are not on the meeting agenda but that, merit further discussion later or through another forum. A parking lot record should identify an owner for the item, as this person will be responsible for ensuring follow-up. The Contractor will include a parking lot list in the meeting minutes.

 

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Non-Clinical Terms of Award

These Non-Clinical Terms of Award detail an agreement between the Biomedical Advanced Research and Development Authority (BARDA) and the Awardee; they apply to all grants and contracts that involve non-clinical research.

Draft protocols for each nonclinical study will be submitted to BARDA for evaluation and comment. BARDA comments will be incorporated into the draft proposal prior to submission to the FDA for comment, if required.

BARDA shall have rights to all protocols, data resulting from execution of these protocols, and final reports, funded by BARDA under this contract, as defined in Rights in Data Clause in FAR 52.227-14. BARDA reserves the right to request that the Awardee provide any contract deliverable in a non-proprietary form, to ensure BARDA has the ability to review and distribute the deliverables, as BARDA deems necessary.

A. Safety and Monitoring Issues

PHS Policy on Humane Care and Use of Laboratory Animals

Before award and then with the annual progress report, the Awardee must submit to BARDA a copy of the current Institutional Animal Care and Use Committees (IACUC) documentation of continuing review and approval and the Office of Laboratory Animal Welfare (OLAW- National Institutes of Health) Federal Wide Assurance (FWA) number for the institution or site.

If other institutions are involved in the research (e.g., a multicenter trial or study), each institution’s IACUC must review and approve the protocol. They must also provide BARDA initial documentation and documentation of continuing review and approval and FWA number.

The Awardee must ensure that the application as well as all protocols are reviewed by the performing institution’s IACUC.

To help ensure the safety of animals used in BARDA funded studies, the Awardee must provide BARDA copies of documents related to all major changes in the status of ongoing protocols, including the following:

 

    All amendments or changes to the protocol, identified by protocol version number, date, or both and date it is valid.

 

    All material changes in IACUC policies and procedures, identified by version number, date, and all required signatories (if applicable)

 

    Termination or temporary suspension of the study(ies) for regulatory issues

 

    Termination or temporary suspension of the protocol.

 

    Any change that is made in the specific IACUC approval for the indicated study(ies).

 

86


    Any other problems or issues that could affect the scientific integrity of the study(ies), i.e. fraud, misrepresentation, misappropriation of funds, etc.

Awardees must notify BARDA by email or fax of any of the above changes within three business days from the time awardee becomes aware of such changes, followed by a letter signed by the institutional business official, detailing notification of the change of status to the local IACUC and a copy of any responses from the IACUC.

If a non-clinical protocol has been reviewed by an institutional biosafety committee (IBC) or the NIH Recombinant DNA Advisory Committee (RAC), the Awardee must provide information about the initial and ongoing review and approval, if any. See the NIH Guidelines for Research Involving Recombinant DNA Molecules.

Non-Clinical Data and Safety Monitoring Requirements

BARDA strongly recommends continued safety monitoring for all non-clinical studies of investigational drugs, devices, or biologics. FDA expects non-clinical studies to include safety in addition to efficacy. Awardee should consider evaluation of clinical relevant safety markers in the pivotal and non-pivotal, non-clinical studies.

BARDA will work with the Awardees on decisions regarding the type and extent of safety data accrual to be employed before the start of efficacy or safety studies.

The Awardee shall inform BARDA of any upcoming site visits and/or audits of CRO facilities funded under this effort. BARDA reserves the right to accompany the awardee on site visits and/or audits of CROs as BARDA deems necessary.

B. BARDA Review Process Before Non-Clinical Study Execution Begins

BARDA is under the same policy-driven assurances as NIH in that it has a responsibility to ensure that mechanisms and procedures are in place to protect the safety and welfare of animals used in BARDA funded non-clinical trials. Therefore, before study execution, the Awardee must provide the following (as applicable) for review and approval by BARDA.:

 

    IACUC approved (signed) non-clinical research protocol identified by version number, date, or both, including details of study design, euthanasia criteria, proposed interventions, and exclusion criteria.

 

    Documentation of IACUC approval, including OLAW FWA number, IACUC registration number, and IACUC name.

 

    Awardee should reduce the number of animals required for a study using power of statistics

 

    Plans for the management of side effects, rules for interventions and euthanasia criteria

 

    Procedures for assessing and collecting safety data

 

87


    If a study is contracted through CRO(s), work orders and service agreements the Awardee shall assure that an integrated safety documentation plan is in place for the study site, pharmacy service records on the dosing material to be used and excipients, and laboratory services (including histopathology).

 

    Documentation that the Awardee or CRO and all staff responsible for the conduct of the research have received required training in the protection and handling of animals

 

    Purchasing of animals and/or other supplies for non-clinical studies funded in part or in whole by BARDA requires written approval by the Contracting Officer. The Awardee must have the ability to return/re-sell animals, at purchase price, to distributor or a third party, in the event that the protocols do not obtain approval

 

    Provide justification for whether studies require good laboratory practice (GLP) conditions

 

    Provide justification for whether studies will be classified as non-pivotal or pivotal studies

BARDA staff comments will be forwarded to the Awardee within two weeks (10 business days) of receipt of the above information. The Awardee must address in writing all study design, safety, regulatory, ethical, and conflict of interest concerns raised by BARDA staff to the satisfaction of BARDA before study execution. After receiving the corrected documentation, that satisfies BARDA staff the BARDA Contracting Officer will provide a written Contract Officer Authorization (COA) Letter to the Awardee. This COA provides authorization to the Awardee to execute the specific nonclinical study funded in part or in whole by BARDA.

In case of problems or issues, the BARDA program officer will contact the Awardee within two weeks (10 business days) by email or fax, followed within 30 calendar days by an official letter to the principal investigator, with a copy to the institution’s office of sponsored programs, listing issues and appropriate actions to be discussed.

Final decisions regarding ongoing safety reporting requirements for research not performed under an Investigational New Drug Application (IND) or investigational device exemption (IDE) must be made jointly by the BARDA and the Awardee.

References

 

    Public Health Service Policy on Humane Care and Use of Laboratory Animals (http://grants.nih.gov/grants/olaw/InvestigatorsNeed2Know.pdf)

 

    USDA Animal Welfare Act

(http://awic.nal.usda.gov/nal_display/index.php?info_center=3&tax_level=3&tax_subject=182&top ic_id=1118&leve13_id=6735&leve14_id=0&leve15_id=0&placement_default=0)

 

88


Clinical Terms of Award

These Clinical Terms of Award detail an agreement between the Biomedical Advanced Research and Development Authority (BARDA) and the Awardee; they apply to all grants and contracts that involve clinical research.

Draft protocols for each clinical study will be submitted to BARDA for evaluation and comment. BARDA comments will be incorporated into the draft proposal prior to submission to the FDA for comment, if required.

BARDA shall have rights to all protocols, data generated from the execution of these protocols, and final reports, funded by BARDA under this contract, as defined in Rights in Data Clause in FAR 52.227-14. BARDA reserves the right to request that the Awardee provide any contract deliverable in a non-proprietary form, to ensure BARDA has the ability to review and distribute the deliverables, as BARDA deems necessary.

A. Safety and Monitoring Issues

Institutional Review Board (IRB) or Independent Ethics Committee (IEC) Approval

Before award and then with the annual progress report, the Awardee must submit to BARDA a copy of the current IRB or IEC approved informed consent document, documentation of continuing review and approval and the Office of Human Research Protections (OHRP) FWA number for the institution or site.

If other institutions are involved in the research (e.g., a multicenter clinical trial or study), each institution’s IRB or IEC must review and approve the protocol. They must also provide BARDA initial and annual documentation of continuing review and approval, including the current approved informed consent document and FWA number.

The grantee institution must ensure that the application as well as all protocols are reviewed by their IRB or IEC.

To help ensure the safety of participants enrolled in BARDA funded studies, the Awardee must provide BARDA copies of documents related to all major changes in the status of ongoing protocols, including the following:

 

    All amendments or changes to the protocol, identified by protocol version number, date, or both and date it is valid.

 

    All changes in informed consent documents, identified by version number, date, or both and dates it is valid.

 

    Termination or temporary suspension of patient accrual.

 

    Termination or temporary suspension of the protocol.

 

    Any change in IRB approval.

 

89


    Any other problems or issues that could affect the participants in the studies.

Awardees must notify BARDA through the Project Officer (PO) or Contracting Officer (CO) of any of the above changes within three working days by email or fax, followed by a letter signed by the institutional business official, detailing notification of the change of status to the local IRB and a copy of any responses from the IRB or IEC.

If a clinical protocol has been reviewed by an institutional biosafety committee (IBC) or the NIH Recombinant DNA Advisory Committee (RAC), the Awardee must provide information about the initial and ongoing review and approval, if any. See the NIH Guidelines for Research Involving Recombinant DNA Molecules.

Data and Safety Monitoring Requirements

BARDA strongly recommends independent safety monitoring for clinical trials of investigational drugs, devices, or biologics; clinical trials of licensed products; and clinical research of any type involving more than minimal risk to volunteers. Independent monitoring can take a variety of forms. Phase III clinical trials must be reviewed by an independent data and safety monitoring board (DSMB); other trials may require DSMB oversight as well. The Awardee shall inform BARDA of any upcoming site visits and/or audits of CRO facilities funded under this effort. BARDA reserves the right to accompany the awardee on site visits and/or audits of CROs as BARDA deems necessary.

A risk is minimal where the probability and magnitude of harm or discomfort anticipated in the proposed research are not greater than those ordinarily encountered in daily life or during the performance of routine physical or psychological examinations or tests. For example, the risk of drawing a small amount of blood from a healthy individual for research purposes is no greater than the risk of doing so as part of a routine physical examination (45 CFR 46.1021).

Final decisions regarding the type of monitoring to be used must be made jointly by BARDA and the Awardee before enrollment starts. Discussions with the responsible BARDA Project Officer regarding appropriate safety monitoring and approval of the final monitoring plan by BARDA must occur before patient enrollment begins and may include discussions about the appointment of one of the following.

 

    Independent Safety Monitor — a physician or other appropriate expert who is independent of the study and available in real time to review and recommend appropriate action regarding adverse events and other safety issues.

 

    Independent Monitoring Committee (IMC) or Safety Monitoring Committee (SMC) — a small group of independent investigators and biostatisticians who review data from a particular study.

 

   

Data and Safety Monitoring Board — an independent committee charged with reviewing safety and trial progress and providing advice with respect to study continuation, modification, and termination. The Awardee may be required to use an established BARDA DSMB or to organize an independent DSMB. All phase III clinical trials must be reviewed by a DSMB; other trials may require DSMB oversight as well.

 

90


 

Please refer to: NIAID Principles for Use of a Data and Safety Monitoring Board (DSMB) For Oversight of Clinical Trials Policy.

When a monitor or monitoring board is organized, a description of it, its charter or operating procedures (including a proposed meeting schedule and plan for review of adverse events), and roster and curriculum vitae from all members must be submitted to and approved by BARDA before enrollment starts.

Additionally, the Awardee must submit written summaries of all reviews conducted by the monitoring group to the BARDA within 30 days of reviews or meetings.

B. BARDA Protocol Review Process Before Patient Enrollment Begins

BARDA has a responsibility to ensure that mechanisms and procedures are in place to protect the safety of participants in BARDA-supported clinical trials. Therefore, before patient accrual or participant enrollment, the Awardee must provide the following (as applicable) for review and approval by BARDA.

 

    IRB or IEC approved clinical research protocol identified by version number, date, or both, including details of study design, proposed interventions, patient eligibility, and exclusion criteria.

 

    Documentation of IRB or IEC approval, including OHRP FWA number, IRB or IEC registration number, and IRB or IEC name.

 

    IRB or IEC approved informed consent document, identified by version number, date, or both and date it is valid.

 

    Plans for the management of side effects.

 

    Procedures for assessing and reporting adverse events.

 

    Plans for data and safety monitoring (see B above) and monitoring of the clinical study site, pharmacy, and laboratory.

 

    Documentation that the Awardee and all study staff responsible for the design or conduct of the research have received Good Clinical Practice (GCP) training in the protection of human subjects.

BARDA staff comments will be forwarded to the Awardee within two weeks (10 business days) of receipt of the above information. The Awardee must address in writing all study design, safety, regulatory, ethical, and conflict of interest concerns raised by the BARDA Project Officer (PO) to the satisfaction of BARDA before patient accrual or participant enrollment can begin. After receiving the corrected documentation, that satisfies BARDA staff the BARDA Contracting Officer will provide a written Contract Officer Authorization (COA) Letter to the Awardee. This COA provides authorization to the awardee to execute the specific clinical study funded in part or in whole by BARDA.

 

91


C. Investigational New Drug or Investigational Device Exemption Requirements

Consistent with federal regulations, clinical research projects involving the use of investigational therapeutics, vaccines, or other medical interventions (including licensed products and devices for a purpose other than that for which they were licensed) in humans under a research protocol must be performed under a Food and Drug Administration (FDA) investigational new drug (IND) or investigational device exemption (IDE).

Exceptions must be granted in writing by FDA. If the proposed clinical trial will be performed under an IND or IDE, the Awardee must provide BARDA with the name and institution of the IND or IDE sponsor, the date the IND or IDE was filed with FDA, the FDA IND or IDE number, any written comments from FDA, and the written responses to those comments.

The Awardee must wait 30 days from FDA receipt of an initial IND or IDE application before initiating a clinical trial.

The Awardee must notify BARDA if the FDA places the study on clinical hold and provide BARDA any written comments from FDA, written responses to the comments, and documentation in writing that the hold has been lifted.

The Awardee must not use grant or contract funds during a clinical hold.

Required Time-Sensitive Notification

Under an IND or IDE, the sponsor must provide FDA safety reports of serious adverse events. Under these Clinical Terms of Award, the Awardee must submit copies to the responsible BARDA Project Officer or the Contracting Officer’s technical representative (COTR) as follows:

 

    Expedited safety report of unexpected or life-threatening experience or death — A copy of any report of unexpected or life-threatening experience or death associated with the use of an IND drug, which must be reported to FDA by telephone or fax as soon as possible but no later than seven days after the IND sponsor’s receipt of the information, must be submitted to the BARDA program officer or the contracting officer’s technical representative within 24 hours of FDA notification.

 

    Expedited safety reports of serious and unexpected adverse experiences — A copy of any report of unexpected and serious adverse experience associated with use of an IND drug or any finding from tests in laboratory animals that suggests a significant risk for human subjects, which must be reported in writing to FDA as soon as possible but no later than 15 days after the IND sponsor’s receipt of the information, must be submitted to the BARDA Project Officer or the Contracting Officer’s Technical Representative within 24 hours of FDA notification.

 

    IDE reports of unanticipated adverse device effect — A copy of any reports of unanticipated adverse device effect submitted to FDA must be submitted to the BARDA Project Officer or the Contracting Officer’s Technical Representative within 24 hours of FDA notification.

 

92


    Expedited safety reports — should be sent to the BARDA Project Officer or the Contracting Officer’s Technical Representative concurrently with the report to FDA.

 

    Other adverse events documented during the course of the trial should be included in the annual IND or IDE report and reported to the BARDA annually.

In case of problems or issues, the BARDA Project Officer or the Contracting Officer’s Technical Representative will contact the Awardee within 10 working days by email or fax, followed within 30 calendar days by an official letter to the principal investigator, with a copy to the institution’s office of sponsored programs, listing issues and appropriate actions to be discussed.

 

    Safety reporting for research not performed under an IND or IDE

Final decisions regarding ongoing safety reporting requirements for research not performed under an IND or IDE must be made jointly by the BARDA Project Officer or the Contracting Officer’s Technical Representative and the Awardee.

 

93


ATTACHMENT 10 — List of Limited Data Rights.

1 of 9 Pages.

 

94


ACHN-490

[***]

 

 

[***] 7 pages in this document have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

95


Identification and Assertion of Restrictions on the Government’s Use, Release, or

Disclosure of Technical Data or Computer Software.

The Offeror asserts for itself, or the persons identified below, that the Government’s rights to use, release, or disclose the following technical data provided to the Government shall be restricted:

 

Technical Data To be Furnished With
Restrictions

  

Basis for Assertion

  

Asserted Rights Category

  

Name of Person Asserting
Restrictions

[***]

   [***]    [***]    [***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

96

Exhibit 10.7B

 

LOGO

 

Normal; AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 14 2. AMENDMENT/MODIFICATION NO. 0001 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the Issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings. Including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this no cost modification is to change the Contracting Officer’s Technical Representative (COTR) / Project Officer (PO), add an Alternate Contracting Officer’s Technical Representative (COTR) / Project Officer (PO) and to incorporate changes into Section F Deliverables. (See Attached). B. This is a no cost modification. The total amount and all other terms and conditions of the contract remain unchanged. Period of Performance: 09/19/2010 to 09/18/2012 Except as provided herein, all terms and conditions of the document referenced In Item 9A or 10A, as heretofore changed, remains unchanged and In full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) John F. Hollway, VP, Business Development 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C. DATE SIGNED 2/23/2011 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243


1. All references in the contract to the Contracting Officer’s Technical Representative (COTR) and Project Officer (PO) are hereby changed:

From:

Joseph Larsen, Ph.D., Contracting Officer’s Technical Representative (COTR)/Project Officer (PO)

DHHS/OS/ASPR/BARDA

330 Independence Avenue, S.W.

Room G644

Washington, D.C. 20201

E-mail: Joseph.Larsen@hhs.gov

To:

Matthew Metz, Ph.D., Contracting Officer’s Technical Representative (COTR)/Project Officer (PO)

DHHS/OS/ASPR/BARDA

330 Independence Avenue, S.W.

Room G644

Washington, D.C. 20201

E-mail: Matthew.Metz@hhs.gov

2. Under all references in the contract to the Contracting Officer’s Technical Representative (COTR) and Project Officer (PO), the following is hereby added as an Alternate Contracting Officer’s Technical Representative (COTR)/Project Officer (PO):

Joseph Larsen, Ph.D., Alternate Contracting Officer’s Technical Representative (COTR)

DHHS/OS/ASPR/BARDA

330 Independence Avenue, S.W.

Room 0644

Washington, D.C. 20201

E-mail: Joseph.Larsen@hhs.gov

3. Under, ARTICLE F.2. REPORTING REQUIREMENTS AND DELIVERABLES, 1. Other Contract Deliverables , the following changes are hereby incorporated into the contract:

1. Other Contract Deliverables

 

#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

1.    Project Meeting    Bi-Weekly
or as
amended by
   The Contractor shall participate in bi- weekly teleconferences with BARDA to discuss the performance of the contract.   

•        Contractor provides agenda 48hrs in advance of meeting to the PO

  

1 Electronic Copy to

 

2


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

      CO and PO    The Contractor prepares a proposed agenda and shall record, maintain and provide draft-meeting minutes to the Project Officer (PO) for approval. The PO will approve the draft version and distribute the final version to the Contract Officer (CO) and Contractor.   

•        PO approves (with CO concurrence) and distributes agenda

 

•        Contractor provides meeting minutes within three business days of the meeting

 

•        PO reviews, comments and approves minutes

   PO and CO
2.    Monthly, Quarterly and Annual Project Status Report/ Meeting    Monthly reports are due on the 15th of each month, except on months when Quarterly/
Annual Technical Progress Reports are due
  

The Monthly/Quarterly Project/Annual Status Report shall address the items listed below and cross-referenced to the Work Breakdown Structure (WBS), Scope of Work (SOW), integrated Master Schedule (IMS), Integrated Baseline Review (IBR) report, Earned Value Management (EVM) Cost Performance Reports (CPR), and approval strategy.

 

1.      A Executive Summary in MS PowerPoint (.ppt) format, highlighting the progress, issues, and relevant activities in manufacturing, non-clinical, clinical, and regulatory. The Executive Summary should be limited to 2-3 pages and highlight critical issues for that reporting period. The Monthly, Quarterly, and Annual Technical Progress Report shall address each of the items below and be cross-referenced to the Critical Path. Integrated Master Schedule (IMS), EVM, WBS/Project Plan and the Risk Mitigation Plan.

 

2.      Progress in meeting contract milestones—broken out by subtasks within each milestone, overall project assessment, problems encountered and recommended solutions. The reports shall detail the planned progress and actual progress during the period covered, explaining occurrences of any differences between the two, and the corrective steps.

 

3.      Provide EVM CPR (quarterly) and Updated Risk Management Plan/Register (quarterly)

  

Monthly Reports:

 

•        Contractor provides Monthly Status Report deliverables on the 15th of each month via email/CD/e-room upload

 

•        PO and CO will review Monthly Reports with the Contractor and provide feedback

 

Quarterly Meeting:

 

•        Contractor provides Quarterly Status Report five business days prior to meeting. This report is an expanded version of the Monthly Status Report

 

•        Contractor shall identify itinerary for the quarterly site visits

 

•        Contractor provides agenda to the PO 48hr in advance of meeting

 

•        PO approves (with CO concurrence) and distributes agenda

 

•        Contractor provides meeting minutes within three business days of the meeting

 

•        PO reviews, comments and approves minutes

 

Annual Meeting:

 

•        Contractor provides Annual Project Status Report deliverables five business days prior to meeting. The annual

   1 Electronic Copy to PO and CO

 

3


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

        

4.      The reports shall also include a three-month roiling forecast of key planned activities, referencing the WBS/IPDP.

 

5.      A tracking log of progress on regulatory submissions with the FDA submission number, description of submission, date of submission, status of submission. and next steps shall he updated continuously upon submission for all Biodefense and Non-Biodefense activities supported in part or whole with BARDA funding

 

6.      Estimated and Actual Expenses: This report shall also have attached either: a) a tabular (excel file) Control Account Plan report generated from MPM; or b) an unofficial CPR Form I. This section of the report shall also contain estimates for the subcontractors’ expenses from the previous month if the subcontractor did not submit a bill in the previous month. Estimates shall be listed for each subcontractor. If the subcontractor(s) was not working or did not incur any costs in the previous month, then a statement to this effect should be included in this report for those respective subcontractors. This section should also include a summary of any cost savings identified by the contractor as part of the 5% cost savings initiative.

 

7.      Contractor shall identify the itinerary for the quarterly site visits (quarterly)

  

   report should also include information from the annual meeting due 15 business days after the meeting. A draft report including .ppt slides should be provided 5 business days prior to the meeting.

 

•        Contractor shall ensure that the board of directors is available to meet with BARDA. BARDA reserves the right to meet with the Contractor’s board of directors once a year to discuss the contract

 

•        PO approves (with CO concurrence) and distributes agenda

 

•        PO approves (with CO concurrence) all meeting material

 

•        Contractor provides meeting minutes within three business days

 

•        PO reviews, comments and approves minutes

 

•        Contractor provides a FINAL annual report within 15 business days after the conclusion of the annual meeting. PO (with CO concurrence) reviews, comments and approves FINAL Annual Report

 

•        BARDA and Contractor shall participate in an in process review

  
3.    Integrated Baseline Review (IBR)    Within 90 days of contract award   

The IBR Report shall address each of the items listed below and be cross-referenced to the WBS, SOW, IMS and approval strategy.

 

1.      Contractor provides baseline proposal and PowerPoint brief

 

2.      A description of the work scope through control account Work

  

•        Contractor provides baseline proposal, .ppt briefing, 10 business days prior to meeting

 

•        Contractor provides agenda to the PO 48hr in advance of meeting

 

•        PO approves (with CO

   1 Electronic Copy to PO and CO

 

4


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

        

         Authorization Documents (WADS)

 

3.      Template for Work Packages

 

4.      Integrated Master Schedule (IMS) with the inclusion of agreed major milestones and control account plans (CAP) for all control accounts

 

5.      Baseline revision documentation and program logs (s) risk register.

  

         concurrence) and distributes agenda

 

•        PO approves (with CO concurrence) all meeting material

 

•        Contractor provides minutes within 48hr of the meeting

 

•        PO reviews and approves minutes

 

•        BARDA will review documentation and provide written comments and questions to Contractor

 

•        Contractor shall address BARDA’s comments and resubmit IBR for BARDA approval within 10 business days

  
4.    Integrated Master Plan    30 days following contract award and updated quarterly   

Integrated Master Plan (aka Integrated Product Development Plan) including WBS, critical path milestones and Earned Value Management Plan

Contractor has the option to combine details from the IMP with the WBS Dictionary (#6) in a single document, updated quarterly. Details include: milestones matched to planned EVM measurements; completion criteria; success criteria: assignments of responsible lead personnel for milestones, or for oversight of subcontractor effort required to meet milestones; and dependencies that cross reference to the Risk Management Plan

  

•        Contractor shall provide all the Integrated Master Plan deliverables 30 days following contract award, and thereafter on the 15th of each month. Deliverable should he included in the Quarterly or Annual Project Status Reports.

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Integrated Master Plan, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  
5.   

Risk Management

Plan

   90 days following contract award and updated quarterly (additional    The Contractor will provide a Risk Management Plan that outlines the impacts of each risk in relation to the cost, schedule and performance objectives. The Risk Management Plan will include risk mitigation strategies. Each risk mitigation strategy will   

•        Contractor shall provide a Risk Management Plan 90 days following contract award and update on the 15th of each Quarter in their Quarterly or Annual

   1 Electronic Copy to PO and CO

 

5


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

      submissions as requested by CO or PO)    capture how the corrective action will reduce impacts on cost, schedule and performance.   

   Project Status Reports

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Risk Management Plan, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  
6.    Program Integrated Master Schedule and WBS Dictionary    The 15th of each quarter (additional submissions as requested by CO or PO)    The Contractor will provide Program Integrated Master Schedule (IMS) and WBS Dictionary with quarterly status updates to reflect changes in schedule, performance, and critical path   

•        Contractor shall provide an Integrated Master Schedule on the 15th of each quarter in their quarterly or annual Project Status Reports

 

•        Integrated Master Schedule shall be in both PDF and Microsoft Project Form

 

•        BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted IMS, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  

1 Electronic Copy (PDF and Microsoft

Project Schedule (.mmp) format to PO and CO

7.    EVM / Contract Performance Report    The 30th day of the month after each calendar quarter (additional submissions as requested by CO or PO)    Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS and a Variance Analysis Report. Contractor will report EVM data on all Cost Plus CLINs   

Contractor shall provide a CPR and Variance Analysis Report on the 30th day of the month after the end of each calendar quarter in their Quarterly or Annual Project Status Reports Contractor shall provide and changes in baseline cost as a result of anticipated cost savings or risks

 

•        Contractor shall provide a PDF of deliverables. BARDA may request, on

   1 Electronic Copy to PO and CO

 

6


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

           

   a quarterly or ad hoc basis that the Contractor provide raw data. BARDA may request additional data at a reporting level or at lower levels, as BARDA deems necessary

 

•        The Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA

  
8.    Incident Report    Within 24 or 48 hrs of activity or incident   

The Contractor shall communicate and document all critical programmatic concerns, risks or potential risks with BARDA within 48 hours. The Contractor shall communicate via email or telephone.

 

The Contractor shall report to the government any activity or incident that is in violation of established security standards or indicates the loss or theft of government products within 24 hrs of activity or incident. The Contractor shall communicate via email, oral or written communication.

  

•        Email, Letter to CO Telephone (w/ written follow-up)

 

•        Written communication with BARDA PO and CO within 48 hrs of Contractor identifying a project risk or potential risk and 24 hrs for Security activities or incident

 

•        Additional updates within 48 hrs of additional developments, additional information and/or understanding

 

•        Contractor shall submit within 5 business days a Corrective Action Plan (if necessary) to address any potential security issues

 

•        If corrective action is required, the Contractor must address concerns raised by BARDA

 

•        Contractor shall address BARDA’s concerns in writing within 5 business days

   1 Electronic Copy to PO and CO
9.    Deviation Request    TBD    Process for changing study protocols and/or the Integrated Master Plan (a.k.a Integrated Product Development Plan)   

•        Contractor shall submit a Deviation Request as soon as the Contractor has sufficient data to support the need for a change from the

   1 Electronic Copy to PO and CO

 

7


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

           

approved study protocols and/or Integrated Master Plan

 

•        The BARDA CO will review and provide a written response to the Deviation Request.

 

•        Contractor shall address BARDA’s comments and resubmit the deviation request that addresses BARDA’s comments within 5 business days

 

•        Contractor shall not proceed with the deviation until BARDA gives its approval

  
10.    Draft and Final Technical Progress Report    Draft 20 business days before and Final 10 business days after completion of the POP   

A draft of Final Technical Progress Report containing a summation of the work performed and the results obtained for the entire contract period of performance. The draft report shall be duly marked as ‘Draft’.

 

The Final Technical Progress Report incorporating the feedback received from BARDA and containing a summation of the work performed and the results obtained for the entire contract period of performance. This final report shall detail, document and summarize the results of the entire contract. This report shall be in sufficient detail to fully describe the progress achieved under all milestones. The final report shall be duly marked as ‘Final’.

  

•        Contractor shall provide a draft report 20 business days and final 10 business days before completion of the contract period

 

•        PO provides edits and additional feedback, which Contractor will incorporate into the Final Technical Progress Report

 

•        The Contractor shall submit one (1) copy of a comprehensive final report to the CO and two (2) copies (one electronically on a CD) to the PO

   1 Electronic Copy to PO and CO
11.    Product Transition Strategy    90 days prior to end of the (base/option) POP    Contractor shall provide a Product Transition Strategy to support transition of the product(s) prior to end of the base and/or option(s) POP. The Product Transition Strategy should provide a strategic plan for further development and/or stockpiling of the product The transition strategy shall provide options and/or a specific approach for the transition of MCM product for further development, procurement, approval and/or stockpile   

•        Contractor shall provide a Product Transition Strategy to support transition of the product(s) 90 days prior to end of the (base/option) POP as an addendum to that Quarter’s Quarterly Project Status Report.

   1 Electronic Copy to PO and CO

 

8


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

12.    Decision Gate Presentation    Event Driven Review following completion of a pre-defined stage of product development and prior to initiation of a new stage    Contractor shall provide a presentation following a prescribed template provided by BARDA prior to the Decision Gate Review   

•        Contractor shall provide an update to technical progress made towards completion of the Decision Gate and provide the presentation, 10 business days prior to the Decision Gate Review

 

•        Contractor shall submit written justification of progress towards satisfying Decision Gate criteria

 

•        After reviewing, the BARDA PO and CO will provide a written response

   1 Electronic Copy to PO and CO
13.    Standard Operating Procedures    As requested by PO and CO    Contractor shall provide Standard Operating Procedures (SOPs) to BARDA for review, as they are completed and updated   

•        Contractor shall submit the Standard Operating Procedures (SOPs) in the form requested by the PO and CO within 15 calendar days of request

   1 Electronic Copy to PO and CO
14.    Approval Strategy    Within 90 days of contract award and updated as part of the quarterly report    Contractor shall provide overview of the approval strategy to include all clinical and non-clinical studies   

•        Contractor will submit proposed clinical and non-clinical strategy to support approval

 

•        If corrective action is required, the Contractor must address concerns raised by BARDA

  
15.    Study Protocols    At least 10 business days prior to FDA Submission   

Contractor steal I provide Pre- Clinical/Non-Clinical/Clinical Trial Protocols to BARDA for evaluation, prior to FDA submission

 

(The CO and PO reserves the right to request within the period of performance a non-proprietary Study Protocol for distribution within the United States Government(USG))

  

•        Contractor will submit proposed protocols to BARDA at least 10 business days prior to FDA submission. If corrective action is required, the Contractor must address in writing all safety, regulatory, ethical, and conflict of interest concerns raised by BARDA to the satisfaction of BARDA before study execution

 

•        After receiving the corrected documentation,

   1 Electronic Copy to PO and CO

 

9


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

           

that satisfies BARDA the CO will provide a written Contract Officer Authorization (COA) Letter to the Contractor. This COA provides authorization to the Contractor to execute the specific clinical study funded in part or in whole by BARDA

 

•        Contractor shall not proceed with any study protocol until BARDA gives its approval

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one calendar day after its submission to CDER

  
16.    Study Reports    Within 30 (draft) or 60 (final) calendar days after completion of analysis and 15 business days prior to submission to FDA   

Contractor shall provide Draft and Final Pre-Clinical/Non-Clinical/Clinical Study Reports to BARDA for review and edits within 30 (draft) or 60 (final) calendar days after completion of analysis of Pre-Clinical/Non-Clinical/ Clinical data and 15 business days prior to submission to FDA

 

Alternatively, clinical draft study reports may be submitted 40 business days, and final reports submitted within 75 business days after database lock, provided submission to BARDA is still at least 15 days prior to FDA submission (“Alternative Schedule”)

 

(The CO and PO reserves the right to request within the period of performance a non-proprietary Study Report for distribution within the USG)

  

•        Contractor shall provide Draft and Final Pre- Clinical/Non-Clinical/ Clinical Study Reports to BARDA within 30 (draft) or 60 (final) calendar days after completion of each report. Clinical study reports may be provided via the Alternative Schedule.

 

•        Contractor will submit proposed Pre- Clinical/Non-Clinical/ Clinical Study Report to BARDA at least 15 business days prior to FDA Submission

 

•        If corrective action is required. The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

•        Contractor shall not proceed with any study report until BARDA

   1 Electronic Copy to PO and CO

 

10


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

           

gives its approval

 

•        Final FDA submissions shall be provided to BARDA concurrently or no later than 1 calendar day of its submission to CDER

  
17.    Manufacturing
Campaign Reports
   Within 30 calendar days after receipt of batch records and 15 business days prior to submission to FDA   

Contractor shall provide Manufacturing Campaign Reports to BARDA for review and edits prior to submission to FDA

 

(The CO and PO reserve the right to request within the period of performance a non-proprietary Manufacturing Campaign Reports for distribution within the USG)

  

•        Contractor will submit proposed Analysis Reports and Manufacturing Campaign Reports to BARDA at least 15 business days prior to FDA Submission.

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

•        Contractor shall not proceed with any FDA submission until BARDA gives its approval

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day after its submission to CDER

   1 Electronic Copy to PO and CO
18.    FDA Meeting Notification    No later than 10 business days prior to the scheduled meeting    The contractor shall forward the dates and times of any meeting with the FDA to BARDA and arrange for appropriate BARDA staff to attend the FDA meetings. BARDA staff shall include up to a maximum of four people (PO, CO, and up to two (2) Subject Matter Experts (SME(s)).   

•        Contractor must notify BARDA of an upcoming meeting with the FDA within 24 hours of scheduling the meeting with the FDA and no later than 10 business days prior to the scheduled meeting

   1 Electronic Copy to PO and CO
19.    FDA Correspondence and Meeting Minutes    Within three (3) calendar days of receiving correspondence from the    The contractor shall forward initial Contractor and CDER-issued draft minutes and final minutes of any meeting with the FDA to BARDA. All documents shall be duly marked as either ‘Draft’ or ‘Final’.   

•        Contractor provides FDA correspondence and meeting minutes within three (3) calendar days of the meeting or correspondence

   1 Electronic Copy to PO and CO

 

11


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

      FDA         
20.    FDA Submissions    At least 15 business days prior to submission to FDA   

The Contractor shall provide BARDA the opportunity to review and comment upon all draft regulatory documents before submission to the FDA. Contractors shall provide BARDA with an electronic copy of the final FDA submission. All documents shall be duly marked as either ‘Draft’ or ‘Final’.

 

The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA submission.

  

•        Contractor will submit proposed FDA Meeting Briefing Packets to BARDA at least 15 business days prior to FDA submission

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA before FDA submission

 

•        Final FDA submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission to CDER

   1 Electronic Copy to PO and CO
21.    FDA Audits    Within 10 business days of a scheduled audit or within 24 hours of an ad hoc site visits/audits if the FDA did not provide advanced notification    The Contractor shall notify the PO and CO within 24 hours of FDA’s arrival to conduct site visits/audits by any regulatory agency. In the event of an FDA inspection which occurs as a result of this contract and for this product, or for any other FDA inspection that has the reasonable potential to impact the performance of this contract, the Contractor shall provide the BARDA with an exact copy (non-redacted of the FDA Form 483, and the Establishment Inspection Report (EIR). The contractor shall provide the PO and CO copies of the plan for addressing areas of non-conformance to FDA regulations for GLP, GMP, or GCP guidelines as identified in the audit report within 10 business days, status updates during the plans execution, and a copy of all final responses to the FDA. The Contractor shall also provide redacted copies of any FDA audit report received from subcontractors that occur as a result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party. The Contractor shall make arrangements for a BARDA representative(s) to be present during   

•        The Contractor shall notify the PO and CO within 24 hours of all FDA arrivals to conduct site visits/audits by any regulatory agency

 

•        Contractor provides QA Audit Reports within 15 calendar days of the audit

 

•        The Contractor shall also provide copies of any FDA audit report received from subcontractors that occur as a result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party.

   1 Electronic Copy to PO and CO

 

12


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

         the final debrief by the regulatory inspector.      
22.    QA Audit Reports    5 business days before report completion    The Contractor shall inform the PO and CO in advance of upcoming audits/site visits of subcontractors as part of the weekly communications, including goals and agenda. BARDA reserves the right to participate in the audit. Upon completion of the audit/site visit the Contractor shall provide a report capturing the findings, results and next steps in proceeding with the subcontractor. If action is requested of the subcontractor, details addressing areas of non-conformance to FDA regulations for GLP, GMP, or GCP guidelines, as identified in the audit report, must be provided to BARDA. The Contractor shall provide responses from the subcontractors to address these concerns and plans for corrective action execution   

•        The Contractor shall inform the PO and CO 10 days in advance of upcoming audits/site visits of subcontractors

 

•        The Contractor shall notify the PO and CO within 5 business days of report completion

   1 Electronic Copy to PO and CO
23.    BARDA Audit    Ad Hoc    The contractor shall accommodate for periodic or ad hoc site visits by BARDA. If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA.   

•        If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA within 10 business days.

 

•        The PO and CO will review the deliverable and provide a response to the Contractor.

 

•        Once corrective action, approved by the CO, is completed, the Contractor will provide a final report to BARDA

   1 Electronic Copy to PO and CO
24.    Technical Documents    Within 10 business days upon request by CO/PO    Contractor shall provide PO and CO upon request with deliverables from the following contract funded activities: Process Development Reports. Assay Qualification Plan/Report. Assay Validation Plan/Report, Assay Technology Transfer Report, Batch Records, SOPs, Master Production   

•        Contractor provides deliverables within 15 calendar days of the completion of activities

 

•        If additional time is required, Contractor shall request additional

  

For Final Documents:

 

1 Electronic Copy to

PO and CO

 

13


        

Records, Certificate of Analysis

(The CO and PO reserves the right to request within the period of performance a non-proprietary Technical Documents for distribution within the USG)

  

time from BARDA on a per deliverable basis

 

•        If corrective action is required, the Contractor must address in writing concerns raised by BARDA

 

•        Contractor will submit proposed FDA Technical Documents to BARDA at least 15 business days prior to FDA submission

 

•        If corrective action is required the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

  
25.    Animal Model or Other Technology Transfer Package    Within 10 business days of request by CO/PO    Contractor shall provide Animal Model or Other Technology Transfer Package relevant data   

•        Contractor shall provide Animal Model or other Technology Transfer Package within 10 business days of request by CO/PO

   1 Electronic Copy to PO and CO
26.    Raw Data or Data Analysis    Within 20 business days after receipt of request by CO/PO    Contractor shall provide Raw Data or Data Analysis for review by BARDA, if requested   

•        Contractor shall provide Raw Data or Data Analysis within 20 business days of request by CO/PO

   1 Electronic Copy to PO and CO
27.    Samples of Therapeutics    Within 20 business days of request by CO/PO    Contractor shall provide samples of non-GMP candidate therapeutics and GMP material manufactured with contract funding to include raw material, Bulk Drug Substance (BDS), Final Drug Product (FDP) and/or labeled and packaged treatment courses. The request will state the type of material and the amount but it is not to exceed the equivalent of 250 treatment courses or its individual manufacturing equivalent. The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped. It is acceptable to label material “Not for Clinical Use”. BARDA reserves the right to request samples throughout the period of   

•        Contractor must submit samples of therapeutics within 20 business days of request by CO/PO.

 

•        The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped.

   CO will provide details upon request

 

14


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

         performance.      
28.    Publications    20 business days for manuscripts and 10 business days for abstracts    Any manuscript or scientific meeting abstract containing data generated under this contract must be submitted to BARDA for review prior to submission   

•        Contractor must submit all manuscript or scientific meeting abstract to PO and CO within 20 business days for manuscripts and 10 business days for abstracts

 

•        The CO will respond with written comments within 10 business days for manuscripts and 5 business days for abstracts.

 

•        If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before Submission.

 

•        Any Final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission

   1 Electronic Copy to PO and CO
29.    Press Release    5 business days prior to release    The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases   

•        The Contractor shall ensure that the CO has received and approved an advanced copy of any press release to this contract not less than 5 business days prior to the issuance of the press release

 

•        If corrective action is required, the Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases

 

•        Any final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its

   1 Electronic Copy to PO and CO

 

15


#

  

Type of
Deliverable

  

Frequency/
time periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/
Form

            submission.   
30.    Contract financing Report    No later than the 30th business day after the end of the reporting period    The Financial Report shall be submitted by the Contractor in accordance with the instructions set forth in section G.4 of this contract.    The Contractor shall provide the contract financing report no later than the 30th business day after the end of the reporting period in accordance with the instructions set forth in section G.4 of this contract.   

 

16

Exhibit 10.7C

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGE 1 1 2. AMENDMENT/MODIFICATION NO. 0003 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. X B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: D. OTHER (Specify type of modification and authority) E. IMPORTANT: Contractor is not is required to sign this document and return copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this no cost modification is to delete [***] as a role of Principal Investigator and add [***] as a role of Principal Investigator to Article G.3. KEY PERSONNEL under Contract Number HHSO100201000046C. B. This is a no cost modification. The total amount and all other terms and conditions of the contract remain unchanged. Period of Performance: 09/19/2010 to 09/18/2012 Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53,243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Exhibit 10.7D

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 2 2. AMENDMENT/MODIFICATION NO. 0004 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers is extended. is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (if required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not. is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to incorporate the following changes into contract number HHS0100201000046C. 1. The period of performance for the base period/CLIN 0001 of contract number HHSO100201000046C is hereby changed from 19 September 2010 through 18 September 2012 to 19 September 2010 through 31 December 2013, at no additional cost to the Government. 2. Under Article B.4.b.1.a. Travel Costs, the amount of [***] and applicable to the base period/CLIN 0001 ONLY. In addition, the base period Continued ... Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) John C. Doyle, Chief Operating Officer 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) 15B. CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C. DATE SIGNED 7/13/2012 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


CONTINUATION SHEET    REFERENCE NO. OF DOCUMENT BEING CONTINUED    PAGE OF
   HHS0100201000046C/0004    2    |    2

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
      (A)

  

SUPPLIES/SERVICES
(B)

   QUANTITY
(C)
   UNIT
(D)
   UNIT
PRICE
(E)
   AMOUNT
(F)
  

of performance/CLIN 0001 is hereby changed to 9/19/2010 - 12/31/2013. These changes also result in no additional cost to the Government.

 

B. This is a no cost modification. The total amount and all other terms and conditions of contract number HHSO100201000046C remain unchanged.

 

Period of Performance: 09/19/2010 to 12/31/2013

           

 

NSN 7540-01-152-8067

    

OPTIONAL FORM 338 (4-86)

Sponsored by GSA

FAR (48 CFR) 53 110

              

Exhibit 10.7E

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 14 2. AMENDMENT/MODIFICATION NO. 0006 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. 0596655 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted. such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified 12. ACCOUNTING AND APPROPRIATION DATA (If required) Net Increase: $15,838,885.00 2012.1992002.25106 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties and FAR 52.217-7. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to exercise Option 1 under CLIN 0002 of the contract in the amount of: Total Estimated Cost: [***] Total Fixed Fee: [***] Total Estimated Cost Plus Fixed Fee: $15,838,885.00 The total period of performance of Option 1 CLIN 0002 under the contract is from 21 September 2012 through 21 March 2014. Continued ... Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


CONTINUATION SHEET    REFERENCE NO. DOCUMENT BEING CONTINUED    PAGE OF
   HHSO100201000046C/0006    2    |    14

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
      (A)

  

SUPPLIES/SERVICES
(B)

   QUANTITY
(C)
   UNIT
(D)
   UNIT
PRICE
(E)
   AMOUNT
(F)
  

1. This modification hereby results in an increase in the total amount of the contract from $27,559,110.00 by $15,838,885.00 to $43,397,995.00 as well as the following:

 

Total Estimated Cost of the Contract: From [***]

 

Total Fixed Fee of the Contract: From [***]

 

Total Estimated Cost Plus Fixed Fee of the Contract: From $27,559,110.00 By $15,838,885.00 To $43,397,995.00

 

2. In Block 14 of the SF 26, the following CAN Number is added:

 

CAN# -1992002: FY 12 $15,838,885.00

 

3. Under Part III—LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS, SECTION J—LIST OF ATTACHMENTS, Attachment 1, Statement of Work, dated 3 August 2012 is hereby deleted and replaced with the attached Statement of Work dated 14 September 2012.

 

4. In addition, under Article G.3. KEY PERSONNEL, the attached updated Table is incorporated into the contract.

 

5. The attached changes are also incorporated into the contract to Go/No Go Criteria Decision Gates under Article F.2. Reporting Requirements and Deliverables.

 

6. Under Article B.4. PROVISIONS APPLICABLE TO DIRECT COSTS, b. Travel Costs, 1. Domestic Travel, a. is deleted and replaced with the following:

 

a. Total expenditures for domestic travel (transportation, lodging, subsistence, and incidental expenses) incurred in direct performance of this contract shall not [***] and [***] during Option Period 1 [***] without the prior written approval of the Contracting Officer via Contracting Officer Authorization COA) Letter.

 

This change does not increase the total amount of the base period/CLIN 0001.

Delivery: 03/21/2014

Delivery Location Code: HHS

HHS

200 Independence Avenue, SW

Washington DC 20201 US

 

Appr. Yr.: 2012 CAN: 1992002 Object Class: 25106

FOB: Destination

Period of Performance: 09/19/2010 to 03/21/2014

 

Change Item 2 to read as follows (amount shown is the obligated amount):

 

Continued…

           

 

NSN 7540-01-152-8067     

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (48 CFR) 53.110

              

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET    REFERENCE NO. DOCUMENT BEING CONTINUED    PAGE OF
   HHSO100201000046C/0007    3    |    14

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
      (A)

  

SUPPLIES/SERVICES
(B)

   QUANTITY
(C)
   UNIT
(D)
   UNIT
PRICE
(E)
   AMOUNT
(F)
2   

Option Period 1: [***]. Obligated Amount: $15,838,885.00

            15,838,885.00

 

NSN 7540-01-152-8067     

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (48 CFR) 53.110

              

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


[***]

 

[***] 9 pages in this document have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

1


ARTICLE G.3. KEY PERSONNEL

 

#

  

NAME

  

ORGANIZATION

  

TITLE

  

ROLE

1    [***]    [***]    [***]    [***]
2    [***]    [***]    [***]    [***]
3    [***]    [***]    [***]    [***]
4    [***]    [***]    [***]    [***]
5    [***]    [***]       [***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

2


Contract Milestones and GO/NO GO Decision Gates for Base and Option CLINs

[***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

3

Exhibit 10.7F

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 2 2. AMENDMENT/MODIFICATION NO. 0007 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers is extended. is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not. is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to incorporate the following changes into Contract Number HHSO100201000046C. 1. The first and second sentences in Article G.7. INDIRECT COST RATES of Contract Number HHSO100201000046C are hereby deleted and replaced with the following: The following indirect rates will be utilized for billing purposes during the base period/CLIN 0001 ONLY. [***]. The Continued ... Except as provided herein, all terms and conditions of the document referenced in item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) Kenneth Hillan, Chief Executive Officer 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFEROR (Signature of person authorized to sign) 15C. DATE SIGNED 1/18/2013 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


CONTINUATION SHEET   

REFERENCE NO. OF DOCUMENT BEING CONTINUED

HHSO100201000046C/0007

  

PAGE OF

2    |    2

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
     (A)

  

SUPPLIES/SERVICES
(B)

  

QUANTITY
(C)

  

UNIT
(D)

  

UNIT
PRICE
(E)

  

AMOUNT
(F)

  

following indirect rates will be utilized for billing purposes during Option 1/CLIN 0002 ONLY. [***].

 

B. This is a no cost modification. The total amount of Contract Number HHSO100201000046C as well as all other terms and conditions of Contract Number HHSO100201000046C remain unchanged.

 

Period of Performance: 09/19/2010 to 03/21/2014

           
NSN 7540-01-152-8067   

OPTIONAL FORM 338 (4-86) Sponsored by GSA

FAR (48 CFR) 53 110

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

Exhibit 10.7G

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 2 2. AMENDMENT/MODIFICATION NO. 0008 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which Includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment. and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the Issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings. Including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to incorporate the following changes into Contract Number HHSO100201000046C. 1. The first and second sentences in Article G.7. INDIRECT COST RATES of Contract Number HHSO100201000046C are hereby deleted and replaced with the following: The following indirect rates will be utilized for billing purposes during the base period/CLIN 0001 ONLY. [***] Continued … Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) Dennis Hom, VP, Finance & Corporate Development 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFICER /s/ Dennis Hom (Signature of person authorized to sign) 15C. DATE SIGNED 2/27/2013 16B. UNITED STATES OF AMERICA /s/ Ethan J. Mueller (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET    Reference no document being continued    PAGE OF
   HHSO100201000046C/0008    2    |    2

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
      (A)

  

SUPPLIES/SERVICES
(B)

   QUANTITY
(C)
   UNIT
(D)
   UNIT
PRICE
(E)
   AMOUNT
(F)
  

[***]. For both 2010 and 2011, [***]. The 2010 and 2011 [***]. The following indirect rates will be utilized for billing purposes during Option 1/CLIN 0002 ONLY. [***].

 

B. This is a no cost modification. The total amount of Contract Number HHSO100201000046C as well as all other terms and conditions of Contract Number HHSO100201000046C remain unchanged.

 

Period of Performance: 09/19/2010 to 03/21/2014

           

 

NSN 7540.01-152-8067     

OPTIONAL FORM 338 (4-86)

Sponsored by GSA

FAR (48 CFR) 53 110

              

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

Exhibit 10.7H

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1 CONTRACT ID CODE PAGE OF PAGE 1 31 2 AMENDMENT/MODIFICATION NO. 0009 3 EFFECTIVE DATE See Block 16C 4 REQUISITION/PURCHASE REQ NO O5018975 5 PROJECT NO (If applicable) 6 ISSUED BY CODE ASPR-BARDA 7 ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8 NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A AMENDMENT OF SOLICITATION NO ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B DATED (SEE ITEM 11) X 10A MODIFICATION OF CONTRACT/ORDER NO HHSO100201000046C CODE 1361331 FACILITY CODE 10B DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation Is amended as set forth In Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified In the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which Includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted. such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment. and Is received prior to the opening hour and date specified 12 ACCOUNTING AND APPROPRIATION DATA (If required) Net Increase: $60,410.398.00 2013.1992002.25106 13 THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO IN ITEM 10A. B THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43 103(b) C THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF X D OTHER (Specify type of modification and authority Bilateral: Mutual Agreement of the Parties and FAR Clause 52.217-7 E IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the Issuing office 14 DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings. Including solicitation/contract subject matter where feasible) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to exercise Option 2 under CLIN 0003 of the contract in the amount of: Total Estimated Cost: [***] Total Fixed Fee: [***] Total Estimated Cost Plus Fixed Fee: $60,410,398.00 The total period of performance of Option 2 CLIN 0003 under the contract is from 1 May 2013 through 15 November 2017. Continued ... Except as provided herein, all terms and conditions of the document referenced In Item 9A or 10A, as heretofore changed, remains unchanged and In full force and effect 15A NAME AND TITLE OF SIGNER (Type or print) Kenneth Hillan, Chief Executive Officer 16A NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C DATE SIGNED 4/19/2013 16B UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET   REFERENCE NO DOCUMENT BEING CONTINUED    PAGE OF
  HHSO100201000046C/0009    2    |    31

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.
(A)

  

SUPPLIES/SERVICES
(B)

  

QUANTITY
(C)

  

UNIT
(D)

  

UNIT PRICE
(E)

  

AMOUNT
(F)

  

1. This modification hereby results in an increase in the total amount of the contract from $43,397,995.00 by $60,410,398.00 to $103,808,293.00 as well as the following:

 

Total Estimated Cost of the Contract: From [***]

 

The Total Fixed Fee of the Contract will [***].

 

Total Estimated Cost Plus Fixed Fee of the Contract: From $43,397,995.00 By $60,410,398.00 To $103,808,393.00

 

2. In Block 14 of the SF 26, the following CAN Number is added:

 

CAN # - 1992002: FY 13 $60,410,398.00

 

 

3. This bilateral modification and Option 2/CLIN 0003 exercise will result in the addition of a Phase 3 Clinical Study to replace a Phase 2 Clinical Study that is no longer needed in Option 2/CLIN 0003. In addition, several Non-Clinical animal study protocols will be finalized under and regulatory documentation requirements will also be added to Option 2/CLIN 0003. This bilateral modification will also add some additional Non-Clinical studies and regulatory documentation requirements to Option 3/CLIN 0004. This will result in no change to the total amount and no change to the period of performance to Option 3/CLIN 0004. All SOW changes to Option 2/CLIN 0003 and Option 3/CLIN 0004 are based on FDA guidance and have been determined to be within the general scope of the contract. As a result, Under Part III—LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS, SECTION J LIST - OF ATTACHMENTS, Attachment 1, Statement of Work, dated 14 September 2012 is hereby deleted and replaced with the attached Statement of Work dated 21 March 2013.

 

4. The incorporation of the attached Statement of Work (SOW) changes in the paragraph above also result in the incorporation of the attached changes into the contract into both the 1. Other Contract Deliverables and the Contract Milestones and Go/No Go Decision Gates for Base and Option CLINs under Article F.2. Reporting Requirements and Deliverables.

 

 

5. Under Article B.4. PROVISIONS APPLICABLE TO DIRECT COSTS, b. Travel Costs, 1. Domestic Travel, a. is deleted and replaced with tie following:

 

a. Total expenditures for domestic travel (transportation, lodging, subsistence, and incidental expenses) incurred in direct performance of this contract shall not exceed [***] during the base period [***] and [***] during Option Period 1 [***] and [***] during Option Period 2 [***] (without the prior written approval of the Contracting Officer via a Contracting Officer Authorization CO; Letter).

 

6. This modification does not change the total amount of the base period/CLIN 0001 and does not change the total amount of Option 1/C IN 0002. The period of performance for both the base period/CLIN 0001 and Option/CLIN 0002 also remain

 

Continued …

           
NSN 7540-01-152-8067         

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (489 CFR) 53 110

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET           Reference no document being continued   PAGE OF
  HHSO100201000046C/0009   3    |    31

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

 

ITEM NO.
(A)

  

SUPPLIES/SERVICES
(B)

  

QUANTITY
(C)

  

UNIT
(D)

  

UNIT PRICE
(E)

  

AMOUNT
(F)

  

unchanged. This modification does not authorize any efforts or performance under Option 3/CLIN 0004.

 

7. In Section I - Contract Clauses, under Article I.1, the following FAR Clause is hereby added: FAR Clause 52.247-63 Preference for U.S. Flag Air Carriers (June 2003).

 

8. Under Part III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS, SECTION J - LIST OF ATTACHMENTS, Attachment 9, Non Clinical and Clinical Terms of Award, dated 29 July 2010, the section in Attachment 9 relating to Clinical Terms of Award is hereby deleted and replaced with the attached Clinical Terms of Award document.

 

9. The first and second sentences in Article G.7. INDIRECT COST RATES of Contract Number HHS0100201000046C are hereby deleted and replaced with the following:

 

The following indirect rates will be utilized for billing purposes during the base period/CLIN 0001 ONLY. For 2010, [***]. For 2011, [***]. For both 2010 and 2011, [***]. The 2010 and 2011 [***]. The following indirect rates will be utilized for billing purposes during Option 1/CLIN 0002 and Option 2/CLIN 0003 ONLY. [***].

 

B. All other terms and conditions of the contract remain unchanged.

 

Delivery: 11/15/2017

 

Delivery Location Code: HHS HHS

 

200 Independence Avenue, SW Washington DC 20201 US

 

Appr. Yr.: 2013 CAN: 1992002 Object Class: 25106

FOB: Destination

Period of Performance: 09/19/2010 to 11/15/2017

 

Change Item 3 to read as follows(amount shown is the obligated amount):

 

           
3   

Option Period 2: Stage 2 Non-clinical studies, Phase 3 Clinical Study.

Obligated Amount: $60,410,398.00

            60,410,398.00
NSN 7540-01-152-8067         

OPTIONAL FORM 336 (4-86)

Sponsored by GSA

FAR (489 CFR) 53 110

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


BAA BARDA-09-34

Advanced Research and Development of Chemical, Biological, Radiological, and

Nuclear Medical Countermeasures

ACHN-490: A NOVEL, BROAD SPRECTRUM “NEOGLYCOSIDE”

ANTIBIOTIC FOR THE TREATMENT OF RESISTANT THREAT AGENTS

Contractual Statement of Work

1. Preamble

Independently and not as an agency of the Government, the Contractor shall be required to furnish all the necessary services, qualified personnel, material, equipment, and facilities, not otherwise provided by the Government, as needed to perform the Statement of Work submitted in response to the Broad Agency Announcement (BAA) BARDA 09- 34.

Government reserves the right to modify the milestones, progress, schedule, budget, or product to add or delete products, process, or schedules as need may arise. Because of the nature of this (R&D) contract and complexities inherent in this and prior programs, at designated milestones the Government will evaluate whether work should be redirected, removed, or whether schedule or budget adjustments should be made. The Government reserves the right to change product, process, schedule, or events to add or delete part or all of these elements as the need arises.

1.1 Overall Objectives and Scope

The overall objective of this contract is to advance the development of ACHN-490 [also called Plazomicin since 2011] as a broad-spectrum therapeutic in an injectable formulation for the treatment of bacterial threat agent infection, including Y. pestis and F. tularenisis or others, as directed by BARDA. The scope of work for this contract includes preclinical, clinical and manufacturing development activities that fall into the following areas: [***]; and all associated regulatory, quality assurance, management, and administrative activities.

2. INTEGRATED PRODUCT DEVELOPMENT PLAN

The contractor shall carry out the following tasks and subtasks, by stage, and in accordance with an agreed upon Integrated Product Development Plan (IPDP) which shall further detail the conduct of the specific tasks and subtasks.

2.1. [***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


[***]

 

[***] 2 pages in this document have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


[***].

 

2.5 Project Management . The Contractor shall provide for the following as outlined below and in the contract deliverables list (reference):

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


2.5.1 The overall management, integration and coordination of all contract activities, including a technical and administrative infrastructure to ensure the efficient planning, initiation, implementation, and direction of all contract activities;

2.5.2 A Principal Investigator (PI) responsible for project management, communication, tracking, monitoring and reporting on status and progress, and recommending modification to the project requirements and timelines, including projects undertaken by subcontractors; The contract deliverables list (reference), identifies all contract deliverables and reporting requirements for this contract

2.5.3 Project Manager(s) with responsibility for monitoring and tracking day-to-day progress and timelines, coordinating communication and project activities; costs incurred; and program management; The contract deliverables list (reference), identifies all contract deliverables and reporting requirements for this contract

2.5.4 A BARDA Liaison with responsibility for effective communication with the Project Officer and Contracting Officer.

2.5.5 Administrative and legal staff to provide development of compliant subcontracts, consulting, and other legal agreements, and ensure timely acquisition of all proprietary rights, including IP rights, and reporting all inventions made in the performance of the project; and

2.5.6 Administrative staff with responsibility for financial management and reporting on all activities conducted by the Contractor and any subcontractors.

2.5.7 Integrated Master Plan: The Contractor provided an Integrated Master Project Plan (including tabular and Gantt forms) to BARDA that clearly indicates the critical path. The Integrated Master Project Plan shall be incorporated into the contract, and will be used to monitor performance of the contract.

2.5.8 Critical Path Milestones: The Integrated Master Project Plan outlines key, critical path milestones, with “go/no go” decision criteria (entrance and exit criteria for each phase of the project). The project plan should include, but not be limited to, milestones in manufacturing, non-clinical and clinical studies, and regulatory submissions.

2.5.9 Work Breakdown Structure: The Contractor shall delineate the Contract Work Breakdown Structure (CWBS) to Level 5 as part of their Integrated Master Project Plan. The CWBS shall follow a BARDA supplied structure to Level 3. BARDA may require Contractor to furnish WBS data at the work package level or at a lower level if there is significant complexity and risk associated with the task.

2.5.10 Risk Management Plan: The Contractor shall develop a risk management plan highlighting potential problems and/or issues that may arise during the life of the contract, their impact on cost, schedule and performance, and appropriate remediation plans. This plan should reference relevant WBS elements where appropriate.

2.5.11 Earned Value Management System Plan: Subject to the requirements under HHSAR Clause 352.234-3, the Contractor shall use principles of Earned Value Management System (EVMS) in the management of this contract. The Seven Principles are:

 

  I. Plan all work scope for the program to completion.

 

  II. Break down the program work scope into finite pieces that can be assigned to a responsible person or organization for control of technical, schedule, and cost objectives.

 

  III. Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments may be measured. Control Changes to the baseline.

 

  IV. Use actual cost incurred and recorded in accomplishing the work performed.

 

  V. Objectively assess accomplishments at the work performance level.

 

  VI. Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed.


  VII. Use earned value information in the company’s management processes.

Elements of EVMS shall be applied to all Cost Plus Fixed Fee CLINs as part of the Integrated Master Project Plan, the Contractor shall submit a written summary of the management procedures that it will establish, maintain and use to comply with EVMS requirements to include the following topics:

2.5.12 Integrated Baseline Review: The Contractor shall submit a plan for an Integrated Baseline Review (IBR) to occur within 90 days of contract award. At the IBR, the Contractor and BARDA shall mutually agree upon the budget, schedule and technical plan baselines (Performance Measurement Baseline). These baselines shall be the basis for monitoring and reporting progress throughout the life of the contract. The IBR is conducted to achieve confidence that the baselines accurately capture the entire technical scope of work, are consistent with contract schedule requirements, are reasonably and logically planned, and have adequate resources assigned. The goals of the IBR are as follows:

 

  i. Jointly assess areas such as the Contractor’s planning for complete coverage of the SOW, logical scheduling of the work activities, adequate resources, and identification of inherent risks

 

  ii. Confirm the integrity of the Performance Measurement Baseline (PMB)

 

  iii. Foster the use of EVM as a means of communication

 

  iv. Provide confidence in the validity of Contractor reporting

 

  v. Identify risks associated with the PMB

 

  vi. Present any revised PMBs for approval

2.5.13 Integrated Master Schedule: The Contractor shall deliver an initial program level Integrated Master Schedule (IMS) that rolls up all time-phased WBS elements down to the activity level. This IMS shall include the dependencies that exist between tasks. This IMS will be agreed to and finalized at the IBR. DI-MGMT-81650 may be referenced as guidance in creation of the IMS (see http://www.acq.osd.mil/pm/).

2.5.14 Monthly Performance Metrics Report: The Contractor shall deliver an Earned Value Contract Performance Report on a Monthly basis. Contractor will provide a monthly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS and a Variance Analysis Report. Contractor will report EVM data on all CLINs. EV Variance thresholds will be +/- 10%. In conjunction with the CPR, the Contractor shall provide a quarterly update to the IMS with up to date performance data and should include actual start/finish and projected start/finish dates.

2.6 Regulatory Compliance . The Contractor shall manage the ACHN-490 IND and shall be responsible for:

2.6.1 Preparing materials for and requesting, scheduling and participating in all meetings with the FDA and other global regulatory agencies, including meetings to review IND, EUA and/or all other data packages;

2.6.2 Providing the dates and times of any meeting with the FDA and other global regulatory agencies to BARDA and make arrangements for appropriate BARDA staff to attend FDA meetings;

2.6.3 Providing BARDA with (i) the initial draft minutes and final draft minutes of any formal meeting with the FDA; (ii) final draft minutes of any informal meeting with the FDA and other global regulatory agencies; and (iii) five business days to review and comment upon any documents to be submitted to the FDA; and

2.6.4 Submitting all documentation to the FDA and other global regulatory agencies in a timely manner, consistent with timelines set out in the contract and by the FDA and other global regulatory agencies.

2.7 Quality Assurance . The Contractor shall:

2.7.1 Provide any relevant SOPs upon request from Project Officer/Contracting Officer;

2.7.2 Ensure strict adherence to FDA regulations and guidance, including requirements for the conduct of animal studies and assays under GLP, the manufacturing of the therapeutic candidate under cGMP, and the


conduct of clinical trials under GCP standards (as defined by 21 CFR §312 and ICH Guidelines document E6). The Contractor shall maintain quality assurance documentation of support adherence in these areas; and

2.7.3 Arrange for independent audits, as needed or as requested by the Project Officer. Audits may be requested to assure that Contractor and/or subcontractor facilities and all planned procedures meet FDA regulations and guidance required for GLP, cGMP and GCP standards. In addition, the Contractor shall provide interim and final audit reports to the Project Office and the Contracting Officer within thirty (30) calendar days of the completion of the audit. The Contractor agrees that BARDA may conduct independent audits of the Contractor and its subcontractors as needed to evaluate compliance with the FDA regulations and guidance, including those required to meet GLP, cGMP or GCP standards.

2.8 Facilities, Equipment and Other Resources . The Contractor shall provide equipment, facilities and other resources required for the implementation of the IPDP, such as the equipment and facilities, training and resources to comply with all Federal and HHS regulations in:

2.8.1 The humane care and use of vertebrate animals;

2.8.2 The handling, storage and shipping of potentially dangerous biological and chemical agents, including Select agents under biosafety levels required for working with the biological agents under study;

2.8.3 The production, characterization, and release testing of active pharmaceutical ingredient and final drug product under cGMP;

2.8.4 The design and conduct of NDA-enabling non-clinical studies under GLP; and

2.8.5 The design and conduct of clinical trials in humans under GCP.

2.9 Security. The contractor shall provide for:

2.9.1 The establishment of a comprehensive security program that provides a security plan for the overall protection of personnel, information, data, and facilities;

2.9.2 Security administration, as an element of the security program that addresses threat and risk assessments and related policies and procedures for personnel security, physical security, information security, information technology; and

2.9.3 Security management, as an element of the security program that describes each element of security: physical, operations, personnel, information, information technology, transportation; and related training, auditing, and reporting requirements.

2.10 Data Management . The Contractor shall:

2.10.1 Be responsible for the development and implementation of data management and quality control systems/procedures, including transmission, storage, confidentiality, and retrieval of all contract data;

2.10.2 Provide for the statistical design and analysis of data resulting from the research;

2.10.3 Provide raw data or specific analyses of data generated with contract funding to the Project Officer upon request.

2.11 Requirements for Implementing the Integrated Product Development Plan.

2.11.1 Within 14 calendar days of the effective date of the contract, the Contractor shall submit an updated Integrated Product Development Plan (IPDP) to the Project Officer and the Contracting Officer for approval prior to the initiation of any activities related to the implementation of these plans.


2.10.2 Stage Gate Reporting. On completion of a stage of the product development, as defined in the approved IPDP, the Contractor shall prepare and submit to the Project Officer and the Contracting Officer a Stage Gate Report that contains (i) sufficient detail, documentation and analysis to support successful completion of the stage according to the predetermined qualitative and quantitative criteria that were established for Go/No Go decision making; and (ii) a description of the next stage of product development to be initiated and a request for approval to proceed to the next stage of product development.

2.10.3 Deviations to Integrated Product Development Plan. During the course of contract performance, in response to a need to change the IPDP, the Contractor shall submit a Deviation Report. This report shall request a change in the agreed-upon IPDP and timelines. This report shall include: (i) discussion of the justification/rationale for the proposed change; (ii) options for addressing the needed changes from the approved timelines, including a cost-benefit analysis of each option; and (iii) recommendations for the preferred option that includes a full analysis and discussion of the effect of the change on the entire product development program, timelines, and budget.

3. Other Items

3.1 Contract Review Meetings . The Contractor shall participate in regular meetings to coordinate and oversee the contract effort as directed by the Contracting and Project Officers. Such meetings may include, but are not limited to, meeting of the Contractors and subcontractors to discuss clinical manufacturing progress, product development, product assay development, scale up manufacturing development, clinical sample assays development, preclinical/clinical study designs and regulatory issues; meetings with individual contractors and other HHS officials to discuss the technical, regulatory, and ethical aspects of the program; and meeting with technical consultants to discuss technical data provided by the Contractor.

The Contractor shall participate in bi-weekly teleconferences between the Contractor and subcontractors and BARDA to review technical progress. Teleconferences or additional face-to-face meetings shall be more frequent at the request of BARDA.

3.2 Publications . The Contractor shall submit to the Project Officer for review any manuscript or scientific meeting abstract containing data generated under this contract no less than thirty (30) calendar days for manuscripts and fifteen (15) calendar days before abstract submission for public presentation or publication. The Contractor shall acknowledge contract support in all such publications.

3.3 Press Releases . Press releases shall be considered to include the public release of information to any medium, excluding peer-reviewed scientific publications. The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases. The contractor shall ensure that the Project Officer has received an advance copy of any press release related to this contract not less than four (4) working days prior to the issuance of the press release.


F.2. REPORTING REQUIREMENTS AND DELIVERABLES

1. Other Contract Deliverables

 

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1.   Project Meeting   Bi-Weekly or as amended by CO and PO   The Contractor shall participate in bi-weekly teleconferences with BARDA to discuss the performance of the contract. The Contractor prepares a proposed agenda and shall record, maintain and provide draft-meeting minutes to the Project Officer (PO) for approval. The PO will approve the draft version and distribute the final version to the Contract Officer (CO) and Contractor.  

•   Contractor provides agenda 48hrs in advance of meeting to the PO

 

•   PO approves (with CO concurrence) and distributes agenda

 

•   Contractor provides meeting minutes within three business days of the meeting

 

•   PO reviews, comments and approves minutes

 

  1 Electronic Copy to PO and CO
2.   Monthly, Quarterly and Annual Project Status Report/ Meeting   Monthly reports are due on the 15th of each month, except on months when Quarterly/ Annual Technical Progress Reports are due  

The Monthly/Quarterly Project/Annual Status Report shall address the items listed below and cross-referenced to the Work Breakdown Structure (WBS), Scope of Work (SOW), Integrated Master Schedule (IMS), Integrated Baseline Review (IBR) report, Earned Value Management (EVM) Cost Performance Reports (CPR), and approval strategy.

 

1.      A Executive Summary in MS PowerPoint (.ppt) format, highlighting the progress, issues, and relevant activities in manufacturing, non-clinical, clinical, and regulatory. The Executive Summary should be limited to 2-3 pages and highlight critical issues for that reporting period. The Monthly, Quarterly, and Annual Technical Progress Report shall address each of the items below and be cross-referenced to the Critical Path, Integrated Master Schedule (IMS), EVM, WBS/Project Plan and the Risk Mitigation Plan.

 

2.      Progress in meeting contract milestones - broken out by subtasks within each milestone, overall project assessment, problems encountered and recommended solutions. The reports shall detail the planned progress and actual progress during the period covered, explaining occurrences of any

 

Monthly Reports:

 

•   Contractor provides

 

Monthly Status Report deliverables on the 15th of each month via email/CD/e-room upload

 

•   PO and CO will review Monthly Reports with the Contractor and provide feedback

 

Quarterly Meeting:

 

•   Contractor provides Quarterly Status Report five business days prior to meeting. This report is an expanded version of the Monthly Status Report

 

•   Contractor shall identify itinerary for the quarterly site visits

 

•   Contractor provides agenda to the PO 48hr in advance of meeting

 

•   PO approves (with CO concurrence) and distributes agenda

 

•   Contractor provides meeting minutes within three business days of the

  1 Electronic Copy to PO and CO


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differences between the two, and the corrective steps.

 

3.      Provide EVM CPR (quarterly) and Updated Risk Management Plan/Register (quarterly)

 

4.      The reports shall also include a three-month rolling forecast of key planned activities, referencing the WBS/IPDP.

 

5.      A tracking log of progress on regulatory submissions with the FDA submission number, description of submission, date of submission, status of submission, and next steps shall be updated continuously upon submission for all Biodefense and Non-Biodefense activities supported in part or whole with BARDA funding

 

6.      Estimated and Actual Expenses: This report shall also have attached either: a) a tabular (excel file) Control Account Plan report generated from MPM; or b) an unofficial CPR Form I. This section of the report shall also contain estimates for the subcontractors’ expenses from the previous month if the subcontractor did not submit a bill in the previous month. Estimates shall be listed for each subcontractor. If the subcontractor(s) was not working or did not incur any costs in the previous month, then a statement to this effect should be included in this report for those respective subcontractors. This section should also include a summary of any cost savings identified by the contractor as part of the 5% cost savings initiative.

 

7.      Contractor shall identify the itinerary for the quarterly site visits (quarterly)

 

   meeting

 

•   PO reviews, comments and approves minutes Annual Meeting:

 

•   Contractor provides Annual Project Status Report deliverables five business days prior to meeting. The annual report should also include information from the annual meeting due 15 business days after the meeting. A draft report including .ppt slides should be provided 5 business days prior to the meeting.

 

•   Contractor shall ensure that the board of directors is available to meet with BARDA. BARDA reserves the right to meet with the Contractor’s board of directors once a year to discuss the contract

 

•   PO approves (with CO concurrence) and distributes agenda

 

•   PO approves (with CO concurrence) all meeting material

 

•   Contractor provides meeting minutes within three business days

 

•   PO reviews, comments and approves minutes

 

•   Contractor provides a FINAL annual report within 15 business days after the conclusion of the annual meeting. PO (with CO concurrence) reviews, comments and approves FINAL Annual

 


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Report

 

•   BARDA and Contractor shall participate in an in-process review

 

 
3.   Integrated Baseline Review (IBR)   Within 90 days of contract award  

The IBR Report shall address each of the items listed below and be cross-referenced to the WBS, SOW, IMS and approval strategy.

 

1.      Contractor provides baseline proposal and PowerPoint brief

 

2.      A description of the work scope through control account Work Authorization Documents (WADs)

 

3.      Template for Work Packages

 

4.      Integrated Master Schedule (IMS) with the inclusion of agreed major milestones and control account plans (CAP) for all control accounts

 

5.      Baseline revision documentation and program logs (s) risk register.

 

•   Contractor provides baseline proposal, .ppt briefing, 10 business days prior to meeting

 

•   Contractor provides agenda to the PO 48hr in advance of meeting

 

•   PO approves (with CO concurrence) and distributes agenda

 

•   PO approves (with CO concurrence) all meeting material

 

•   Contractor provides minutes within 48hr of the meeting

 

•   PO reviews and approves minutes

 

•   BARDA will review documentation and provide written comments and questions to Contractor

 

•   Contractor shall address BARDA’s comments and resubmit IBR for BARDA approval within 10 business days

  1 Electronic Copy to PO and CO
4.   Integrated Master Plan   30 days following contract award and updated quarterly  

Integrated Master Plan (aka Integrated Product Development Plan) including WBS, critical path milestones and Earned Value Management Plan

 

Contractor has the option to combine details from the IMP with the WBS Dictionary (#6) in a single document, updated quarterly. Details include: milestones matched to planned EVM measurements; completion criteria; success criteria; assignments of responsible lead personnel for milestones, or for oversight of subcontractor effort required to meet milestones; and dependencies that cross reference to the Risk Management Plan

 

 

•   Contractor shall provide all the Integrated Master Plan deliverables 30

days following contract award, and thereafter on the 15th of each month. Deliverable should be included in the Quarterly or Annual Project Status Reports,

 

•   BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Integrated Master Plan, and the

 


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Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

 
5.  

Risk

Management

Plan

  90 days following contract award and updated quarterly (additional submissions as requested by CO or PO)   The Contractor will provide a Risk Management Plan that outlines the impacts of each risk in relation to the cost, schedule and performance objectives. The Risk Management Plan will include risk mitigation strategies. Each risk mitigation strategy will capture how the corrective action will reduce impacts on cost, schedule and performance.  

•   Contractor shall provide a Risk Management Plan 90 days following contract award and update on the 15th of each Quarter in their Quarterly or Annual Project Status Reports

 

•   BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted Risk Management Plan, and the Contractor must address in writing all concerns raised by BARDA within twenty business days of Contractor’s receipt of this list of concerns.

  1 Electronic Copy to PO and CO
6.   Program Integrated Master Schedule and WBS Dictiona ry   The 15th of each quarter (additional submissions as requested by CO or PO)   The Contractor will provide Program Integrated Master Schedule (IMS) and WBS Dictionary with quarterly status updates to reflect changes in schedule, performance, and critical path  

•   Contractor shall provide an Integrated Master Schedule on the 15th of each quarter in their quarterly or annual Project Status Reports

 

•   Integrated Master Schedule shall be in both PDF and Microsoft Project Form

 

•   BARDA shall provide Contractor with a written list of concerns in response to Contractor’s submitted IMS, and the Contractor must address in writing all concerns raised by BARDA within twenty business

  1 Electronic Copy (PDF and Microsoft Project Schedule (.mmp) format to PO and CO


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days of Contractor’s receipt of this list of concerns.

 
7.   EVM / Contract Performance Report   The 30th day of each month covering the prior month (additional submissions as requested by CO or PO)   Contractor will provide a quarterly Contract Performance Report (CPR) at an agreed upon reporting level using the BARDA provided WBS (format 1) and a Variance Analysis Report (fonnat 5). Contractor will report EVM data on all Cost Plus CLINs  

•   Contractor shall provide a CPR/format I and Variance Analysis Report/ format 5 on the 30th day of each month covering the prior month

 

•   Contractor shall provide a

 

PDF of deliverables. BARDA may request, on a quarterly or ad hoc basis that the Contractor provide raw data.

 

BARDA may request additional data at a reporting level or at lower levels, as BARDA deems necessary

 

•   The Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA

  1 Electronic Copy to PO and CO
8.   Incident Report   Within 24 or 48 hrs of activity or incident  

The Contractor shall communicate and document all critical programmatic concerns, risks or potential risks with BARDA within 48 hours . The Contractor shall communicate via email or telephone.

 

The Contractor shall report to the government any activity or incident that is in violation of established security standards or indicates the loss or theft of government products within 24 hrs of activity or incident. The Contractor shall communicate via email, oral or written communication.

 

•   Email, Letter to CO Telephone (w/ written follow-up)

 

•   Written communication with BARDA PO and CO within 48 hrs of Contractor identifying a project risk or potential risk and 24 hrs for Security activities or

incident

 

•   Additional updates within 48 hrs of additional developments, additional information and/or understanding

 

•   Contractor shall submit within 5 business days a Corrective Action Plan (if necessary) to address any potential security issues

  1 Electronic Copy PO and CO


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•   If corrective action is required, the Contractor must address concerns raised by BARDA

 

•   Contractor shall address BARDA’s concerns in writing within 5 business days

 
9.   Deviation Request   TBD   Process for changing study protocols and/or the Integrated Master Plan (a.k.a Integrated Product Development Plan)  

•   Contractor shall submit a Deviation Request as soon as the Contractor has sufficient data to support the need for a change from the approved study protocols and/or Integrated Master Plan

 

•   The BARDA CO will review and provide a written response to the Deviation Request.

 

•   Contractor shall address BARDA’s comments and resubmit the deviation request that addresses BA RDA’s comments within 5 business days

 

•   Contractor shall not proceed with the deviation until BARDA gives its approval

  1 Electonic Copy to PO and CO
10.   Draft and Final Technical Progress Report   Draft 20 business days before and Final 10 business days after completion of the POP  

A draft of Final Technical Progress Report containing a summation of the work performed and the results obtained for the entire contract period of performance. The draft report shall be duly marked as ‘Draft’.

 

The Final Technical Progress Report incorporating the feedback received from BARDA and containing a summation of the work performed and the results obtained for the entire contract period of performance. This final report shall detail, document and summarize the results of the entire contract. This report shall be in sufficient detail to fully describe the progress achieved under all milestones. The final report shall be duly marked as ‘Final’.

 

•   Contractor shall provide a draft report 20 business days and final 10 business days before completion of the

contract period

 

•   PO provides edits and additional feedback, which Contractor will incorporate into the Final Technical Progress Report

 

•   The Contractor shall submit one (1) copy of a comprehensive final report to the CO and two (2) copies (one

  I Electronic Copy to PO and CO


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electronically on a CD) to the PO

 
11.   Product Transition Strategy   90 days prior to end of the (base/ option) POP  

Contractor shall provide a Product Transition Strategy to support transition of the product(s) prior to end of the base and/or option(s) POP. The Product Transition Strategy should provide a strategic plan for further development and/or stockpiling of the product

 

The transition strategy shall provide options and/or a specific approach for the transition of MCM product for further development, procurement, approval and/or stockpile

 

•   Contractor shall provide a Product Transition Strategy to support transition of the product(s) 90 days prior to end of the (base/option) POP as an addendum to that Quarter’s Quarterly Project Status Report.

  1 Electronic Copy to PO and CO
12.   Decision Gate Presentation   Event Driven Review following completion of a pre- defined stage of product development and prior to initiation of a new stage   Contractor shall provide a presentation following a prescribed template provided by BARDA prior to the Decision Gate Review  

•   Contractor shall provide an update to technical progress made towards completion of the Decision Gate and provide the presentation, 10 business days prior to the Decision Gate Review

 

•   Contractor shall submit written justification of progress towards satisfying Decision Gate criteria

 

•   After reviewing, the BARDA PO and CO will provide a written response

  1 Electronic Copy to PO and CO
13.   Standard Operating Procedures   As requested by PO and CO   Contractor shall provide Standard Operating Procedures (SOPs) to BARDA for review, as they are completed and updated  

•   Contractor shall submit the Standard Operating Procedures (SOPs) in the form requested by the PO and CO within 15 calendar days of request

  1 Electronic Copy to PO and CO
14.   Approval Strategy   Within 90 days of contract award and updated as part of the quarterly report   Contractor shall provide overview of the approval strategy to include all clinical and non-clinical studies  

•   Contractor will submit proposed

clinical and non-clinical strategy to support approval

 

•   If corrective action is required, the Contractor must address concerns raised by BARDA

  1 Electronic Copy to PO and CO
15.   Study Protocols   At least 10 business days prior to FDA Submission   Contractor shall provide Pre-Clinical/Non-Clinical/ Clinical Trial Protocols to BARDA for evaluation,  

•   Contractor will submit proposed protocols to BARDA at least 10

  1 Electronic Copy to PO and CO


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prior to FDA submission

 

(The CO and PO reserves the right to request within the period of performance a non- proprietary Study Protocol for distribution within the United States Government(USG))

 

business days prior to FDA submission. If corrective action is required, the Contractor must address in writing all safety, regulatory, ethical, and conflict of interest concerns raised by BARDA to the satisfaction of BARDA before study execution

 

•   After receiving the corrected documentation, that satisfies BARDA the CO will provide a written Contract Officer Authorization (COA) Letter to the Contractor. This COA provides authorization to the Contractor to execute the specific clinical study funded in part or in whole by BARDA

 

•   Contractor shall not proceed with any study protocol until BARDA gives its approval

 

•   Final FDA submissions shall be submitted to BARDA concurrently or no later than one calendar day after its submission to CDER

 
16.   Study Reports   Within 30 (draft) or 60 (final) calendar days after completion of analysis and 15 business days prior to submission to FDA  

Contractor shall provide Draft and Final Pre-Clinical/Non-Clinical/Clinical Study Reports to BARDA for review and edits within 30 (draft) or 60 (final) calendar days after completion of analysis of Pre-Clinical/Non-Clinical/ Clinical data and 15 business days prior to submission to FDA

 

Alternatively, clinical draft study reports may be submitted 40 business days, and final reports submitted within 75 business days after database lock, provided submission to BARDA

 

•   Contractor shall provide Draft and Final Pre- Clinical/Non-Clinical/ Clinical Study Reports to

BARDA within 30 (draft) or 60 (final) calendar days after completion of each report. Clinical study reports may be provided via the Alternative Schedule.

  1 Electronic Copy to PO and CO


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is still at least 15 days prior to FDA submission (“Alternative Schedule”)

 

(The CO and PO reserves the right to request within the period of performance a non-proprietary Study Report for distribution within the USG)

 

•   Contractor will submit proposed Pre-Clinical/Non-Clinical/ Clinical Study Report to BARDA at least 15 business days prior to FDA Submission

 

•   If corrective action is required, The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

•   Contractor shall not proceed with any study report until BARDA gives its approval

 

•   Final FDA submissions shall be provided to BARDA concurrently or no later than 1 calendar day of its submission to CDER

  1 Electronic Copy to PO and CO
17.   Manufacturing Campaign Reports   Within 30 calendar days after receipt of batch records and 15 business days prior to submission to FDA  

Contractor shall provide Manufacturing Campaign Reports to BARDA for review and edits prior to submission to FDA

 

(The CO and PO reserve the right to request within the period of performance a non-proprietary Manufacturing Campaign Reports for distribution within the USG)

 

•   Contractor will submit proposed Analysis Reports and Manufacturing Campaign Reports to BARDA at least 15 business days prior to FDA Submission.

 

•   If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the satisfaction

of BARDA before FDA Submission

 

•   Contractor shall not proceed with any FDA submission until BARDA gives its approval

 

•   Final FDA submissions shall be submitted to BARDA concurrently or no later than one (1)

  1 Electronic Copy to PO and CO


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calendar day after its submission to CDER

 
18.   FDA Meeting Notification   No later than 10 business days prior to the scheduled meeting   The contractor shall forward the dates and times of any meeting with the FDA to BARDA and arrange for appropriate BARDA staff to attend the FDA meetings. BARDA staff shall include up to a maximum of four people (PO, CO, and up to two (2) Subject Matter Experts (SME(s)).  

•   Contractor must notify BARDA of an upcoming meeting with the FDA within 24 hours of scheduling the meeting with the FDA and no later than 10 business days prior to the scheduled meeting

  1 Electronic Copy to PO and CO
19.   FDA Correspondence and Meeting Minutes   Within three (3) calendar days of receiving correspondence from the FDA  

The contractor shall forward initial Contractor and CDER-issued draft minutes and final minutes of any

meeting with the FDA to BARDA. All documents shall be duly marked as either ‘Draft’ or ‘Final’.

 

•   Contractor provides FDA correspondence and meeting minutes within three (3) calendar days of the meeting or correspondence

  1 Electronic Copy to PO and CO
20.   FDA Submissions   At least 15 business days prior to submission to FDA  

The Contractor shall provide BARDA the opportunity to review and comment upon all draft regulatory documents before submission to the FDA. Contractors shall provide BARDA with an electronic copy of the final FDA submission. All documents shall be duly marked as either ‘Draft’ or ‘Final’.

 

The Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA submission.

 

•   Contractor will submit proposed FDA Meeting Briefing Packets to BARDA at least 15 business days prior to FDA submission

 

•   If corrective action is required, the Contractor must address in writing all concerns raised by BARDA staff to the satisfaction of BARDA before FDA submission

 

•   Final FDA submissions shall be submitted to BARDA concurrently or no later than one (I) calendar day of its submission to CDER

  1 Electronic Copy to PO and CO
21.   FDA Audits   Within 10 business days of a scheduled audit or within 24 hours of an ad hoc site visits/audits if the FDA did not provide advanced notification   The Contractor shall notify the PO and CO within 24 hours of FDA’s arrival to conduct site visits/audits by any regulatory agency. In the event of an FDA inspection which occurs as a result of this contract and for this product, or for any other FDA inspection that has the reasonable potential to impact the performance of this contract, the Contractor shall provide the BARDA with an exact copy (non-redacted of the FDA Form 483, and the Establishment Inspection  

•   The Contractor

shall notify the PO and CO within 24 hours of all FDA arrivals to conduct site visits/audits by any regulatory agency

 

•   Contractor provides QA Audit Reports within 15 calendar days of the audit

 

•   The Contractor shall also provide copies

  1 Electronic Copy to PO and CO


#  

 

Type of

Deliverable

 

Frequency/

time periods

 

Description of Deliverable

 

Reporting

Procedures

 

Quantity/

Form

      Report (EIR). The contractor shall provide the PO and CO copies of the plan for addressing areas of non- conformance to FDA regulations for GLP, GMP, or GCP guidelines as identified in the audit report within 10 business days, status updates during the plans execution, and a copy of all final responses to the FDA. The Contractor shall also provide redacted copies of any FDA audit report received from subcontractors that occur as a result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party. The Contractor shall make arrangements for a BARDA representative(s) to be present during the final debrief by the regulatory inspector.  

of any FDA audit report received from subcontractors that occur as a result of this contract or for this product within three (3) calendar days of receiving correspondence from the FDA and/or third party.

 
22.   QA Audit Reports   5 business days before report completion   The Contractor shall inform the PO and CO in advance of upcoming audits/site visits of subcontractors as part of the weekly communications, including goals and agenda. BARDA reserves the right to participate in the audit. Upon completion of the audit/site visit the Contractor shall provide a report capturing the findings, results and next steps in proceeding with the subcontractor. If action is requested of the subcontractor, details addressing areas of non-conformance to FDA regulations for GLP, GMP, or GCP guidelines, as identified in the audit report, must be provided to BARDA. The Contractor shall provide responses from the subcontractors to address these concerns and plans for corrective action execution  

•   The Contractor shall inform the PO and CO 10 days in advance of upcoming audits/site visits of subcontractors

 

•   The Contractor shall notify the PO and CO within 5 business days of report completion

  1 Electronic Copy to PO and CO
23.   BARDA Audit   Ad Hoc   The contractor shall accommodate for periodic or ad hoc site visits by BARDA. If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA.  

•   If BARDA, the Contractor or other parties identifies any issues during an audit, the Contractor shall capture the issues, identify potential solutions and provide a report to BARDA within 10 business days.

 

•   The PO and CO will review the deliverable and provide a response to the Contractor.

 

•   Once corrective action, approved by the CO, is

  1 Electronic Copy to PO and CO


#  

 

Type of

Deliverable

 

Frequency/

time periods

 

Description of Deliverable

 

Reporting

Procedures

 

Quantity/

Form

       

completed, the Contractor will provide a final report to BARDA

 
24.   Technical Documents   Within 10 business days upon request by CO/P0  

Contractor shall provide PO and CO upon request with deliverables from the following contract funded activities: Process Development Reports, Assay Qualification Plan/Report, Assay Validation Plan/Report, Assay Technology Transfer Report, Batch Records, SOPs, Master Production Records, Certificate of Analysis

 

(The CO and PO reserves the right to request within the period of performance a non-proprietary Technical Documents for distribution within the USG)

 

•   Contractor provides deliverables within 15 calendar days of the completion of activities

 

•   If additional time is required, Contractor shall request additional time from BARDA on a per deliverable basis

 

•   If corrective action is required, the Contractor must address in writing concerns raised by BARDA

 

•   Contractor will submit proposed FDA Technical Documents to BARDA at least 15 business days prior to FDA submission

 

•   If corrective action is required the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before FDA Submission

 

For Final Documents:

 

1 Electronic Copy to PO and CO

24.1   Clinical Study Interim Status Update   Every two weeks, if any changes since the previous update   Contractor shall provide PO with a status update of clinical studies that are actively enrolling patients by study site of: cumulative enrollment; new enrollments; activation or inactivation of study sites  

•   Updates, to the extent they are available, will be presented during bi-weekly teleconferences

 

•   If no changes have occurred

since the prior update only a simple statement that there is no new data is required

  1 e-copy to PO contained in bi-weekly meeting materials
24.2   Clinical Study Status Update   Every month, if any changes since previous update   Contractor shall provide PO with a status update of clinical studies that are actively enrolling patients to include by study site: cumulative enrollment; new enrollments; screen failures; patients dropped from study; AE and SAES; activation or inactivation of study sites; investigator appointments or changes; and status of IRB/IEC review/approval/renewal. Contractor  

•   Update will be submitted by e-mail or other electronic format to be provided by BARDA by the end of the 5 th business day of each new month

 

•   Updates, to the extent they are

  1 Electronic copy to PO


#  

 

Type of

Deliverable

 

Frequency/

time periods

 

Description of Deliverable

 

Reporting

Procedures

 

Quantity/

Form

      will provide proposed format for BARDA PO review and approval  

available, will be presented during bi-weekly teleconferences

 

•   If no changes have occurred since the prior update only a simple statement that there is no new data is required

 
25.   Animal Model or Other Technology Transfer Package   Within 10 business days of request by CO/P0   Contractor shall provide Animal Model or Other Technology Transfer Package relevant data  

•   Contractor shall provide Animal Model or other Technology Transfer Package within 10 business days of request by CO/PO

  1 Electronic Copy to PO and CO
26.   Raw Data or Data Analysis   Within 20 business days after receipt of request by CO/PO   Contractor shall provide Raw Data or Data Analysis for review by BARDA, if requested  

•   Contractor shall provide Raw Data or Data Analysis within 20 business days of request by CO/PO

  1 Electronic Copy to PO and CO
27.   Samples of Therapeutics   Within 20 business days of request by CO/PO   Contractor shall provide samples of non-GMP candidate therapeutics and GMP material manufactured with contract funding to include raw material, Bulk Drug Substance (BDS), Final Drug Product (FDP) and/or labeled and packaged treatment courses. The request will state the type of material and the amount but it is not to exceed the equivalent of 250 treatment courses or its individual manufacturing equivalent. The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped. It is acceptable to label material “Not for Clinical Use”. BARDA reserves the right to request samples throughout the period of performance.  

•   Contractor must submit samples of therapeutics within 20 business days of request by CO/PO.

 

•   The Contractor will be advised by the CO how samples are to be packaged and where samples are to be shipped.

  CO will provide details upon request
28.   Publications   20 business days for manuscripts and 10 business days for abstracts   Any manuscript or scientific meeting abstract containing data generated under this contract must be submitted to BARDA for review prior to submission  

•   Contractor must submit all manuscript or scientific meeting abstract to PO and CO within 20 business days for manuscripts and 10 business days for abstracts

 

•   The CO will respond with written comments within 10 business days for manuscripts and 5 business days for

  1 Electronic Copy to PO and CO


#  

 

Type of

Deliverable

 

Frequency/

time periods

 

Description of Deliverable

 

Reporting

Procedures

 

Quantity/

Form

       

abstracts.

 

•   If corrective action is required, the Contractor must address in writing all concerns raised by BARDA to the satisfaction of BARDA before Submission.

 

•   Any Final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission

 
29.   Press Releases   5 business days prior to release   The Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases  

•   The Contractor shall ensure that the CO has received and approved an advanced copy of any press release to this contract not less than 5 business days prior to the issuance of the press release

 

•   If corrective action is required, the Contractor agrees to accurately and factually represent the work conducted under this contract in all press releases

 

•   Any final submissions shall be submitted to BARDA concurrently or no later than one (1) calendar day of its submission.

  1 Electronic Copy to PO and CO
30.   Contract financing Report   No later than the 30th business day after the end of the reporting period   The Financial Report shall be submitted by the Contractor in accordance with the instructions set forth in section G.4 of this contract.  

•   The Contractor shall provide the

contract financing report

no later than the 30th business day after the end of the reporting period in accordance with the instructions set forth in section G.4 of this contract.

 


Contract Milestones and GO/NO GO Decision Gates for Base and Option CLINs

[*** ]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


Clinical Terms of Award

These Clinical Terms of Award detail an agreement between the Biomedical Advanced Research and Development Authority (BARDA) and the Awardee; they apply to all grants and contracts that involve clinical research.

Draft protocols for each clinical study will be submitted to BARDA for evaluation and comment. BARDA comments will be incorporated into the draft proposal prior to submission to the FDA for comment, if required.

BARDA owns all protocols, data generated from the execution of these protocols, and final reports, funded by BARDA under this contract, as defined in Rights in Data Clause in FAR 52.227-14. BARDA reserves the right to request that the Awardee provide any contract deliverable in a non-proprietary form, to ensure BARDA has the ability to review and distribute the deliverables, as BARDA deems necessary.

A. Safety and Monitoring Issues

Institutional Review Board (IRB) or Independent Ethics Committee (IEC) Approval

Before award and then with the annual progress report, the Awardee must submit to BARDA a copy of the current IRB or IEC approved informed consent document, documentation of continuing review and approval and the Office of Human Research Protections (OHRP) FWA number for the institution or site.

When a non-US Institution becomes engaged in research to which the FWA applies, and the institution does not provide a FWA number, written project officer’s approval must be obtained before the site can be allowed to enroll any subjects under an alternative human research subjects protection assurance including, but not limited to the following:

 

    The Common Rule;

 

    The U.S. Food and Drug Administration regulations at 21 CFR parts 50 and 56;

 

    The current International Conference on Harmonization E-6 Guidelines for Good Clinical Practice;

 

    The current Council for International Organizations of Medical Sciences International Ethical Guidelines for Biomedical Research Involving Human Subjects;

 

    The current Canadian Tri-Council Policy Statement: Ethical Conduct for Research Involving Humans;

 

    The current Indian Council of Medical Research Ethical Guidelines for Biomedical Research on Human Subjects; or

 

    Other standard(s) for the protection of human subjects recognized by U.S. federal departments and agencies which have adopted the U.S. Federal Policy for the Protection of Human Subjects.

If other institutions are involved in the research (e.g., a multicenter clinical trial or study), each institution’s IRB or IEC must review and approve the protocol. They must also provide BARDA initial and annual documentation of continuing review and approval, including the current approved informed consent document and FWA number, if applicable.

The grantee institution must ensure that the application as well as all protocols are reviewed by their IRB or IEC.

To help ensure the safety of participants enrolled in BARDA funded studies, the Awardee must provide BARDA copies of documents related to all major changes in the status of ongoing protocols, including the following:

 

    All amendments or changes to the protocol, identified by protocol version number, date, or both and date it is valid.

 

    All changes in template informed consent documents, identified by version number, date, or both and dates it is valid.

 

    Termination or temporary suspension of patient accrual.


    Termination or temporary suspension of the protocol.

 

    Any change in IRB or IEC approval status (e.g. withdrawal or suspension).

 

    Any other significant problems or issues that could affect the safety of participants in the studies.

Awardees must notify BARDA through the Project Officer (PO) or Contracting Officer (CO) of any of the above changes within three working days by email or fax, followed by a letter signed by the institutional business official, detailing notification of the change of status to the local IRB and a copy of any responses from the IRB or IEC.

If a clinical protocol has been reviewed by an institutional biosafety committee (IBC) or the NIH Recombinant DNA Advisory Committee (RAC), the Awardee must provide information about the initial and ongoing review and approval, if any. See the NIH Guidelines for Research Involving Recombinant DNA Molecules. Data and Safety Monitoring Requirements

BARDA strongly recommends independent safety monitoring for clinical trials of investigational drugs, devices, or biologics; clinical trials of licensed products; and clinical research of any type involving more than minimal risk to volunteers. Independent monitoring can take a variety of forms. Phase III clinical trials must be reviewed by an independent data and safety monitoring board (DSMB) or data monitoring committee (DMC); other trials may require DSMB/DMC oversight as well. The Awardee shall inform BARDA of any co-monitoring and sponsor company oversight clinical or CRO site visits and/or audits of CRO facilities funded under this effort. BARDA reserves the right to accompany the awardee on site visits and/or audits of CROs as BARDA deems necessary. The Awardee shall provide BARDA with an updated register of at (Awardee and CRO conducted) site visits that have been conducted on a monthly basis.

A risk is minimal where the probability and magnitude of harm or discomfort anticipated in the proposed research are not greater than those ordinarily encountered in daily life or during the performance of routine physical or psychological examinations or tests. For example, the risk of drawing a small amount of blood from a healthy individual for research purposes is no greater than the risk of doing so as part of a routine physical examination (45 CFR 46.1021).

Final decisions regarding the type of monitoring to be used must be made jointly by BARDA and the Awardee before enrollment starts. Discussions with the responsible BARDA Project Officer regarding appropriate safety monitoring and approval of the final monitoring plan by BARDA must occur before patient enrollment begins and may include discussions about the appointment of one of the following.

 

    Independent Safety Monitor — a physician or other appropriate expert who is independent of the study and available in real time to review and recommend appropriate action regarding adverse events and other safety issues.

 

    Independent Monitoring Committee (IMC) or Safety Monitoring Committee (SMC) — a small group of independent investigators and biostatisticians who review data from a particular study.

 

    Data and Safety Monitoring Board/Data Monitoring Committee — an independent committee charged with reviewing safety and trial progress and providing advice with respect to study continuation, modification, and termination. The Awardee may be required to use an established BARDA DSMB or to organize an independent DSMB. All phase III clinical trials must be reviewed by a DSMB/DMC; other trials may require DSMB oversight as well. Please refer to: NIAID Principles for Use of a Data and Safety Monitoring Board (DSMB) For Oversight of Clinical Trials Policy.

When a monitor or monitoring board is organized, a description of it, its charter or operating procedures (including a proposed meeting schedule and plan for review of adverse events), and roster and curriculum vitae from all members must be submitted to and approved by BARDA before enrollment starts. BARDA is entitled to have an observer (silent, non-voting) participant in the open DMC meetings/portions of meetings.


Additionally, the Awardee must submit written summaries of all open session reviews conducted by the monitoring group to the BARDA within 30 days of reviews or meetings. Closed session summaries must be submitted within 30 days of their becoming available to the Awardee

B. BARDA Protocol Review Process Before Patient Enrollment Begins

BARDA has a responsibility to ensure that mechanisms and procedures are in place to protect the safety of participants in BARDA-supported clinical trials. Therefore, before patient accrual or participant enrollment, the Awardee must provide the following (as applicable) for review and approval by BARDA.

 

  1. IRB or IEC approved clinical research protocol identified by version number, date, or both, including details of study design, proposed interventions, patient eligibility, and exclusion criteria.

 

  2. Documentation of IRB or IEC approval, including OHRP FWA number or applicable documentation of compliance, and IRB or IEC name.

 

  3. Template informed consent document, identified by version number, date, or both and date it is valid. BARDA may have access to any site-specific informed consent documents and translations of these as requested.

 

  4. Plans for the management of side effects.

 

  5. Procedures for assessing and reporting adverse events.

 

  6. Plans for data and safety monitoring (see B above) and monitoring of the clinical study site, pharmacy, and laboratory.

 

  7. Documentation that the Awardee and all study staff responsible for the design or conduct of the research have received Good Clinical Practice (GCP) training in the protection of human subjects.

BARDA staff comments will be forwarded to the Awardee within three weeks (15 business days) of receipt of the above information. The Awardee must address in writing all study design, safety, regulatory, ethical, and conflict of interest concerns raised by the BARDA Project Officer (PO) to the satisfaction of BARDA before patient accrual or participant enrollment can begin. After receiving the corrected documentation, that satisfies BARDA staff the BARDA Contracting Officer will provide a written Contract Officer Authorization (COA) Letter to the Awardee. This COA provides authorization to the awardee to execute the specific clinical study funded in part or in whole by BARDA.

C. Investigational New Drug or Investigational Device Exemption Requirements

Consistent with federal regulations, clinical research projects involving the use of investigational therapeutics, vaccines, or other medical interventions (including licensed products and devices for a purpose other than that for which they were licensed) in humans under a research protocol must be performed under a Food and Drug Administration (FDA) investigational new drug (IND) or investigational device exemption (IDE).

Exceptions must be granted in writing by FDA. If the proposed clinical trial will be performed under an IND or IDE, the Awardee must provide BARDA with the name and institution of the IND or IDE sponsor, the date the IND or IDE was filed with FDA, the FDA IND or IDE number, any written comments from FDA, and the written responses to those comments.

The Awardee must wait 30 days from FDA receipt of an initial IND or IDE application before initiating a clinical trial.

The Awardee must notify BARDA if the FDA places the study on clinical hold and provide BARDA any written comments from FDA, written responses to the comments, and documentation in writing that the hold has been lifted.


The Awardee must not use grant or contract funds during a clinical hold.

Required Time-Sensitive Notification

Under an IND or IDE, the sponsor must provide FDA safety reports of serious adverse events. Under these Clinical Terms of Award, the Awardee must submit copies to the responsible BARDA Project Officer or the Contracting Officer’s technical representative (COTR) as follows:

 

    Expedited safety report of unexpected or life-threatening experience or death — A copy of any report of unexpected or life-threatening experience or death associated with the use of an IND drug, which must be reported to FDA by telephone or fax as soon as possible but no later than seven days after the IND sponsor’s receipt of the information, must be submitted to the BARDA program officer or the contracting officer’s technical representative within 24 hours of FDA notification.

 

    Expedited safety reports of serious and unexpected adverse experiences — A copy of any report of unexpected and serious adverse experience associated with use of an IND drug or any finding from tests in laboratory animals that suggests a significant risk for human subjects, which must be reported in writing to FDA as soon as possible but no later than 15 days after the IND sponsor’s receipt of the information, must be submitted to the BARDA Project Officer or the Contracting Officer’s Technical Representative within 24 hours of FDA notification.

 

    IDE reports of unanticipated adverse device effect — A copy of any reports of unanticipated adverse device effect submitted to FDA must be submitted to the BARDA Project Officer or the Contracting Officer’s Technical Representative within 24 hours of FDA notification.

 

    Expedited safety reports — should be sent to the BARDA Project Officer or the Contracting Officer’s Technical Representative concurrently with the report to FDA.

 

    Other adverse events documented during the course of the trial should be included in the annual IND or IDE report and reported to the BARDA annually.

In case of problems or issues, the BARDA Project Officer or the Contracting Officer’s Technical Representative will contact the Awardee within 10 working days by email or fax, followed within 30 calendar days by an official letter to the principal investigator, with a copy to the institution’s office of sponsored programs, listing issues and appropriate actions to be discussed.

 

    Safety reporting for research not performed under an IND or IDE

Final decisions regarding ongoing safety reporting requirements for research not performed under an IND or IDE must be made jointly by the BARDA Project Officer or the Contracting Officer’s Technical Representative and the Awardee.

Exhibit 10.7I

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 2 2. AMENDMENT/MODIFICATION NO. 0010 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment. and Is received prior to the opening hour and date specified 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings. Including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this modification is to incorporate the following changes into Contract Number HHSO100201000046C. 1. The first and second sentences in Article G.7. INDIRECT COST RATES of Contract Number HHSO100201000046C are hereby deleted and replaced with the following: The following indirect rates will be utilized for billing purposes during the entire base period/CLIN 0001 ONLY. For the entire base period/CLIN 0001, [***] Continued … Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFICER (Signature of person authorized to sign) 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53 243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET   

Reference no document being continued

HHSO100201000046C/0010

  

PAGE OF

2    |    2

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

  

 

ITEM NO.
     (A)

  

SUPPLIES/SERVICES
(B)

  

QUANTITY
(C)

  

UNIT
(D)

  

UNIT
PRICE
(E)

  

AMOUNT
(F)

  

[***]. These final base period/CLIN 0001 indirect rates are the final indirect rates for the entire base period/CLIN 0001 ONLY and the contractor agrees [***] for the base period/CLIN 0001 ONLY and the contractor also agrees to [***] and the contractor will not [***]. The following indirect rates will be utilized for billing purposes during Option 1/CLIN 0002 and Option 2/CLIN 0003 ONLY. [***].

 

2. In addition, this no cost bilateral modification also amends the indirect rate agreement dated 25 February 2013 for the purposes of adding the following ONLY to the agreement:

 

The following final indirect rates will be utilized for billing purposes during the entire base period/CLIN 0001 ONLY. For the entire base period/CLIN 0001, [***]. These final base period/CLIN 0001 indirect rates are the final indirect rates for the entire base period/CLIN 0001 ONLY and the contractor agrees [***] and the contractor also agrees [***] and the contractor will not [***].

 

B. This is a no cost modification. The total amount of Contract Number HHSO100201000046C as well as all other terms and conditions of Contract Number HHSO100201000046C remain unchanged.

 

Period of Performance: 09/19/2010 to 11/15/2017

           
NSN 7540.01-152-8067   

OPTIONAL FORM 338 (4-86)

Sponsored by GSA

FAR (48 CFR) 53 110

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

Exhibit 10.7J

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGE 1 3 2. AMENDMENT/MODIFICATION NO. 0011 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended. is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date, etc) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 The purpose of this modification is is to change Option 2/CLIN 0003 from a Total Estimated Cost Plus Fixed Fee ($0.00 Fixed Fee) to a Cost Sharing CLIN. Please see the attached Pages. Period of Performance: 09/19/2010 to 11/15/2017 Except as provided herein, all terms and conditions of the document referenced In Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) Dennis Hom, VP, Finance and Corporate Development 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFEROR (Signature of person authorized to sign) 15C. DATE SIGNED 8/29/2013 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53 243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.


A. Under, ARTICLE B.2. ESTIMATED COST , Option 2, CLIN 0003 is hereby modified as follows:

 

  1. Option 2, CLIN 0003, is a cost-sharing CLIN. Monies shall be provided for the total cost of performance from the Department of Health and Human Services, and the Contractor, Achaogen, Incorporated.

 

  2. The Government shall provide monies for Option 2, CLIN 0003 in an amount not to exceed [***]. The total amount obligated by the Government for Option 2, OLIN 0003 shall not exceed the Total Estimated Cost of [***] and the Government will not be responsible for any Contractor incurred costs that exceed this amount under Option 2, CLIN 0003 unless a modification to the contract is signed by the Contracting Officer which expressly increases this amount. The Contractor’s share for Option 2, CLIN 0003 is estimated at [***].

 

  3. For Option 2, CLIN 0003, the Contractor shall maintain records of all contract costs (including costs claimed by the Contractor as being its share) and such records shall be subject to the Audit and Records-Negotiation and Final Decisions on Audit Findings clauses of the General Clauses.

 

  4. For Option 2, CLIN 0003, costs contributed by the Contractor shall not be charged to the Government under any other contract, grant, or cooperative agreement (including allocation to other grants, contracts, or cooperative agreements as part of an independent research and development program). The Contractor shall report the organization’s share of the costs expended by category, on the Financial Report, as referenced in the CONTRACT FINANCIAL REPORT Article in SECTION G of this contract.

 

  5. For Option 2, CLIN 0003, it is estimated that the amount currently allotted will cover performance of the contract through 15 November 2017.

 

CLIN

  

Estimated

Period of

Performance

  

Supplies/Services

   Estimated USG
Cost
   Estimated
Achaogen Cost
Sharing
   Total
Estimated Cost
0003           

1 May 2013 through

15 November 2017.

  

Option Period 2: State 2 [***]

 

Reports, Meeting Minutes, Release Certificates, Databases and Other Data Deliverables.

   [***]    [***]    [***]

6. the following clause is hereby added to Article I.1, Section 1 CONTRACT CLAUSES and applicable ONLY to CLIN 0003.

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


52.216-12    Apr 1984   

Cost Sharing Contract – no fee

(Applicable to CLIN 0003 ONLY)

B. This is a bilateral, no cost modification. The scope, period of performance and the total contract amount remain unchanged and all other terms and conditions of the contract remain unchanged.

Exhibit 10.7K

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGE 1 3 2. AMENDMENT/MODIFICATION NO. 0012 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 end 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which Includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 The purpose of this modification is to change the Estimated Achaogen Cost Sharing Amount under Option 2/CLIN 0003. Please see the attached Pages. Period of Performance: 09/19/2010 to 11/15/2017 Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) Dennis Hom, VP of Finance and Corporate Development 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) ETHAN J. MUELLER 15B. CONTRACTOR/OFFEROR (Signature of person authorized to sign) 15C. DATE SIGNED 11/4/2013 16B. UNITED STATES OF AMERICA (Signature of Contracting Officer) 16C. DATE SIGNED NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


A. Under, ARTICLE B.2. ESTIMATED COST , Option 2, CLIN 0003 is hereby modified as follows:

 

  1. Option 2, CLIN 0003, is a cost-sharing CLIN. Monies shall be provided for the total cost of performance from the Department of Health and Human Services, and the Contractor, Achaogen, Incorporated.

 

  2. The Government shall provide monies for Option 2, CLIN 0003 in an amount not to exceed [***]. The total amount obligated by the Government for Option 2, CLIN 0003 shall not exceed the Total Estimated Cost of [***] and the Government will not be responsible for any Contractor incurred costs that exceed this amount under Option 2, CLIN 0003 unless a modification to the contract is signed by the Contracting Officer which expressly increases this amount. The Contractor’s share for Option 2, CLIN 0003 is estimated at [***].

 

  3. For Option 2, CLIN 0003, the Contractor shall maintain records of all contract costs (including costs claimed by the Contractor as being its share) and such records shall be subject to the Audit and Records-Negotiation and Final Decisions on Audit Findings clauses of the General Clauses.

 

  4. For Option 2, CLIN 0003, costs contributed by the Contractor shall not be charged to the Government under any other contract, grant, or cooperative agreement (including allocation to other grants, contracts, or cooperative agreements as part of an independent research and development program). The Contractor shall report the organization’s share of the costs expended by category, on the Financial Report, as referenced in the CONTRACT FINANCIAL REPORT Article in SECTION G of this contract.

 

  5. For Option 2, CLIN 0003, it is estimated that the amount currently allotted will cover performance of the contract through 15 November 2017.

 

CLIN

  

Estimated

Period of

Performance

  

Supplies/Services

  

Estimated

USG Cost

  

Estimated
Achaogen Cost
Sharing

  

Total

Estimated Cost

0003    1 May 2013 through 15 November 2017.   

Option Period 2: [***] in accordance with Section

C.1.Statement of Work

 

Reports, Meeting Minutes, Release Certificates, Databases and Other Data Deliverables.

   [***]    [***]    [***]

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


6. The following clause contained in Article I.1, Section I CONTRACT CLAUSES is applicable ONLY to CLIN 0003:

 

52.216-12    Apr 1984   

Cost Sharing Contract — no fee

(Applicable to CLIN 0003 ONLY)

7. Under ARTICLE F.2 – REPORTING REQUIREMENTS AND DELIVERABLES under 1. OTHER CONTRACT DELIVERABLES , the following is added:

 

#

  

Type of
Deliverable

  

Frequency/ time

periods

  

Description of Deliverable

  

Reporting Procedures

  

Quantity/

Form

31.       

Private Financing Status

Report

  

Quarterly, AND within 10 business days of the following significant developments:

 

1.      Obtaining financing

 

2.      Being declined financing

 

3.      Abandoning or changing plans presented at the previous quarter

   The Contractor shall present to BARDA progress over the previous quarter, and plans for the coming quarter aimed at obtaining financing. A separate presentation shall be made in the event of significant developments. Briefings will provide detail and meet the timing requirements here to the extent that confidential disclosure of the information is allowed by law and in keeping with agreements with potential sources of financing.   

A mutually

agreeable time will be selected for the presentation, which may be in conjunction with quarterly meetings, via teleconference, or in person. Contractor provides materials presenting the information, labeled proprietary and confidential as appropriate.

  

1 paper or electronic

Copy to PO and CO

B. This is a bilateral, no cost modification. The scope, period of performance and the total contract amount remain unchanged and all other terms and conditions of the contract remain unchanged.

Exhibit 10.7L

 

LOGO

AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES 1 2 2. AMENDMENT/MODIFICATION NO. 0013 3. EFFECTIVE DATE See Block 16C 4. REQUISITION/PURCHASE REQ. NO. N/A. 5. PROJECT NO. (If applicable) 6. ISSUED BY CODE ASPR-BARDA 7. ADMINISTERED BY (If other than Item 6) CODE ASPR-BARDA ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 ASPR-BARDA 200 Independence Ave., S.W. Room 638-G Washington DC 20201 8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) (X) 9A. AMENDMENT OF SOLICITATION NO. ACHAOGEN, INC. 1361331 ACHAOGEN, INC. 7000 SHORELINE 7000 SHORELINE CT STE 371 SOUTH SAN FRANCISCO CA 940801957 9B. DATED (SEE ITEM 11) X 10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201000046C CODE 1361331 FACILITY CODE 10B. DATED (SEE ITEM 13) 09/01/2010 11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. 12. ACCOUNTING AND APPROPRIATION DATA (If required) N/A. 13. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. CHECK ONE A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date. etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X D. OTHER (Specify type of modification and authority) Bilateral: Mutual Agreement of the Parties. E. IMPORTANT: Contractor is not is required to sign this document and return 1 copies to the issuing office. 14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) Tax ID Number: 68-0533693 DUNS Number: 167293153 A. The purpose of this no cost modification is to incorporate the following changes into the contract: 1. The Period of Performance for the Base Period/ CLIN 0001 of contract HHSO100201000046C is hereby changed from 19 September 2010 through 31 December 2013 to 19 September 2010 through 30 June 2014, at no additional cost to the Government. 2. The Period of Performance for Option 1/ CLIN 0002 of contract HHSO100201000046C is hereby changed from 21 September 2012 through 21 March 2014 to 21 September 2012 to 30 Continued… Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. 15A. NAME AND TITLE OF SIGNER (Type or print) Dennis P. Hom, Vice President, Finance and Corporate Development 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) THOMAS P. HASTINGS-TICKERHOFF 15B. CONTRACTOR/OFFEROR /s/ Dennis P. Hom (Signature of person authorized to sign) 15C. DATE SIGNED 12/13/2013 16B. UNITED STATES OF AMERICA /s/ Thomas P. Hastings (Signature of Contracting Officer) 16C. DATE SIGNED 12/17/13 NSN 7540-01-152-8070 Previous edition unusable STANDARD FORM 30 (REV. 10-83) Prescribed by GSA FAR (48 CFR) 53.243

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 


CONTINUATION SHEET  

REFERENCE NO. OF DOCUMENT BEING CONTINUED

HHSO100201000046C/0013

  

PAGE OF

2    |    2

 

NAME OF OFFEROR OR CONTRACTOR

ACHAOGEN, INC. 1361331

 

ITEM NO.

      (A)

  

SUPPLIES/SERVICES

(B)

  

QUANTITY
(C)

  

UNIT

(D)

  

UNIT PRICE

(E)

  

AMOUNT

(F)

September 2014, at no additional cost to the Government.

3. Under Article B.4.b.1.a. Travel Costs, the amount of [***] is hereby changed to [***] and is applicable to the Base Period/CLIN 0001 only.

4. Under Article G.2. Contracting Officer’s Technical Representative (COTR), the COTR is now known as the Contracting Officer’s Representative (COR). The COR for the contract is hereby changed from Matthew Metz, Ph.D., to:

Christopher Houchens, Ph.D.

DHHS/OS/ASPR/BARDA

330 Independence Avenue, SW, Room G644

Washington, DC 20201

Email: Christopher.Houchens@hhs.gov

5. Under Article G.3. Key Personnel, the following name and title is added to the list of key personnel for the contract:

[***]

B. This is a no cost modification. The total amount and all other terms and conditions of contract number HHSO100201000046C remain unchanged.

Period of Performance: 09/19/2010 to 11/15/2017

 

[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

 

Exhibit 10.8

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “ Agreement ”) dated as of November 1, 2011 (the “ Effective Date ”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“ Oxford ”), as collateral agent (in such capacity, the “ Collateral Agent ”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (“SVB”) (each a “ Lender ” and collectively, the “ Lenders ”), and ACHAOGEN, INC., a Delaware corporation with offices located at 7000 Shoreline Ct., Suite 371, South San Francisco, California 94080 (“ Borrower ”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows:

 

1. ACCOUNTING AND OTHER TERMS

1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP. Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 14. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.

 

2. LOANS AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

2.2 Term Loans.

(a) Availability . (i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower in an aggregate amount up to Eight Million Dollars ($8,000,000) according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term A Loan ”, and collectively as the “ Term A Loans ”); which shall be available as follows: (x) Four Million Dollars ($4,000,000) (the “ Term A Loan (1) ”) on the Effective Date; and (y) Four Million Dollars ($4,000,000) (the “ Term A Loan (2) ”) upon Borrower’s request, through June 30, 2012. After repayment, no Term A Loan may be re-borrowed.

(ii) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans to Borrower in an aggregate amount up to Four Million Dollars ($4,000,000) according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term B Loan ”, and collectively as the “ Term B Loans ”; each Term A Loan or Term B Loan is hereinafter referred to singly as a “ Term Loan ” and the Term A Loans and the Term B Loans are hereinafter referred to collectively as the “ Term Loans ”). After repayment, no Term B Loan may be re-borrowed.

(b) Repayment . Borrower shall make monthly payments of interest only commencing on the first (1 st ) Payment Date following the Funding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal and interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s applicable Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to thirty (30) months. All unpaid principal and accrued and unpaid interest with respect to the Term A Loans is due and payable in full on the Maturity Date. The Term Loans may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

 

1


(c) Mandatory Prepayments . If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued but unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other sums, that shall have become due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).

(d) Permitted Prepayment of Term Loans . Borrower shall have the option to prepay all or any part (but not less than One Million Dollars ($1,000,000)), of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay all or such portion of the Term Loans at least ten (10) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) the principal amount of the Term Loans being prepaid plus accrued but unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other sums, that shall have become due and payable but have not been paid, including Lenders’ Expenses, if any, and interest at the Default Rate with respect to any past due amounts.

2.3 Payment of Interest on the Credit Extensions.

(a) Interest Rate . Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a fixed per annum rate (which rate shall be fixed for the duration of the applicable Term Loan) equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the day on which the Term Loan is made, and shall accrue on a Term Loan, or any portion thereof, for the day on which the Term Loan or such portion is paid.

(b) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “ Default Rate ”). Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

(c) 360-Day Year . Interest shall be computed on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days.

(d) Debit of Accounts . Collateral Agent and each Lender shall debit (or ACH), first the Designated Deposit Account, and second, any other deposit accounts maintained by Borrower for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due. These debits (or ACH activity) shall not constitute a set-off.

(e) Payments . Except as otherwise expressly provided herein, all loan payments by Borrower hereunder shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month. Payments of principal and/or interest received after 2:00 p.m. Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest made hereunder and pursuant to any other Loan Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.

2.4 Secured Promissory Notes. The Term Loans shall be evidenced by one or more Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a “ Secured Promissory Note ”), and shall

 

2


be repayable as set forth herein. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment. The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower hereunder or under any Secured Promissory Note to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

2.5 Fees. Borrower shall pay to Collateral Agent:

(a) Facility Fee . (i) A fully earned, non-refundable facility fee of Twenty Thousand Dollars ($20,000), receipt of which hereby is acknowledged; and (ii) an additional fee (the “ Term B Fee ”) of Twenty Thousand Dollars ($20,000), which shall be fully earned and nonrefundable, and due and payable on the Funding Date of the Term B Loan; in each case, to be shared between the Lenders pursuant to their respective Commitment Percentages; provided that (a) the facility fees as described herein shall be applied to the Lenders’ Expenses due and payable hereunder (with any amount of Lenders’ Expenses in excess of such fees to be borne by Borrower); and (b) in the event Borrower does not request and/or the Lenders do not make the Term B Loan, the Term B Fee shall not be due or payable;

(b) Final Payment . The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

(c) Prepayment Fee . The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares; and

(d) Lenders’ Expenses . All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.

2.6 Withholding. Payments received by Lenders from Borrower hereunder will be made free and clear of any withholding taxes. Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any such withholding or deduction from any such payment or other sum payable hereunder to Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request, furnish Lenders with proof reasonably satisfactory to Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.

 

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Subject to the terms of the Post Closing Letter, each Lender’s obligation to make a Term A Loan is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent may reasonably deem necessary or appropriate, including, without limitation:

(a) duly executed original Loan Documents to which Borrower is a party;

 

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(b) duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower;

(c) duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage;

(d) the Operating Documents of Borrower and good standing certificates of Borrower certified by the Secretary of State of Borrower’s state of organization and each state in which Borrower is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

(e) the Perfection Certificate for Borrower;

(f) the Annual Projections, for the current calendar year;

(g) duly executed original officer’s certificate for Borrower, in a form acceptable to Collateral Agent and Lenders;

(h) Collateral Agent shall have received certified copies, dated as of a recent date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

(i) a subordination agreement from each holder of Subordinated Debt, including but not limited to Wellcome Trust Limited;

(j) a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s leased locations;

(k) a copy of any applicable registration rights agreement or investors’ rights agreement and any amendments thereto;

(l) a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;

(m) evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders; and

(n) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.2 Conditions Precedent to the Term A Loan (2). The obligation of each Lender to make the Term A Loan (2) is subject to the following conditions precedent:

(a) Borrower shall have delivered to Oxford a Warrant in substantially the form attached hereto as Annex I; and

(b) Satisfaction of the requirements of Section 3.4 below.

3.3 Conditions Precedent to the Term B Loan. The obligation of each Lender to make the Term B Loan is subject to the following conditions precedent:

(a) Borrower shall have delivered to Oxford a Warrant in substantially the form attached hereto as Annex I; and

(b) Satisfaction of the requirements of Section 3.4 below.

 

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3.4 Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a) receipt by the Lenders of an executed Payment/Advance Form in the form of Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance Request Form in the form of Exhibit B-2 attached hereto;

(b) the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Payment/Advance Form (and the Loan Payment/Advance Request Form) and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

(c) in such Lender’s reasonable discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender; and

(d) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.5 Covenant to Deliver. Borrower agrees to deliver to Collateral Agent each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent of any such item shall not constitute a waiver by the Lenders of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.

3.6 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 2:00 p.m. Eastern time three (3) Business Days prior to the date the Term Loan is to be made. Together with any such facsimile notification, Borrower shall deliver to Lenders by electronic mail, facsimile a completed Payment/Advance Form (and the Loan Payment/Advance Request Form, with respect to SVB) executed by a Responsible Officer or his or her designee. Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.

 

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort claim (as defined in the Code), in excess of Twenty Five Thousand Dollars ($25,000), Borrower shall promptly notify Collateral Agent in a writing signed by Borrower of the general details thereof (and further details as may be required by Collateral

 

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Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, and each Lender, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to the Borrower.

4.2 Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights hereunder, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent and Lenders under the Code.

 

5. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Collateral Agent and the Lenders as follows at all times:

5.1 Due Organization, Authorization: Power and Authority. Borrower and each of Borrower’s Subsidiaries is duly existing and is in good standing as a Registered Organization in its jurisdiction of organization and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a Material Adverse Change. In connection with this Agreement, Borrower has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower (the “ Perfection Certificate ”). Borrower represents and warrants that (a) Borrower’s exact legal name is that which is indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) each Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its respective predecessors) has not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower, and each of Borrower’s Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower or any of Borrower’s Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.

The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, including the Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower, or any of Borrower’s Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower, or any of Borrower’s Subsidiaries or their respective properties is bound. Borrower is not in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change.

 

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5.2 Collateral.

(a) Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and Borrower does not have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificate delivered to Collateral Agent in connection herewith with respect of which Borrower has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected security interest therein.

(b) On the Effective Date, the Collateral is not in the possession of any third party bailee (such as a warehouse) except as disclosed in the Perfection Certificate and, as of the Effective Date, no such third party bailee possesses components of the Collateral in excess of One Hundred Thousand Dollars ($100,000). None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificate on the Effective Date or as permitted pursuant to Section 6.11.

(c) All Inventory is in all material respects of good and marketable quality, free from material defects.

(d) Borrower is the sole owner of the Intellectual Property it purports to own, except for non-exclusive licenses granted to its customers in the ordinary course of business and other licenses permitted hereunder. Except as noted on the Perfection Certificate, Borrower is not a party to, nor is bound by, any material license or other material agreement with respect to which Borrower is the licensee that (i) prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such material license or material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s right to sell any Collateral. Borrower shall provide written notice to Collateral Agent within ten (10) days of entering into or becoming bound by any material license or material agreement (other than over-the-counter software that is commercially available to the public). Borrower shall take such commercially reasonable steps as Collateral Agent requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for (i) all licenses or agreements to be deemed “Collateral” and for Collateral Agent to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (ii) Collateral Agent shall have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Collateral Agent’s rights and remedies under this Agreement and the other Loan Documents.

5.3 Litigation. Except as disclosed on the Perfection Certificate, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower, or any of Borrower’s Subsidiaries, involving more than One Hundred Thousand Dollars ($100,000).

5.4 No Material Deterioration in Financial Condition; Financial Statements. All consolidated financial statements for Borrower or any of Borrower’s Subsidiaries delivered to Collateral Agent fairly present, in all material respects the consolidated financial condition of Borrower or any of Borrower’s Subsidiaries and the consolidated results of operations of Borrower or any of Borrower’s Subsidiaries. There has not been any material deterioration in the consolidated financial condition of Borrower or any of Borrower’s Subsidiaries since the date of the most recent financial statements submitted to any Lender.

5.5 Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

5.6 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower is not, nor is any of Borrower’s Subsidiaries, a “holding company” or an “affiliate” of a “holding

 

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company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a Material Adverse Change. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any such Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

Borrower is not, nor are any of Borrower’s Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) a Blocked Person. Borrower is not, nor to the knowledge of Borrower, are any of Borrower’s Affiliates or agents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducting any business or engaged in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) dealing in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

5.7 Subsidiaries; Investments. Borrower does not own any stock, shares, partnership interests or other equity securities except for Permitted Investments.

5.8 Tax Returns and Payments; Pension Contributions. Borrower and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, and Borrower, and each such Subsidiary, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, and each such Subsidiary in all jurisdictions in which Borrower or such Subsidiary is subject to taxes, including the United States, unless such taxes are being contested in accordance with the following sentence. Borrower, may defer payment of any contested taxes, provided that Borrower or its applicable Subsidiary (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower is not aware of any claims or adjustments proposed for any of Borrower’s or any of Borrower’s Subsidiaries’ prior tax years which could result in additional taxes becoming due and payable by Borrower or any of Borrower’s Subsidiaries. Borrower and each of Borrower’s Subsidiaries has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not, nor have any of Borrower’s Subsidiaries, withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or any such Subsidiary, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.

5.10 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

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5.11 Definition of Knowledge. ” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.

 

6. AFFIRMATIVE COVENANTS

Borrower shall, and shall cause each of Borrower’s Subsidiaries to, do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, the noncompliance with which could reasonably be expected to have a Material Adverse Change.

(b) Obtain and keep in full force and effect, all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders in all of the Collateral. Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals obtained by Borrower.

6.2 Financial Statements, Reports, Certificates.

(a) Deliver to each Lender: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower, and each of Borrower’s Subsidiaries, for such month certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent; (ii) as soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s, or Borrower’s Subsidiaries’ fiscal year, audited consolidated financial statements prepared under GAAP (subject to customary end-of-year adjustments), consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion; (iii) as soon as available after approval thereof by Borrower’s Board of Directors, but no later than forty-five (45) days after the last day of each of Borrower’s fiscal years, Borrower’s financial projections for the entire current fiscal year as approved by Borrower’s Board of Directors, which such annual projections shall be set forth in a month-by-month format (such annual financial projections as originally delivered to Collateral Agent and the Lenders are referred to herein as the “ Annual Projections ”; provided that, any revisions of the Annual Projections approved by Borrower’s Board of Directors shall be delivered to Collateral Agent and the Lenders no later than seven (7) days after such approval); (iv) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt provided that, for the avoidance of doubt, such statements, reports or notices shall not include materials provided by Borrower only to Borrower’s Board of Directors; (v) in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission, (vi) prompt notice of (A) any material change in the composition of the Intellectual Property, (B) notice of the registration of any copyright, including any subsequent ownership right of Borrower in or to any copyright, patent or trademark, and (C) prompt notice of Borrower’s knowledge of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property; (vii) as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each deposit account or securities account maintained by Borrower, or any of Borrower’s Subsidiaries, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and (viii) other financial information as reasonably requested by Collateral Agent or any Lender. Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address.

 

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(b) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.

(c) Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Borrower shall allow, at the sole cost of Borrower, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (except while an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral. Such audits shall be conducted no more often than twice every year unless (and more frequently if) an Event of Default has occurred and is continuing.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and their Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify Collateral Agent of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000) individually or in the aggregate in any calendar year.

6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, and each of Borrower’s Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

6.5 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Collateral Agent may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent. All property policies shall have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent as additional insured. All policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall endeavor to give Collateral Agent at least thirty (30) days notice before canceling, amending, or declining to renew its policy. At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000) with respect to any loss, but not exceeding Two Hundred Fifty Thousand Dollars ($250,000), in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent, on behalf of the Lenders, has been granted a first priority security interest (subject to Permitted Liens), and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Collateral Agent, Collateral Agent may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent deems prudent.

6.6 Operating Accounts.

(a) Maintain all of Borrower’s and each of Borrower’s Subsidiaries’ primary operating and investment accounts with SVB or its Affiliates in accounts which are subject to a Control Agreement in favor of Collateral Agent (as necessary to perfect Collateral Agent’s Lien in such accounts).

 

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(b) Borrower and each of Borrower’s Subsidiaries shall provide Collateral Agent five (5) days’ prior written notice before establishing any Collateral Account at or with any Person other than SVB. In addition, for each Collateral Account that Borrower or any of Borrower’s Subsidiaries at any time maintains, Borrower or any such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder within 10 days after establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s or any of Borrower’s Subsidiaries’ employees and identified to Collateral Agent by Borrower as such.

(c) Borrower shall not, nor shall Borrower’s Subsidiaries, maintain any Collateral Accounts except Collateral Accounts located in the United States in accordance with Sections 6.6(a) and (b).

6.7 Protection of Intellectual Property Rights. Borrower shall use commercially reasonable efforts to: (a) protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s written consent.

6.8 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Collateral Agent and Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.

6.9 Notices of Litigation and Default. Borrower will give prompt written notice to Collateral Agent of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of Borrower’s Subsidiaries which could reasonably be expected to result in damages or costs to Borrower or any of Borrower’s Subsidiaries of One Hundred Fifty Thousand Dollars ($150,000) or more or which could reasonably be expected to have a Material Adverse Change. Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

6.10 Landlord Waivers; Bailee Waivers. In the event that Borrower, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2 (and subject to the thresholds set forth therein), then Borrower will first receive the written consent of Collateral Agent and such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.

6.11 Creation/Acquisition of Subsidiaries. In the event Borrower or any of Borrower’s Subsidiaries creates or acquires any Subsidiary, Borrower or such Subsidiary shall promptly notify Collateral Agent of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower, or such Subsidiary, as applicable, shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the stock, units or other evidence of ownership of each Subsidiary.

 

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6.12 Further Assurances.

(a) Execute any further instruments and take further action as Collateral Agent reasonably requests to perfect or continue Collateral Agent’s and each Lender’s Lien in the Collateral or to effect the purposes of this Agreement.

(b) Deliver to Collateral Agent, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise on the operations of Borrower or any of Borrower’s Subsidiaries.

6.13 Right to Invest. Borrower shall grant to each Lender a right to invest in Borrower’s future private equity rounds on the terms and conditions set forth in the Investment Letter.

 

7. NEGATIVE COVENANTS

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:

7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and Permitted Investments; (d) of non-exclusive licenses for the use of the Intellectual Property of Borrower, or any of Borrower’s Subsidiaries, in the ordinary course of business in connection with joint ventures and corporate collaborations; (e) licenses for the use of the Intellectual Property of Borrower, or any of Borrower’s Subsidiaries, that are approved by Borrower’s Board of Directors and which could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discrete geographical areas outside of the United States; or (f) other Transfers not set forth above, not to exceed Fifty Thousand Dollars ($50,000) in the aggregate in any fiscal year; provided that Borrower may not make Transfers in addition to those specifically enumerated above except to the extent the same are contemplated in the Annual Projections.

7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless a replacement for such Key Person is approved by Borrower’s Board of Directors and engaged by Borrower within ninety (90) days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to venture capital investors so long as Borrower identifies to Collateral Agent the venture capital investors prior to the closing of the transaction). Borrower shall not, without at least five (5) days’ prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred and Fifty Thousand Dollars ($250,000) of Collateral); (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. Notwithstanding the foregoing, a Subsidiary may merge or consolidate into another Subsidiary (provided such surviving Subsidiary is a “co-Borrower” hereunder or has provided a secured guaranty of Borrower’s Obligations hereunder) or into Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.

 

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7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s or any Lender’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent or any Lender) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any of Borrower’s Subsidiaries from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do not exceed Three Hundred Fifty Thousand Dollars ($350,000) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for (a) transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person or (b) equity investments by Borrower’s investors (including in the form of convertible Subordinated Debt).

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.

7.10 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and its principals, which information includes the name and address of Borrower and their principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws. Borrower shall not, nor shall Borrower permit any Subsidiary or Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Borrower shall immediately notify Collateral Agent if Borrower has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.

 

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Borrower shall not, nor shall Borrower permit any Subsidiary or Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

8. EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “ Event of Default ”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.9 (Notices of Default) or 6.11 (Creation/Acquisition of Subsidiaries) or Borrower violates any covenant in Section 7; or

(b) Borrower, or any of Borrower’s Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents (other than the Warrants), and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;

8.3 Investor Abandonment. Any Lender determines in its good faith judgment, that (i) Borrower will not be able to satisfy the Obligations as they become due and payable, and (ii) none of Borrower’s principal investors (defined as each investor that has designated a member of Borrower’s Board of Directors) intends to fund such amounts as may be necessary to enable Borrower to satisfy the Obligations as they become due and payable;

8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under control of Borrower (including a Subsidiary) on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which Borrower maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and

(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any part of its business;

 

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8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that could have a Material Adverse Change;

8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement; or

8.10 Governmental Approvals. Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a Material Adverse Change; or

8.11 Lien Priority. Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens.

 

9. RIGHTS AND REMEDIES

9.1 Rights and Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of any Lender shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders).

(b) Without limiting the rights of the Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

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(ii) apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or

(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.

(c) Without limiting the rights of the Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

(i) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;

(ii) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates. Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;

(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;

(iv) place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(v) demand and receive possession of Borrower’s Books;

(vi) appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower; and

(vii) Subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of

 

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Collateral Agent or a third party as the Code or any applicable law permits. Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as Borrower’s attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral. Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of Borrower of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents. Any balance remaining shall be delivered to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category. Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise. Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent. If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims. To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.

9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of

 

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the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Collateral Agent’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent and then is only effective for the specific instance and purpose for which it is given. Collateral Agent’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Collateral Agent has all rights and remedies provided under the Code, any applicable law, by law, or in equity. Collateral Agent’s exercise of one right or remedy is not an election, and Collateral Agent’s waiver of any Event of Default is not a continuing waiver. Collateral Agent’s delay in exercising any remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral Agent on which Borrower is liable.

 

10. NOTICES

All notices, consents, requests, approvals, demands, or other communication (collectively, “ Communication ”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Any of Collateral Agent, Lender or Borrower may change its mailing address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

If to Borrower:   

ACHAOGEN, INC.

7000 Shoreline Ct., Suite 371

S. San Francisco, California 94080

Attn: Chief Operating Officer

Tel:  (650) 260-3133

with a copy to:   

Latham &Watkins LLP

140 Scott Drive

Menlo Park California 94025

Attn: Mark Roeder

Fax:  (650) 463-2600

   and
  

Latham &Watkins LLP

505 Montgomery Street, Suite 2000

San Francisco, California 94111

Attn: Haim Zaltzman

Fax:  (415) 395-8095

If to Collateral Agent:   

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: General Counsel

Fax: (703) 519-5225

 

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with a copy to   

SILICON VALLEY BANK

555 Mission Street, Suite 900

San Francisco, CA 94105

Attn:  James Taylor

Fax:  (415) 615-0076

with a copy to:   

DLA Piper LLP (US)

4365 Executive Drive, Suite 1100

San Diego, California 92121-2133

Attn: Troy Zander

Fax: (858) 638-5086

 

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Collateral Agent and each Lender each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Collateral Agent or Lenders from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Collateral Agent or Lenders. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR ANY PARTY TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court

 

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under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

12. GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6). The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “ Lender Transfer ”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents; provided , however , that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “ Approved Lender ”). Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) a Lender’s own financing or securitization transactions and upon the occurrence of a default, Event of Default or similar occurrence with respect to such financing or securitization transaction shall be permitted to any Person if such person is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent, without Borrower’s consent.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “ Indemnified Person ”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “ Claims ”) asserted by any other party in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with; related to; following; or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct. Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross negligence or willful misconduct.

12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.

 

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12.4 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.5 Correction of Loan Documents. Collateral Agent may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties .

12.6 Amendments in Writing; Integration. (a) No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that

(i) no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;

(ii) no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;

(iii) no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (D) release all or substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;

(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.

(b) Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.

(c) This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

 

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12.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

12.8 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

12.9 Confidentiality. In handling any confidential information of Borrower, the Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, Event of Default or similar occurrence with respect to such financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information. Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so long as Collateral Agent does not disclose Borrower’s identity or the identity of any person associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.

12.10 Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

13. COLLATERAL AGENT

13.1 Appointment and Authorization of Collateral Agent. Each Lender hereby irrevocably appoints, designates and authorizes Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, Collateral Agent shall not have any duties or responsibilities, except those expressly set forth

 

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herein, nor shall Collateral Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

13.2 Delegation of Duties. Collateral Agent may execute any of its duties under this Agreement or any other Loan Document by or through its, or its Affiliates, agents, employees or attorneys-in-fact and shall be entitled to obtain and rely upon the advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

13.3 Liability of Collateral Agent. Except as otherwise provided herein, no Collateral Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by Borrower or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Collateral Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Collateral Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any Affiliate thereof.

13.4 Reliance by Collateral Agent. Collateral Agent may rely, and shall be fully protected in acting, or refraining to act, upon, any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order, bond or other paper or document that it has no reason to believe to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies and telexes, to have been sent by the proper party or parties. In the absence of its gross negligence or willful misconduct, Collateral Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to Collateral Agent and conforming to the requirements of the Loan Agreement or any of the other Loan Documents. Collateral Agent may consult with counsel, and any opinion or legal advice of such counsel shall be full and complete authorization and protection in respect of any action taken, not taken or suffered by Collateral Agent hereunder or under any Loan Documents in accordance therewith. Collateral Agent shall have the right at any time to seek instructions concerning the administration of the Collateral from any court of competent jurisdiction. Collateral Agent shall not be under any obligation to exercise any of the rights or powers granted to Collateral Agent by this Agreement and the other Loan Documents at the request or direction of Lenders unless Collateral Agent shall have been provided by Lenders with adequate security and indemnity against the costs, expenses and liabilities that may be incurred by it in compliance with such request or direction.

13.5 Notice of Default. Unless any officer of Collateral Agent acting in its capacity as an officer of Collateral Agent on Borrower’s account has actual knowledge thereof or have been notified in writing thereof by Lenders, Collateral Agent shall not be required to ascertain or inquire as to the existence or possible existence of any Event of Default. Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any default and/or Event of Default unless Collateral Agent shall have received written notice from a Lender or Borrower, describing such default or Event of Default. Collateral Agent will notify the Lenders of its receipt of any such notice. Collateral Agent shall take such action with respect to an Event of Default as may be determined by Lenders in accordance with the terms of Section 9(a); provided, however, that while an Event of Default has occurred and is continuing, Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as Collateral Agent shall deem advisable or in the best interest of the Lenders, including without limitation, satisfaction of other security interests, liens or encumbrances on the Collateral not permitted under the Loan Documents, payment of taxes on behalf of Borrower, payments to

 

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landlords, warehouseman, bailees and other persons in possession of the Collateral and other actions to protect and safeguard the Collateral, and actions with respect to insurance claims for casualty events affecting Borrower and/or the Collateral.

13.6 Credit Decision; Disclosure of Information by Collateral Agent. Each Lender acknowledges that no Collateral Agent-Related Person has made any representation or warranty to it, and that no act by Collateral Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower, or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Collateral Agent-Related Person to any Lender as to any matter, including whether Collateral Agent-Related Persons have disclosed material information in their possession. Each Lender represents to Collateral Agent that it has, independently and without reliance upon any Collateral Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower, or any of Borrower’s Subsidiaries, and all applicable bank or other regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Collateral Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by Collateral Agent herein, Collateral Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower or any of its Affiliates which may come into the possession of any Collateral Agent-Related Person.

13.7 Indemnification of Collateral Agent. Each Lender severally, but not jointly, agrees (a) to indemnify and hold Collateral Agent (and each Collateral Agent-Related Person) harmless from and against and (b) promptly upon receipt by each Lender of Collateral Agent’s statement, to reimburse Collateral Agent, according to such Lender’s Pro Rata Share, to the extent Collateral Agent shall not otherwise have been reimbursed by Borrower on account of and for, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, the fees and disbursements of counsel and other advisors) or disbursements of any kind of nature whatsoever with respect to Collateral Agent’s performance of its duties under this Agreement and the other Loan Documents; provided, however, that no Lender shall be liable for the payment to Collateral Agent of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from Collateral Agent’s gross negligence or willful misconduct. Such reimbursement shall not in any respect release Borrower from any liability or obligation. If any indemnity furnished to Collateral Agent for any purpose shall, in the opinion of Collateral Agent, be insufficient or become impaired, Collateral Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. Collateral Agent’s right to indemnification shall survive termination of this Agreement.

13.8 Collateral Agent in its Individual Capacity. With respect to its Credit Extensions, Oxford shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not Collateral Agent, and the terms “Lender” and “Lenders” include Oxford in its individual capacity.

13.9 Successor Collateral Agent. Collateral Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to Lenders and Borrower; provided, however, that the retiring Collateral Agent shall continue to serve until a successor Collateral Agent shall have been selected and approved pursuant to this Section 13.19. Upon any such notice, Collateral Agent shall have the right to appoint, subject to the consent of Lenders, a successor Collateral Agent. Without limitation of the foregoing, if Collateral Agent becomes insolvent or commits any act or omission constituting gross negligence or willful misconduct of its duties as Collateral Agent hereunder, then the Lenders shall have the right to replace the Collateral Agent. Upon the acceptance of its appointment as successor Collateral Agent hereunder, the Person acting as such successor Collateral Agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the respective term “Collateral Agent” means such successor Collateral Agent and the retiring Collateral Agent’s appointment, powers and duties in such capacities

 

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shall be terminated without any other further act or deed on its behalf. After any retiring Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of this Article 13 and Section 12.2 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement.

13.10 Proofs of Claim. In case of any Insolvency Proceeding relative to Borrower, each Lender shall promptly file a claim or claims, on the form required in such proceeding, for the full outstanding amount of such Lender’s claim, and shall use its best efforts to cause said claim or claims to be approved and each of the Lenders hereby irrevocably agrees that, to the extent that it fails timely to do so, any other Lender may in the name of the first Lender, or otherwise, prove up (but not vote) any and all claims of the first Lender relating to the first Lender’s claim.

13.11 Collateral and Guaranty Matters. Each Lender irrevocably authorizes Collateral Agent, at its option and in its discretion, to release any guarantor and any Lien on any Collateral granted to or held by Collateral Agent under any Loan Document (i) upon the date that all Obligations (other than inchoate indemnity obligations) due hereunder have been fully and indefeasibly paid in full and no Term Loan Commitments or other obligations of any Lender to provide funds to Borrower under this Agreement remain outstanding, (ii) that is transferred or to be transferred as part of or in connection with any Transfer permitted hereunder or under any other Loan Document, or (iii) as approved in accordance with Section 12.6. Upon request by Collateral Agent at any time, all Lenders will confirm in writing Collateral Agent’s authority to release its interest in particular types or items of Property, pursuant to this Section 13.11.

13.12 Silicon Valley Bank as Agent . Collateral Agent hereby appoints Silicon Valley Bank (“ SVB ”) as its agent (and SVB hereby accepts such appointment) for the purpose of perfecting Collateral Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected by possession or control, including without limitation, all deposit accounts maintained at SVB.

13.13 Cooperation of Borrower. If necessary in connection with any Lender assignment permitted under Section 12.1 and upon Collateral Agent’s request, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions during business hours and upon reasonable prior notice (which meetings shall be conducted no more often than twice every twelve months unless an Event of Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each Lender to disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’s possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.

 

14. DEFINITIONS

14.1 Definitions. As used in this Agreement, the following terms have the following meanings:

Account ” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

Affiliate ” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

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Agreement ” is defined in the preamble hereof.

Amortization Date ” is September 1, 2012.

Annual Projections ” is defined in Section 6.2(a).

Anti-Terrorism Laws ” means any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

Approved Fund ” means any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

Approved Lender ” has the meaning given it in Section 12.1.

Basic Rate ” means with respect to a Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the greater of (i) eight percent (8.00%) and (ii) the sum of (a) the three (3) month U.S. LIBOR rate reported in the Wall Street Journal three (3) Business Days prior to the Funding Date of such Term Loan, plus (b) seven and three quarters percent (7.75%).

Blocked Person ” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

Borrower ” is defined in the preamble hereof.

Borrower’s Books ” are Borrower’s books and records including ledgers, federal, and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

Business Day ” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.

Cash Equivalents ” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct purchase by Borrower, co-borrower, or any subsidiary of Borrower of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower, co-borrower, or any subsidiary of Borrower shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of Borrower’s Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security.

 

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Claims ” are defined in Section 12.2.

Code ” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

Collateral ” is any and all properties, rights and assets of Borrower described on Exhibit A and any and all other properties, rights and assets of Borrower granted by Borrower to Collateral Agent, for the ratable benefit of the Lenders, and each Lender, or arising under the Code or other applicable law, now, or in the future.

Collateral Account ” is any Deposit Account, Securities Account, or Commodity Account.

Collateral Agent ” means, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.

Collateral Agent-Related Person ” means the Collateral Agent, together with its Affiliates, and the officers, directors, employees, agents, advisors, auditors and attorneys-in-fact of such Persons; provided, however, that no Collateral Agent-Related Person shall be an Affiliate of Borrower.

Commitment Percentage ” is set forth in Schedule 1.1 , as amended from time to time.

Commodity Account ” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

Communication ” is defined in Section 10.

Compliance Certificate ” is that certain certificate in the form attached hereto as Exhibit C .

Contingent Obligation ” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

Control Agreement ” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.

 

27


Credit Extension ” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

Default Rate ” is defined in Section 2.3(b).

Deposit Account ” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

Designated Deposit Account ” is Borrower’s deposit account, account number 3300374224, maintained with Silicon Valley Bank.

Dollars ,” “ dollars ” and “ $ ” each mean lawful money of the United States.

Effective Date ” is defined in the preamble of this Agreement.

Eligible Assignee ” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.

Equipment ” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

ERISA ” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.

Event of Default ” is defined in Section 8.

Final Payment ” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of all or any portion of a Term Loan pursuant to Section 2.2(c) or (d), equal to the principal amount of the portion of such Term Loan being repaid or prepaid multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.

Final Payment Percentage ” is eight and one quarter percent (8.25%).

 

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Funding Date ” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

GAAP ” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

General Intangibles ” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

Governmental Approval ” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

Governmental Authority ” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

IND/Data Event ” means the earlier of (x) the filing by Borrower of an Investigational New Drug (“IND”) Application with the Food and Drug Administration on either ACHN-978 or ACHN-975; or (y) positive data from Phase II cUTI/AP [complicated urinary tract infection and acute pyelonephritis] trials for ACHN-490.

Indebtedness ” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

Indemnified Person ” is defined in Section 12.2.

Insolvency Proceeding ” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

Intellectual Property ” includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service marks, mask works, rights of use of any name, domain names, or any other similar rights, any applications therefor, whether registered or not, and the goodwill of the business of any Person connected with and symbolized thereby, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.

Inventory ” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

29


Investment ” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.

Investment Letter ” is that certain letter agreement, dated as of the Effective Date, in form and content reasonably acceptable to Collateral agent and the Lenders, pursuant to which Borrower grants to Lenders or their Affiliates a right (but not an obligation) to invest up to Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate, in any of Borrower’s future rounds of private equity financing on the terms, conditions and pricing set forth therein.

Key Person ” means each of Borrower’s (i) Chief Executive Officer, who is Kevin Judice as of the Effective Date, (ii) Chief Operating Officer, who is John Doyle as of the Effective Date and (iii) Chief Medical Officer, who is Kenneth Hillan as of the Effective Date.

Lender ” is any one of the Lenders.

Lenders ” shall mean the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.

Lenders’ Expenses ” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or the Lenders in connection with the Loan Documents.

Lien ” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

Loan Documents ” are, collectively, this Agreement, the Warrants, the Perfection Certificate, each Compliance Certificate, the Post Closing Letter, the Investment Letter, any subordination agreements, any note, or notes or guaranties executed by Borrower, and any other present or future agreement entered into by Borrower for the benefit of Lenders and Collateral Agent in connection with this Agreement, all as amended, restated, or otherwise modified.

Loan Payment/Advance Request Form ” is that certain form attached hereto as Exhibit B-2 .

Material Adverse Change ” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

Maturity Date ” is the date which is twenty-nine (29) months after the Amortization Date.

Obligations ” are Borrower’s obligation to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the Lenders now or later, in connection with; related to; following; or arising from, out of or under, this Agreement or, the other Loan Documents (other than the Warrants), or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents (other than the Warrants).

OFAC ” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

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OFAC Lists ” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

Operating Documents ” are, for any Person, such Person’s formation documents, as certified by the Secretary of State of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

Payment/Advance Form ” is that certain form attached hereto as Exhibit B-1 .

Payment Date ” is the first (1 st ) calendar day of each calendar month.

Perfection Certificate ” is defined in Section 5.1.

Permitted Indebtedness ” is:

(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;

(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

(c) Subordinated Debt;

(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

(e) Indebtedness secured by liens specified in clause (c) of the definition of “Permitted Liens”;

(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business; and

(g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may be.

Permitted Investments ” are:

(a) Investments shown on the Perfection Certificate and existing on the Effective Date;

(b) Investments in cash and Cash Equivalents;

(c) Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved by the board of directors of Borrower or the audit committee of the board of directors of Borrower and provided to the Lenders; and

(d) (i) Investments of Subsidiaries in or to other Subsidiaries or Borrower, (ii) Investments by Borrower in Subsidiaries and (iii) Investments in connection with joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the licensing of Intellectual Property permitted under Section 7.1, the development of technology or the providing of technical support; not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate for (i), (ii) and (iii), above, in any fiscal year.

 

31


Permitted Liens ” are:

(d) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;

(e) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended , and the Treasury Regulations adopted thereunder;

(f) purchase money Liens (i) on Equipment or other assets subject to capital leases acquired or held by Borrower incurred for financing the acquisition of the Equipment or such assets subject to capital leases, or (ii) on existing Equipment or such assets subject to capital leases when acquired, in each case if the Lien is confined to the property and improvements and the proceeds of the Equipment or other assets subject to capital leases; provided that such Liens under this clause (c) (A) may have priority over liens granted to Collateral Agent hereunder to the extent provided under the Code so long as the Indebtedness secured by the Liens remain outstanding and (B) may secure Indebtedness of no more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate principal amount outstanding at any one time;

(g) statutory Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties, provided they have no priority over any of Collateral Agent’s or any Lender’s Lien and the aggregate amount of the obligations secured by such Liens does not any time exceed Twenty-Five Thousand Dollars ($25,000);

(h) leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or Intellectual Property) granted in the ordinary course of Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent a security interest;

(i) banker’s liens, rights of setoff and Liens in favor of financial institutions incurred made in the ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such institutions to secure solely payment of fees and similar costs and expenses and provided such accounts are maintained in compliance with Section 6.6(b) hereof;

(j) Liens to secure payment of workers’ compensation, employment insurance, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(k) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;

(l) licenses of Intellectual Property permitted by Section 7.1 hereof; and

(m) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) and (c) above, but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness may not increase.

Person ” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

Post Closing Letter ” means that certain Post Closing Letter dated as of the Effective Date by and among Collateral Agent and Borrower.

 

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Prepayment Fee ” means with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

(i) for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Funding Date of such Term Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid; and

(ii) for a prepayment made thereafter and prior to the Maturity Date, no Prepayment Fee shall be applicable.

Pro Rata Share ” means, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.

Registered Organization ” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made

Required Lenders ” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “ Original Lender ”) have not assigned or transferred any of their interests in their respective Term Loans, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loans, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loans, Lenders holding, sixty-six percent (66%) or more of the aggregate outstanding principal balance of the Term Loans, plus , in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its respective Term Loan, (B) each assignee of an Original Lender provided such assignee was assigned or transferred and continues to hold one hundred percent (100%) of the assigning Original Lender’s interest in the Term Loans and (C) any Person or party providing financing to an Original Lender or formed to undertake a securitization transaction with respect to an Original Lender and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction (in each case in respect of clauses (A), (B) and (C) of this clause (ii), whether or not such Lender is included within the Lenders holding sixty-six percent (66%) of the Terms Loans). For purposes of this definition only, a Lender shall be deemed to include itself, and any Lender that is an Affiliate or Approved Fund of such Lender.

Requirement of Law ” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

Responsible Officer ” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.

Second Draw Period ” means the period commencing on the date of the achievement of the IND/Data Event and ending on the earlier of (i) June 30, 2012 and (ii) the occurrence of an Event of Default (unless waived by the Lenders in their sole and reasonable discretion); provided, however, that the Second Draw Period shall not commence if on the date of the occurrence of the IND/Data Event an Event of Default has occurred and is continuing.

Secured Promissory Note ” is defined in Section 2.4.

Secured Promissory Note Record ” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.

Securities Account ” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

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Subordinated Debt ” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between Collateral Agent, Borrower, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.

Subsidiary ” means, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or one or more of Affiliates of such Person.

Term Loan ” is defined in Section 2.2(a)(ii) hereof.

Term A Loan ” is defined in Section 2.2(a)(i) hereof.

Term A Loan (1) ” is defined in Section 2.2(a)(i) hereof.

Term A Loan (2) ” is defined in Section 2.2(a)(i) hereof.

Term B Fee ” is defined in Section 2.5(a) hereof.

Term B Loan ” is defined in Section 2.2(a)(ii) hereof.

Term Loan Commitment ” means, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1.1 . Term Loan Commitments ” means the aggregate amount of such commitments of all Lenders.

Transfer ” is defined in Section 7.1.

Warrants ” are those certain Warrants to Purchase Stock dated as of the Effective Date, or any date thereafter, issued by Borrower in favor of each Lender.

[ Balance of Page Intentionally Left Blank ]

 

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

BORROWER:
ACHAOGEN, INC.
By  

/s/ John C. Doyle

Name:  

John C. Doyle, Jr.

Title:  

Chief Operating Officer

COLLATERAL AGENT AND LENDER:
OXFORD FINANCE LLC
By  

/s/ T.A. Lex

Name:  

T.A. Lex

Title:  

COO

LENDER:
SILICON VALLEY BANK
By  

/s/ James Taylor

Name:  

James Taylor

Title:  

Relationship Manager

[ Signature Page to Loan and Security Agreement ]


SCHEDULE 1.1

Lenders and Commitments

Term A Loan (1)

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 2,333,333.32         58.333333

SILICON VALLEY BANK

   $ 1,666,666.68         41.666667
  

 

 

    

 

 

 

TOTAL

   $ 4,000,000.00         100.00
  

 

 

    

 

 

 

Term A Loan (2)

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 2,333,333.32         58.333333

SILICON VALLEY BANK

   $ 1,666,666.68         41.666667
  

 

 

    

 

 

 

TOTAL

   $ 4,000,000.00         100.00
  

 

 

    

 

 

 

Aggregate Term A Loans

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 4,666,666.64         58.333333

SILICON VALLEY BANK

   $ 3,333,333.36         41.666667
  

 

 

    

 

 

 

TOTAL

   $ 8,000,000.00         100.00
  

 

 

    

 

 

 

Term B Loans

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 2,333,333.36         58.333334

SILICON VALLEY BANK

   $ 1,666,666.64         41.666667
  

 

 

    

 

 

 

TOTAL

   $ 4,000,000.00         100.00
  

 

 

    

 

 

 

Aggregate (all Term Loans)

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 7,000,000.00         58.333333

SILICON VALLEY BANK

   $ 5,000,000.00         41.666667
  

 

 

    

 

 

 

TOTAL

   $ 12,000,000.00         100.00
  

 

 

    

 

 

 


EXHIBIT A

Description of Collateral

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired: (i) any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing (collectively “ Intellectual Property ”); provided, however, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing; and (ii) more than 65% of the total combined voting power of all classes of stock entitled to vote the shares of capital stock (the “Shares”) of any Subsidiary of Borrower not incorporated or organized under the laws of one of the States or jurisdictions of the United States (in the event that Borrower demonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than sixty five percent (65%) of the Shares creates a present and existing adverse tax consequence to Borrower under the U.S. Internal Revenue Code).

Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and Lenders, Borrower has agreed not to encumber any of its Intellectual Property.


EXHIBIT B-1

Loan Payment/Advance Request Form

[See attached]


DISBURSEMENT LETTER

The undersigned, being the duly elected and acting of ACHAOGEN, INC., a Delaware corporation with offices located at 7000 Shoreline Ct., Suite 371, South San Francisco, California 94080 (“ Borrower ”), does hereby certify to OXFORD FINANCE LLC , (“ Oxford ” and “ Lender ”), as collateral agent (the “ Collateral Agent ”) in connection with that certain Loan and Security Agreement dated as of November 1, 2011, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “ Loan Agreement ”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:

1. The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

2. No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.

3. Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.

4. All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.

5. No Material Adverse Change has occurred.

6. The undersigned is a Responsible Officer.

7. The proceeds of the Term A Loan (1) shall be disbursed as follows:

 

Disbursement from Oxford:

  

Loan Amount:

   $ 2,333,333.32   

Plus:

  

—Deposit Received

   $ 20,000.00   

Less:

  

—Lenders’ Legal Fees

   ($ 54,424.15 )* 

Net Proceeds due from Oxford:

   $ 2,298,909.17   

Disbursement from SVB:

  

Loan Amount

   $ 1,666,666.68   

Net Proceeds due from SVB:

   $ 1,666,666.68   

TOTAL TERM A LOAN (1) NET PROCEEDS FROM LENDERS

   $ 3,965,575.85   

[ Balance of Page Intentionally Left Blank ]

 

* Legal fees and costs are through the Effective Date. Post-closing legal fees and costs, payable after the Effective Date, to be invoiced and paid post-closing.


10. The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows:

 

Account Name:    ACHAOGEN, INC.  
Bank Name:    Silicon Valley Bank  
Bank Address:   

 

  .
Account Number:   

 

  .
ABA Number:   

 

  .

[ Balance of Page Intentionally Left Blank ]


Dated as of the date first set forth above.

 

BORROWER:
ACHAOGEN, INC.
By  

 

Name:  

 

Title:  

 

COLLATERAL AGENT AND LENDER:
OXFORD FINANCE LLC
By  

 

Name:  

 

Title:  

 

[ Signature Page to Loan Payment/Advance Request Form; Disbursement Letter ]


EXHIBIT B-2

Loan Payment/Advance Request Form

D EADLINE FOR SAME DAY PROCESSING IS N OON P ACIFIC T IME *

 

Fax To:

   Date:  

 

 

 

L OAN  P AYMENT :

         

ACHAOGEN, INC.

From Account #

 

 

           To Account #  

 

 
  (Deposit Account #)      (Loan Account #)  

Principal $

 

 

           and/or Interest $  

 

 

Authorized Signature:

 

 

          Phone Number:  

 

 

Print Name/Title:

 

 

     
       

 

L OAN A DVANCE :

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

From Account #

 

 

           To Account #  

 

 
  (Loan Account #)      (Deposit Account #)  

Amount of Advance $

 

 

       

All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date:

 

Authorized Signature:

 

 

    Phone Number:  

 

 

Print Name/Title:

 

 

       
         

 

O UTGOING W IRE R EQUEST :

Complete only if all or a portion of funds from the loan advance above is to be wired.

Deadline for same day processing is noon, Pacific Time

Beneficiary Name:

 

 

    Amount of Wire: $  

 

 

Beneficiary Bank:

 

 

    Account Number:  

 

 

City and State:

 

 

       

 

Beneficiary Bank Transit (ABA) #:

 

 

    Beneficiary Bank Code (Swift, Sort, Chip, etc.):  

 

 
      (For International Wire Only)    

Intermediary Bank:

 

 

    Transit (ABA) #:  

 

 

For Further Credit to:

 

 

 

Special Instruction:

 

 

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).

 

Authorized Signature:

 

 

    2 nd  Signature (if required):  

 

 

Print Name/Title:

 

 

    Print Name/Title:  

 

 

TELEPHONE #:                                  TELEPHONE #:                     ]


EXHIBIT C

Compliance Certificate

 

TO:   

OXFORD FINANCE LLC, as Collateral Agent and Lender

SILICON VALLEY BANK, as Lender

FROM:    ACHAOGEN, INC.

The undersigned authorized officer (“ Officer ”) of ACHAOGEN, INC. (“ Borrower ”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders (the “ Agreement ”),

(i) Borrower is in complete compliance for the period ending                      with all required covenants except as noted below;

(ii) There are no Events of Default, except as noted below;

(iii) Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

(iv) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement;

(v) No Liens have been levied or claims made against Borrower or any of Borrower’s Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders.

Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under Complies column.

 

    

Reporting Covenant

  

Requirement

       

Complies

1)    Financial statements    Monthly within 30 days       Yes    No    N/A
2)    Annual (CPA Audited) statements    Within 180 days after Fiscal Year End       Yes    No    N/A
3)    Annual Financial Projections/Budget (prepared on a monthly basis)    Annually (w/n 45 days of FYE) and when revised       Yes    No    N/A


4)    A/R & A/P agings    If applicable       Yes    No    N/A
5)    8-K, 10-K and 10-Q Filings    If applicable       Yes    No    N/A
6)    Compliance Certificate    Monthly within 30 days       Yes    No    N/A
7)    IP Report    when required       Yes    No    N/A
8)    Total amount of Borrower’s cash and cash equivalents at the last day of the measurement period         $                        

 

  

Deposit and Securities

Accounts

   (Please list all accounts; attach separate sheet if additional space needed)
    

Bank

  

Account Number

  

New Account?

  

Acct Control

Agmt in place?

1)          Yes    No    Yes    No
2)          Yes    No    Yes    No
3)          Yes    No    Yes    No
4)          Yes    No    Yes    No
5)          Yes    No    Yes    No
6)          Yes    No    Yes    No
   Financial Covenants    Requirement    Actual       Compliance
   none               
   Other Matters               
   Have there been any changes in management since the last Compliance Certificate?    Yes    No   
   Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Agreement?    Yes    No   
   Have there been any new or pending claims or causes of action against Borrower that involve more than $150,000?    Yes    No   
   Exceptions               
  

 

Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional space needed.)

  

 

 

     

 

 

     

 

 

     

 

 


         LENDERS USE           
  

 

      ONLY           
ACHAOGEN, INC.    DATE                 
By:          Received by:   

             

     Verified by:       

             

Name:                    
Title:          Date:         Date:         
           

             

       

             

         Compliance Status      Yes            No


EXHIBIT D

Secured Promissory Note

[See attached]


SECURED PROMISSORY NOTE

( Term A Loan [(1)][(2)] )

 

$[2,333,333.32][1,666,666.68]    Dated: November 1, 2011

FOR VALUE RECEIVED, the undersigned, ACHAOGEN, INC., a Delaware corporation with offices located at 7000 Shoreline Ct., Suite 371, South San Francisco, California 94080 (“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][SILICON VALLEY BANK] (“ Lender ”) the principal amount of [TWO MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE HUNDRED THIRTY THREE DOLLARS AND 32/100 ($2,333,333.32)][ONE MILLION SIX HUNDRED SIXTY SIX THOUSAND SIX HUNDRED SIXTY SIX DOLLARS AND 68/100 ($1,666,666.68)] or such lesser amount as shall equal the outstanding principal balance of the Term A Loan [(1)][(2)] made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term A Loan [(1)][(2)], at the rates and in accordance with the terms of the Loan and Security Agreement dated November 1, 2011 by and among Borrower, Oxford Finance LLC, as Collateral Agent, and the Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”). If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

Borrower agrees to pay any initial partial monthly interest payment from the date the Term A Loan [(1)][(2)] is made to Borrower under this Secured Promissory Note (this “ Note ”) to the first Payment Date (“ Interim Interest ”) on the first Payment Date.

Principal, interest and all other amounts due with respect to the Term A Loan [(1)][(2)], are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Note. The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.

The Loan Agreement, among other things, (a) provides for the making of a secured Term A Loan [(1)][(2)] by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of the Term A Loan [(1)][(2)], interest on the Term A Loan [(1)][(2)] and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement.

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.

This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of California.

The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.


[ Balance of Page Intentionally Left Blank ]


IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.

 

BORROWER:
ACHAOGEN, INC.
By  

 

Name:  

 

Title:  

 


LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

Date

   Principal
Amount
   Interest Rate    Scheduled
Payment Amount
   Notation By
           
           
           
           
           


SECURED PROMISSORY NOTE

(Term B Loan )

 

$[2,333,333.36][$1,666,666.64]    Dated: November 1, 2011

FOR VALUE RECEIVED, the undersigned, ACHAOGEN, INC., a Delaware corporation with offices located at 7000 Shoreline Ct., Suite 371, South San Francisco, California 94080 (“Borrower”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][SILICON VALLEY BANK] (“ Lender ”) the principal amount of [TWO MILLION THREE HUNDRED THIRTY THREE THOUSAND THREE HUNDRED THIRTY THREE DOLLARS AND 36/100 ($2,333,333.36)][ONE MILLION SIX HUNDRED SIXTY SIX THOUSAND SIX HUNDRED SIXTY SIX DOLLARS AND 64/100 ($1,666,666.64)] or such lesser amount as shall equal the outstanding principal balance of the Term B Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term B Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated November 1, 2011 by and among Borrower, Oxford Finance LLC, as Collateral Agent, and the Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”). If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

Borrower agrees to pay any initial partial monthly interest payment from the date the Term B Loan is made to Borrower under this Secured Promissory Note (this “ Note ”) to the first Payment Date (“ Interim Interest ”) on the first Payment Date.

Principal, interest and all other amounts due with respect to the Term B Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Note. The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.

The Loan Agreement, among other things, (a) provides for the making of a secured Term B Loan by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of the Term B Loan, interest on the Term B Loan and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement.

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.

This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of California.

The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.


[ Balance of Page Intentionally Left Blank ]


IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.

 

BORROWER:
ACHAOGEN, INC.
By  

 

Name:  

 

Title:  

 


LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

Date

   Principal
Amount
   Interest Rate    Scheduled
Payment Amount
   Notation By
           
           
           
           
           


CORPORATE BORROWING CERTIFICATE

 

B ORROWER :    ACHAOGEN, INC.    D ATE : September     , 2011
L ENDERS    OXFORD FINANCE LLC, as Collateral Agent and Lender   
   SILICON VALLEY BANK, as Lender   

I hereby certify as follows, as of the date set forth above:

1. I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.

3. Attached hereto as Exhibit A and Exhibit B , respectively, are true, correct and complete copies of (i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws. Neither such Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.

4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Lenders may rely on them until each Lender receives written notice of revocation from Borrower.

R ESOLVED , that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:

 

Name

  

Title

  

Signature

  

Authorized to
Add or Remove
Signatories

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

R ESOLVED F URTHER , that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

R ESOLVED F URTHER , that such individuals may, on behalf of Borrower:

Borrow Money . Borrow money from Lenders.

Execute Loan Documents . Execute any loan documents any Lender requires.

Grant Security . Grant Collateral Agent and Lenders a security interest in any of Borrower’s assets.

Negotiate Items . Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

Issue Warrants . Issue warrants for Borrower’s capital stock.


Further Acts . Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.

R ESOLVED F URTHER , that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.

5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.

 

By:  

 

Name:  

 

Title:  

 

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

 

I, the     of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.
  [print title]  

 

By:  

 

Name:  

 

Title:  

 


EXHIBIT A

Certificate of Incorporation (including amendments)

[See attached]


EXHIBIT B

Bylaws

[See attached]

Exhibit 10.9(A)

 

Net Multi-Tenant Laboratory   7000 Shoreline/Achaogen - Page 1

AMENDED AND RESTATED LEASE AGREEMENT

THIS AMENDED AND RESTATED LEASE AGREEMENT (this “ Lease ”) is made as of this 29th day of December, 2010 (the “ Lease Date ”), between ARE-SAN FRANCISCO NO. 17, LLC , a Delaware limited liability company (“ Landlord ”), and ACHAOGEN, INC. , a Delaware corporation (“ Tenant ”).

RECITALS

A. Prior to the Lease Date, Oscient Pharmaceuticals Corporation, a Massachusetts corporation (“ Oscient ”) (as successor-in-interest to Genesoft, Inc.), and Landlord (as successor-in-interest to MJ Research Company, Inc.) were parties to that certain Agreement of Lease dated as of October 6, 2000, as amended by that certain First Amendment to Lease dated as of December 5, 2002; and as further amended by that certain Second Amendment to Lease dated as of March 25, 2004, whereby Landlord leased to Oscient approximately 68,640 rentable square feet (“ RSF ”) of the Building (as hereinafter defined) (the “ Oscient Premises ”).

B. Prior to the Lease Date, Tenant subleased from Oscient a portion of the Oscient Premises (the “ Oscient Sublease Premises ”)) pursuant to that certain Sublease dated as of August 18, 2004 (the “ Original Oscient Sublease ”), as amended by that certain First Amendment to Sublease by and between Tenant and Oscient dated as of January 18; 2007 (the “ First Oscient Sublease Amendment ”), and as further amended by that certain Second Amendment to Sublease by and between Tenant and Oscient dated as of September 11, 2008 (the “ Second Oscient Sublease Amendment ,” collectively with the Original Oscient Sublease and the First Oscient Sublease Amendment, the “ Oscient Sublease ”).

C. Prior to the Lease Date, Landlord and Tenant entered into that certain Lease Agreement dated October 12, 2009, as amended by that certain letter agreement between Landlord and Tenant dated October 30, 2009, as further amended by that certain letter agreement between Landlord and Tenant dated May 19, 2010 (as amended, the “ Existing Lease ”) pursuant to which Tenant leased (i) the Oscient Sublease-Premises directly from Landlord and (ii) a portion of the Building described in the Existing Lease as “Premises East”.

F. Effective as of March 1, 2011 (the “ Effective Date ”), Landlord and Tenant desire to amend and restate the Existing Lease in its entirety, to among other things, modify the Premises demised under the Lease.

BASIC LEASE PROVISIONS

 

Address:

   7000 Shoreline Court, South San Francisco, California

Premises:

   Prior to the Premises East Commencement Date, the “Premises” hereunder shall continue to consist of and be defined as the approximately 30,651 RSF premises defined as the “Premises” in the Existing Lease (the “ Existing Lease Premises ”).
   From and after the Premises East Commencement Date, the “Premises” hereunder shall consist of and be defined as that portion of the Project, deemed to contain approximately 35,411 RSF, consisting of (a) a portion of the Project as shown on Exhibit A-1 attached hereto (“ Premises West ”), and (b) a portion of the Project as shown on Exhibit A-2 attached hereto (“ Premises East ”).

Project:

   The real property on which the building (the “ Building ”) in which the Premises are located, together with all improvements thereon and appurtenances thereto as described on Exhibit B .

 

LOGO  

Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

Copy or Distribute. Alexandra and the Alexandria Logo are

registered trademark of Alexandria Real Estate Equities, Inc.


Net Multi-Tenant Laboratory    7000 Shoreline/Achaogen - Page 2

 

Base Rent:

 

Period

   RSF      Base Rent per
Month
     Base Rent per RSF per
Month
 

March 1, 2011 – Premises East Commencement Date

     30,651       $ 70,497.30       $ 2.30   

Premises East Commencement Date – March 31, 2012

     35,411       $ 81,445.30       $ 2.30   

April 1, 2012 – March 31, 2013

     35,411       $ 92,068.60       $ 2.60   

April 1, 2013 – March 31, 2014

     35,411       $ 102,691.90       $ 2.90   

 

Rentable Area of Premises:       Prior to the Premises East Commencement Date: 30,651 RSF.

  

After the Premises East Commencement Date: 35,411 RSF.

Rentable Area of Project:                 136,393 RSF

Tenant’s Share of Operating Expenses:   Prior to the Premises East Commencement Date: 22.47%.

  

After the Premises East Commencement Date: 25.96%.

Security Deposit:    $175,937.00, consisting of $127,359.00 for Premises West (the “ Premises West Security Deposit ”) and $48,578.00 for Premises East (the “ Premises East Security Deposit ”)
Base Term:    A term beginning on the Effective Date and ending March 31, 2014.
Extension Term:    April 1, 2014 through March 31,2019
Permitted Use:    Research and development, laboratory, related office and other related uses consistent with the character of the Project and otherwise in compliance with the provisions of Section 7 hereof.

 

Address for Rent Payment:

   Landlord’s Notice Address:

P.O. Box 51783

   385 E. Colorado Boulevard, Suite 299

Los Angeles, CA 90051-6083

   Pasadena, CA 91101
  

Attention: Corporate Secretary

Tenant’s Notice Address:

7000 Shoreline Court

South San Francisco, CA 94080

Attention: Finance Department

The following Exhibits and Addenda are attached hereto and incorporated herein by this reference:

 

x  EXHIBIT A-1 –    PREMISES WEST DESCRIPTION
x  EXHIBIT A-2 –    PREMISES EAST DESCRIPTION
x  EXHIBIT B –    DESCRIPTION OF PROJECT

 

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x  EXHIBIT C –    RELINQUISHED SPACE
x  EXHIBIT D –    RULES AND REGULATIONS
x   EXHIBIT E-1 –    REMOVABLE INSTALLATIONS
x   EXHIBIT E-2 –    LANDLORD’S PERSONAL PROPERTY
x   EXHIBIT F –    WORK LETTER
x   EXHIBIT G –    FORM SNDA
x   EXHIBIT H     ACKNOWLEDGEMENT OF COMMENCEMENT DATE

1. Lease of Premises . Upon and subject to all of the terms and conditions hereof, (i) effective as of the Effective Date, Landlord hereby leases the Existing Lease Premises to Tenant and Tenant hereby leases the Existing Lease Premises from Landlord and (ii) effective as of the Premises East Commencement Date (as hereinafter defined), Landlord hereby leases Premises West (as defined in the Basic Lease Provisions above) and Premises East (as defined in the Basic Lease Provisions above) to Tenant and Tenant hereby leases Premises West (as defined in the Basic Lease Provisions above) and Premises East (as defined in the Basic Lease Provisions above) from Landlord. The portions of the Project which are for the non-exclusive use of tenants of the Project are collectively referred to herein as the “ Common Areas .” Landlord reserves the right to modify the Common Areas, provided that such modifications do not materially and adversely affect Tenant’s use of or access to the Premises for the Permitted Use.

2. Prior Lease; Commencement Date; Term; Acceptance of Premises .

 

  (a) Prior Lease; Term.

(i) Effective as of the Effective Date, the Existing Lease shall terminate and be of no further force and effect other than any obligations of the parties thereunder intended to survive termination of the Existing Lease and thereafter this Lease shall govern the relationship between Landlord and Tenant as to the Premises.

(ii) Landlord and Tenant acknowledge and agree that the Existing Lease Premises include the portion of the Building depicted on Exhibit C attached hereto (the “ Relinquished Space ”). On or before the Premises East Commencement Date, Tenant shall vacate and surrender the Relinquished Space in the condition required by the Existing Lease as if the “Term” of the Existing Lease had expired as to the Relinquished Space on the Premises East Commencement Date and Tenant’s failure to do so shall constitute a holding over with respect to the Relinquished Space under Section 8 of this Lease. Following the Premises East Commencement Date, the Premises shall not include the Relinquished Space. Notwithstanding the foregoing, Tenant shall be entitled to surrender the Relinquished Space without removing or restoring any alterations currently in the Restoration Space and without improving the condition or the Restoration Space from its condition as of the Lease Date.

(iii) The “ Premises East Commencement Date ” shall be the later of (i) April 1, 2011 and (ii) the date that Landlord delivers the Premises East to Tenant with the Landlord’s Work (defined below) other than the Demising Work (as defined in the Work Letter) substantially completed and in vacant, broom clean condition. The “Term” of this, Lease shall be the Base Term, as defined above in the Basic Lease Provisions, and any Extension Term which Tenant may elect pursuant to Section 40 hereof. Upon request of Landlord, Tenant shall execute and deliver a written acknowledgment of the Premises East Commencement Date and the expiration date of the Term in the form of the “Acknowledgement of Commencement Date” attached to this Lease as Exhibit D ; provided , however , Tenant’s failure to execute and deliver such acknowledgment shall not affect Landlord’s rights hereunder.

 

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Notwithstanding anything to the contrary contained herein, for the period of 60 consecutive days after the Premises East Commencement Date, Landlord shall, at its sole cost and expense (which shall not constitute an Operating Expense), be responsible for any repairs that are required to be made to portions of the Premises East and the Building Systems serving the Premises East which are newly installed as part of Landlord’s Work, unless Tenant was responsible for the cause of such repair, in which case Tenant shall pay the cost.

(iv) This Lease constitutes the complete agreement of Landlord and Tenant with respect to the direct lease between Landlord and Tenant of the Premises, and supersedes any and all prior representations, inducements, promises, agreements, understandings, and negotiations that are not contained herein.

(b) Acceptance of Premises . Tenant has been in possession of, and conducting business in, Premises West under the Existing Lease and intends to continue conducting business in Premises West from and after the Effective Date. As a result, Tenant is the party most familiar with the condition of Premises West as of the Effective Date. As conclusively evidenced by Tenant’s execution and delivery of this Lease, Tenant accepts the Premises “as is”, in their condition as of the Effective Date, without any qualifications, restrictions, or limitations, subject to all applicable Legal Requirements (as defined in Section 7 hereof), except Landlord’s obligation to complete Landlord’s Work (as defined in the Work Letter). Further, since (i) Premises West will not be empty and/or unoccupied at any time prior to the Effective Date and Landlord will have no opportunity to inspect, examine, and/or audit Premises West in order to establish the condition of Premises West as of the Effective Date, Landlord shall have no liability for any defects in Premises West and shall have no obligation to perform any work (other than Landlord’s Work) or to refurbish, finish, or otherwise alter Premises West in order to prepare Premises West for Tenants use or occupancy; and (ii) Premises East will not be empty and/or unoccupied at any time prior to the Premises East Commencement Date and Landlord will have no opportunity to inspect, examine, and/or audit Premises East in order to establish the condition of Premises East as of the Premises East Commencement Date, except as otherwise provided herein, Landlord shall have no liability for any defects in Premises East and shall have no obligation to perform any work (other than Landlord’s Work) or to refurbish, finish, or otherwise alter Premises East in order to prepare Premises East for Tenant’s use or occupancy. Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use. Landlord in executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments and agreements contained herein.

3. Rent.

(a) Base Rent . The first month’s Base Rent with respect to Premises West and the Premises West Security Deposit (as hereinafter defined) shall be due and payable on delivery of an executed copy of this Lease to Landlord. The first month’s Base Rent with respect to Premises East and the Premises East Security Deposit (as hereinafter defined) shall be due and payable on the Premises East Commencement Date. Tenant shall pay to Landlord in advance, without demand, abatement, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month during the Term hereof, in lawful money of the United States of America, at the office of Landlord for payment of Rent set forth above, or to such other person or at such other place as Landlord may from time to time designate in writing. Payments of Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any Rent (as defined in Section 5 ) due hereunder except for any abatement as may be expressly provided in this Lease.

 

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(b) Additional Rent . In addition to Base Rent, subject to Section 3(a) , commencing on the Effective Date with respect to Premises West and commencing on the Premises East Commencement Date with respect to Premises East, Tenant agrees to pay to Landlord as additional rent (“ Additional Rent ”): (i) Tenant’s Share of “Operating Expenses” (as defined in Section 5 ), and (ii) any and all other amounts Tenant assumes or agrees to pay under the provisions of this Lease, including, without limitation, any and all other sums that may become due by reason of any default of Tenant or failure to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after any applicable notice and cure period.

4. Intentionally Omitted .

5. Operating Expense Payments . Landlord shall deliver to Tenant a written estimate of Operating Expenses for each calendar year during the Term (the “ Annual Estimate ”), which may be revised by Landlord from time to time but in no event more than twice during such calendar year. Commencing on the Effective Date, during each month of the Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12th of Tenant’s Share of the Annual Estimate. Payments for any fractional calendar month shall be prorated in accordance with Section 25 .

The term “ Operating Expenses ” means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year by Landlord with respect to the Project, including, without duplication, Taxes (as defined in Section 9 ), reasonable reserves consistent with good business practice for future repairs and replacements, capital repairs and improvements to the Project amortized over the lesser of 7 years and the useful lives of such capital items (with Tenant not to be charged for any components of Operating Expenses to the extent that the components are paid for by application of reserves, regardless of whether the reserves were collected by Landlord prior to or during the Term), and the costs of Landlord’s third party property manager not to exceed 3.0% of Base Rent (or, if there is no third party property manager, administration rent in the amount of 3.0% of Base Rent), excluding only:

(a) the original construction costs of the Project and renovation prior to the Effective Date or the Premises East Commencement Date, as applicable, and costs of correcting defects in such original construction or renovation;

(b) capital expenditures for expansion of the Project;

(c) interest, points, fees, principal payments of Mortgage (as defined in Section 27 ) debts of Landlord, financing costs and amortization of funds borrowed by Landlord, whether secured or unsecured and all payments base rent (but not taxes or operating expenses) under any ground lease or other underlying lease of all or any portion of the Project;

(d) depreciation of the Project (except for capital improvements, the cost of which are includable in Operating Expenses);

(e) advertising, legal and space planning expenses and leasing commissions and other costs and expenses incurred in procuring and leasing space to tenants for the Project, including any leasing office maintained in the Project or outside of the Project, free rent and construction allowances for tenants;

 

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(f) legal and other expenses incurred in the negotiation or enforcement of leases or the securing or defense of Landlord’s title to the Building or the Project;

(g) completing, fixturing, improving, renovating, painting, redecorating or other work, which Landlord pays for or performs for other tenants within their premises, and costs of correcting defects in such work;

(h) intentionally omitted;

(i) costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by Tenant or other tenants of the Project, whether or not actually paid;

(j) salaries, wages, benefits and other compensation paid to officers and employees of Landlord who are not assigned in whole or in part to the operation, management, maintenance or repair of the Project, provided, that, any salaries, wages, benefits, and other compensation paid to officers and employees of Landlord who are assigned in part (rather than in whole) to the operation, management, maintenance or repair of the Project to be charged to the Project on a prorated basis based on the actual amount of time spent by those individuals on the Project;

(k) general organizational, administrative and overhead costs relating to creating or maintaining Landlord’s existence, either as a corporation, partnership, or other entity, including general corporate, legal and accounting expenses and all general corporate overhead and general administrative expenses not related to the operation of the Building or the Project;

(l) costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu thereof) incurred in connection with disputes with tenants, other occupants, or prospective tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or disputes with employees, consultants, management agents, leasing agents, purchasers or mortgagees of the Building;

(m) costs incurred by Landlord due to the violation by Landlord, its employees, agents or contractors or any tenant of the terms and conditions of any lease of space in the Project or any Legal Requirement (as defined in Section 7 );

(n) penalties, fines or interest incurred as a result of Landlord’s inability or failure to make payment of Taxes and/or to file any tax or informational returns when due, or from Landlord’s failure to make any payment of Taxes required to be made by Landlord hereunder before delinquency;

(o) overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Project to the extent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;

(p) costs of Landlord’s charitable or political contributions, or of fine art maintained at the Project;

(q) costs in connection with services (including electricity), items or other benefits of a type which are not standard for the Project and which are not available to Tenant without specific charges therefor, but which are provided to another tenant or occupant of the Project, whether or not such other tenant or occupant is specifically charged therefor by Landlord;

(r) costs incurred in the sale, financing or refinancing of the Project (including, Without limitation, transfer taxes);

 

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(s) net income taxes of Landlord or the owner of any interest in the Project, franchise, transfer, capital stock, gift, estate or inheritance taxes or any federal, state or local documentary taxes imposed against the Project or any portion thereof or interest therein;

(t) any expenses otherwise includable within Operating Expenses to the extent actually reimbursed by persons other than tenants of the Project under leases for space in the Project;

(u) salaries and benefits and other compensation to executives, officers or partners of Landlord above the grade of building manager or to any other person above the grade of building manager;

(v) Landlord’s costs of electricity and other services sold or provided to tenants in the Building (including Tenant) and for which Landlord is entitled to be reimbursed by such tenants as a separate additional charge or rental over and above the base rent or operating expenses payable under the lease with such tenant;

(w) costs incurred in connection with environmental cleanup, response action or remediation on, in or under or about the Project;

(x) any increase in insurance premiums to the extent such increase is caused or attributable to the use, occupancy or act of any other tenant;

(y) reserves for bad debts and rent loss reserves;

(z) the cost of any separate electrical meter Landlord may provide to any of the other tenants in the Building;

(aa) expenses allocable directly and solely to any retail space in the Building and to any garage in the Building;

(bb) lease concessions, including rental abatements and construction allowances granted to specific tenants;

(cc) the cost of repairs or other work to the extent Landlord is actually reimbursed by insurance or condemnation proceeds; and

(dd) repair costs resulting from the gross negligence or willful misconduct of Landlord or its employees, contractors or agents.

Within 90 days after the end of each calendar year (or such longer period as may be reasonably required, but not to exceed 180 days after the end of any calendar year), Landlord shall furnish to Tenant a statement (an “ Annual Statement ”) showing in reasonable detail: (a) the total and Tenant’s Share of actual Operating Expenses for the previous calendar year, and (b) the total of Tenant’s payments in respect of Operating Expenses for such year. If Tenant’s Share of actual Operating Expenses for such year exceeds Tenant’s payments of Operating Expenses for such year, the excess shall be due and payable by Tenant as Rent within 30 days after delivery of such Annual Statement to Tenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’s Share of actual Operating Expenses for such year, Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement, except that after the expiration, or earlier termination of the Term or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant within 30 days after delivery of such Annual Statement, but after deducting all other amounts due Landlord.

 

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The Annual Statement shall be final and binding upon Tenant unless Tenant, within 60 days after Tenant’s receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reason therefor. If, during such 60 day period, Tenant reasonably and in good faith questions or contests the accuracy of Landlord’s statement of Tenant’s Share of Operating Expenses, Landlord will provide Tenant with access to Landlord’s books and records relating to the operation of the Project and such information as Landlord reasonably determines to be responsive to Tenant’s questions (the “ Expense Information ”). If after Tenant’s review of such Expense Information, Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Operating Expenses, then Tenant shall have the right to have an independent public accounting firm selected by Tenant from among the 5 largest in the United States, working pursuant to a fee arrangement other than a contingent fee (at Tenant’s sole cost and expense) and approved by Landlord (which approval shall not be unreasonably withheld or delayed), audit and/or review the Expense Information for the year in question (the “ Independent Review ”). The results of any such Independent Review shall be binding on Landlord and Tenant. If the Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceeded Tenant’s Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeeding installments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after delivery of such statement, except that after the expiration or earlier termination of this Lease or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord. If the Independent Review shows that Tenant’s payments with respect to Operating Expenses for such calendar year were less than Tenant’s Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement. If the Independent Review shows that Tenant has overpaid with respect to Operating Expenses by more than 5% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review.

Operating Expenses for the calendar years in which Tenant’s obligation to share therein begins and ends shall be prorated. During the period of Landlord’s ownership of the Project prior to the Effective Date, Operating Expenses for any year in which the Project was not at least 95% occupied on average were computed as though the Project had been 95% occupied on average during such year. Notwithstanding anything set forth herein to the contrary, if the Project is not at least 95% occupied on average during any year of the Term, Tenant’s Share of Operating Expenses for such year shall be computed as though the Project had been 95% occupied on average during such year.

Tenant’s Share ” shall be the percentage set forth in the Basic Lease Provisions as Tenant’s Share as reasonably adjusted by Landlord only for changes in the physical size of the Building or the Project occurring after the Effective Date. Landlord may equitably increase Tenant’s Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project that includes the Premises or that varies with occupancy or use; provided, however, that Tenant shall not be responsible for any item of expense or cost reimbursable by any other tenant in the Project for any item of expense or cost reimbursable by such tenant that relates to a repair, replacement, or service that benefits only that tenant’s premises or only a portion of the Project that includes that tenant’s premises and not any portion of the Premises. Upon request from Tenant, Landlord shall provide reasonable information supporting the decision to make any such equitable adjustment. Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder are collectively referred to herein as “Rent.”

6. Security Deposit . Tenant shall deposit with Landlord, upon the delivery of an executed copy of this Lease to Landlord, the Premises West Security Deposit, and upon the Premises East Commencement Date, the Premises East Security Deposit (collectively, the “ Security Deposit ”) for the performance of all of Tenant’s obligations hereunder, which Security Deposit shall be in the form of an unconditional and irrevocable letter of credit (the “ Letter of Credit ”): (i) in form and substance

 

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reasonably satisfactory to Landlord; (ii) naming Landlord as beneficiary; (iii) expressly allowing Landlord to draw upon it at any time from time to time by delivering to the issuer notice that Landlord is entitled to draw thereunder pursuant to this Section 6 ; (iv) issued by an FDIC-insured financial institution reasonably satisfactory to Landlord; and (v) redeemable by presentation of a sight draft in the state of California. Landlord acknowledges and agrees that, as of the Lease Date, Silicon Valley Bank satisfies the criteria of clause (iv) of the preceding sentence. However, the preceding sentence shall not limit Landlord’s right to reasonably disapprove of Silicon Valley Bank based on a material adverse change in the financial condition of Silicon Valley Bank occurring after the Lease Date if Tenant does not provide Landlord with a substitute Letter of Credit complying with all of the requirements hereof at least 10 days before the stated expiration date of any then current Letter of Credit, Landlord shall have the right to draw the full amount of the current Letter of Credit and hold the funds drawn in cash without obligation for interest thereon as the Security Deposit. The Security Deposit shall be held by Landlord as security for the performance of Tenants obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon each occurrence of a Default (as defined in Section 20 ), Landlord may use all or any part of the Security Deposit to pay delinquent payments due under this Lease, future rent damages under California Civil Code Section 1951.2, and the cost of any damage, injury, expense or liability caused by such Default, without prejudice to any other remedy provided herein or provided by law. Landlord’s right to use the Security Deposit under this Section 6 includes the right to use the Security Deposit to pay future rent damages following the termination of this Lease pursuant to Section 21(c) below. Upon any use of all or any portion of the Security Deposit in accordance with this Section 6 , Tenant shall pay Landlord within 10 days after demand the amount that will restore the Security Deposit to the amount set forth in the Basic Lease Provisions. Tenant hereby waives the provisions of any law, now or hereafter in force, including, without limitation, California Civil Code Section 1950.7, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant. Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings. The Security Deposit, or any balance thereof ( i.e. , after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Section 6 ), shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within 90 days after the expiration or earlier termination of this Lease.

If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a) transfer any Security Deposit then held by Landlord to a person or entity assuming Landlord’s obligations under this Section 6 , or (b) return to Tenant any Security Deposit then held by Landlord and remaining after the deductions permitted herein. Upon such transfer to such transferee and the transferee’s written assumption of Landlord’s obligations under this Lease, or the return of the Security Deposit to Tenant, Landlord shall have no further obligation with respect to the Security Deposit, and Tenant’s right to the return of the Security Deposit shall apply solely against Landlord’s transferee. The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default Landlord’s obligation respecting the Security Deposit is that of a debtor, not a trustee, and no interest shall accrue thereon.

7. Use. The Premises shall be used solely for the Permitted Use set forth in the Basic Lease Provisions. Tenant shall comply with all laws, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises, and to the use and occupancy thereof, including, without limitation, the Americans With Disabilities Act,

 

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42 U.S.C. § 12101, et seq. (together with the regulations promulgated pursuant thereto, “ ADA ”) (collectively, “ Legal Requirements ” and each, a “ Legal Requirement ”). Tenant shall promptly following written notice from Landlord thereof discontinue any use of the Premises which is declared by any Governmental Authority (as defined in Section 9 ) having jurisdiction to be a violation of a Legal Requirement. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s or Landlord’s insurance, materially increase the insurance risk, or cause the disallowance of any sprinkler or other credits. Tenant shall not permit any part of the Premises to be used as a “place of public accommodation”, as defined in the ADA or any similar legal requirement. Tenant shall reimburse Landlord promptly upon demand for any additional premium charged for any such insurance policy by reason of Tenant’s failure to comply with the provisions of this Section or otherwise caused by Tenant’s use and/or occupancy of the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit or permit waste, overload the floor or structure of the Premises, subject the Premises to use that would damage the Premises or obstruct or interfere with the rights of Landlord or other tenants or occupants of the Project, including conducting or giving notice of any auction, liquidation, or going out of business safe on the Premises, or using or allowing the Premises to be used for any unlawful purpose. Tenant shall cause any equipment or machinery to be installed in the Premises so as to reasonably prevent sounds or vibrations from the Premises from extending into Common Areas, or other space in the Project. Tenant shall not place any machinery or equipment weighing 500 pounds or more in or upon the Premises or transport or move such items through the Common Areas of the Project or in the Project elevators without the prior written consent of Landlord. Tenant shall not, without the prior written consent of Landlord, use the Premises in any manner which will require ventilation, air exchange, heating, gas, steam, electricity or water beyond the existing capacity of the Project as proportionately allocated, to the Premises based upon Tenant’s Share as usually furnished for the Permitted Use. Landlord’s consent under this Section 7 shall not be unreasonably withheld, delayed or conditioned.

Without cost to Tenant, Landlord shall be responsible for the compliance of the Common Areas of the Project with Legal Requirements ( e.g. , the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq., together with regulations promulgated pursuant thereto, “ ADA ”) in effect as of the Effective Date. From and after the Effective Date, Landlord shall, as an Operating Expense (to the extent such Legal Requirement takes effect after the Effective Date and is generally applicable to similar buildings in the area in which the Project is located) or at Tenant’s expenses (to the extent such Legal Requirement takes effect after the Effective Date and is applicable solely by reason of Tenant’s, as compared to other tenants of the Project, particular use of the Premises) make any alterations or modifications to the Common Areas or the exterior of the Building that are required by Legal Requirements, including the ADA. Landlord has received no written notice from any Governmental Authority (as defined in Section 9 below) that the Premises are not in compliance with the applicable provisions of the ADA. Tenant, at its sole expense, shall make any alterations or modifications to the interior of the Premises that are required by Legal Requirements (including, without limitation, compliance of the Premises with the ADA). Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or judgments, and all reasonable expenses incurred in investigating or resisting the same (including, without limitation, reasonable attorneys’ fees, charges and disbursements and costs of suit) (collectively, “ Claims ”) arising out of or in connection with Tenant’s breach of its obligations under this Section 7 , and Tenant shall indemnify, defend, hold and save Landlord harmless from and against any and all Claims arising out of or in connection with any breach of its obligations under this Section 7 .

 

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8. Holding Over . If, with Landlord’s express written consent, Tenant retains possession of the Premises after the termination of the Term, (i) unless otherwise agreed in such written consent, such possession shall be subject to immediate termination by Landlord at any time; (ii) all of the other terms and provisions of this Lease (including, without limitation, the adjustment of Base Rent pursuant to Section 4 hereof) shall remain in full force and effect (excluding any expansion or renewal option or other similar right or option) during such holdover period; (iii) Tenant shall continue to pay Base Rent in the amount payable upon the date of the expiration or earlier termination of this Lease or such other amount as Landlord may indicate, in Landlord’s sole and absolute discretion, in such written consent; and (iv) all other payments shall continue under the terms of this Lease. If Tenant remains in possession of the Premises after the expiration of the Term or the earlier termination of the Term without the express written consent of Landlord, Tenant shall become a tenant at sufferance upon the terms of this Lease, except that (A) during the first 30 days, commencing as of March 1, 2012, the monthly rental shall be equal to 125% of Base Rent in effect during the last 30 days of the Term, (B) during the next 30 days, the monthly rental shall be equal to 150% of Base Rent in effect during the last 30 days of the Term, and (C) thereafter, the monthly rental shall be equal to 175% of Base Rent in effect during the last 30-days of the Term. In addition, if Tenant remains in possession of the Premises after the expiration of the Term or the earlier termination of the Term without the express written consent of Landlord, Tenant shall be responsible for all damages suffered by Landlord resulting from or occasioned by Tenant’s holding over, including consequential damages. No holding over by Tenant beyond the Term, whether with or without consent of landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section 8 shall not be construed as consent for Tenant to retain possession of the Premises. Acceptance by Landlord of Rent after the expiration of the Term or the earlier termination of this Lease shall not result in a renewal or reinstatement of this Lease.

9. Taxes . Landlord shall pay, as part of Operating Expenses, all taxes, levies, fees, assessments and governmental charges of any kind, existing as of the Effective Date (with respect to Premises West) and the Premises East Commencement Date (with respect to Premises East) or thereafter enacted (collectively referred to as “ Taxes ”), imposed by any federal, state, regional, municipal, local or other governmental authority or agency, including, without limitation, quasi-public agencies (collectively, “ Governmental Authority ”) during the Term, including, without limitation, all Taxes: (i) imposed on, or measured by or based, in whole or in part, on rent payable to (or gross receipts received by) Landlord under this Lease and/or from the rental by Landlord of the Project or any portion thereof; or (ii) based on the square footage, assessed value or other measure or evaluation of any kind of the Premises or the Project; or (iii) assessed or imposed by or on the operation or maintenance of any portion of the Premises or the Project, including parking; or (iv) assessed or imposed by, or at the direction of, or resulting from Legal Requirements, or interpretations thereof, promulgated by any Governmental Authority; or (v) imposed as a license or other fee, charge, tax, or assessment on Landlord’s business or occupation of leasing space in the Project. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens securing Taxes. Taxes shall not include any net income taxes imposed on Landlord except to the extent such net income taxes are in substitution for any Taxes payable hereunder. If any such Tax is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall pay, prior to delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any Taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property, or if the assessed valuation of the Project is increased by a value attributable to improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, higher than the base valuation on which Landlord from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have the right, but not the obligation, to pay such Taxes. Landlord’s reasonable determination of any excess assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such payment by Landlord shall constitute Additional Rent due from Tenant to Landlord immediately upon demand.

 

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10. Parking . Subject to all matters of record, Force Majeure, a Taking (as defined in Section 19 below) and the exercise by Landlord of its rights hereunder, Tenant shall have the right, in common with other tenants of the Project pro rata in accordance with the rentable area of the Premises and the rentable areas of the Project occupied by such other tenants, to park in those areas within the Project designated by Landlord for non-reserved parking, subject in each case to Landlord’s reasonable rules and regulations. Landlord shall not charge Tenant for parking during the Base Term or the Extension Term, but thereafter, if Tenant continues to occupy the Premises, then Tenant shall pay Landlord’s prevailing rates for parking. Landlord may allocate parking spaces among Tenant and other tenants in the Project pro rata as described above if Landlord determines that such parking facilities are becoming crowded. Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties, including other tenants of the Project.

11. Utilities, Services . Landlord shall provide, subject to the terms of this Section 11 , hot and cold-water, electricity, heat, ventilation, and air conditioning, light, power, telephone, sewer, elevator service and other utilities (including gas and fire sprinklers to the extent the Projects plumbed for such services), refuse and trash collection and janitorial services in at least the quality and quantity presently provided to the Premises as of the Lease Date (collectively, “ Utilities ”). Landlord shall pay, as Operating Expenses or subject to Tenant’s reimbursement obligation, for all Utilities used on the Premises, all maintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any Governmental Authority or Utility provider, and any taxes, penalties, surcharges or similar charges thereon. Landlord may cause, at Tenant’s expense, any Utilities to be separately metered or charged directly to Tenant by the provider and the expense of such Utilities shall be excluded from Operating Expenses. Tenant shall pay directly to the Utility provider, prior to delinquency, any separately metered Utilities and services which may be furnished to Tenant or the Premises during the Term. Tenant shall pay, as part of Operating Expenses, its share of all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of Utilities, from any cause whatsoever other than Landlord’s grossly negligent act or omission or willful misconduct, shall result in eviction or constructive eviction of Tenant, termination of this Lease or the abatement of Rent. Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use.

Notwithstanding the preceding to the contrary, if Tenant is prevented from using, and does not use, the Premises or any material portion thereof as a result of any failure of Landlord to provide or repair/restore Utilities in accordance with this Section 11 , then Tenant shall give Landlord written notice of such failure. If such failure continues for five (5) consecutive business days after Landlord’s receipt of any such notice (the “ Eligibility Period ”) and is solely due to Landlord’s gross negligence or willful misconduct (to the extent within Landlord’s reasonable control) (an “ Abatement Event ”), then Base Rent and Operating Expenses shall be abated or reduced, as the case may be, after the expiration of the Eligibility Period, for such time that such Abatement Event continues (the “ Abatement Period ”), in the proportion that the rentable area of the portion of the Premises that Tenant is actually prevented from using, and does not use, bears to the total rentable area of the Premises. Tenant’s right to abate Base Rent under this Section 11 shall be Tenant’s sole and exclusive remedy at law or in equity for an Abatement Event. This section shall not apply to any event described in Sections 18 or 19 .

12. Alterations and Tenant’s Property . Any alterations, additions, or improvements made to the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature upon any doors or windows in the Premises, but excluding installation, removal or realignment of furniture systems (other than removal of furniture systems owned or paid for by Landlord) not involving any modifications to the structure or connections (other then by ordinary plugs or jacks) to Building Systems (as defined in Section 13 ) (“ Alterations ”) shall be subject to Landlord’s prior written consent, which may be given or withheld in Landlord’s sole discretion if any such Alteration affects the structure or Building Systems, but which shall otherwise not be unreasonably withheld, conditioned or delayed. Tenant may

 

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construct nonstructural Alterations in the Premises without Landlord’s prior approval if (i) the cost of any single project does not exceed $30,000, and (ii) the aggregate cost of all such work in any 12 month period does not exceed $60,000 (a “ Notice-Only Alteration ”), provided Tenant notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be accompanied by plans, specifications, work contracts and such other information concerning the nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which notice and accompanying materials shall be delivered to Landlord not less than 15 days in advance of any proposed construction. If Landlord approves any Alterations, Landlord may impose such conditions on Tenant in connection with the commencement, performance and completion of such Alterations as Landlord may deem appropriate in Landlord’s reasonable discretion. Any request for approval shall be in writing, delivered not less than 15 days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts and such other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailing addresses of all persons performing work or supplying materials. Landlord’s right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that such plans and specifications or construction comply with applicable Legal Requirements. Tenant shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements and with Legal Requirements and shall implement at its sole cost and expense any alteration or modification required by Legal Requirements as a result of any Alterations. Tenant shall pay to Landlord, as Additional Rent, on demand an amount equal to 3% of all charges incurred by Tenant or its contractors or agents in connection with any Alteration (excluding Notice-Only Alterations) to cover Landlord’s overhead and expenses for plan review, coordination, scheduling and supervision. Before Tenant begins any Alteration, Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any reasonable expense incurred by Landlord by reason of work done by Tenant or its contractors, delays caused by such work, or inadequate cleanup.

Tenant shall furnish security or make other arrangements reasonably satisfactory to Landlord to assure payment for the completion of all Alterations work free and clear of liens, and shall provide (and cause each contractor or material subcontractor to provide) certificates of insurance for workers’ compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) a sworn statement setting forth the names of all contractors and material subcontractors who did the work and final lien waivers from all such contractors and material subcontractors; and (ii) “as built” plans for any such Alteration.

Except for Removable Installations (as hereinafter defined), all Installations (as hereinafter defined) shall be and shall remain the property of Landlord during the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remain upon and be surrendered with the Premises as a part thereof. Notwithstanding the foregoing, Landlord may, at the time its approval of any such Installation is requested, notify Tenant that Landlord requires that Tenant remove such Installation upon the expiration or earlier termination of the Term, in which event Tenant shall remove such Installation in accordance with the immediately succeeding sentence. Upon the expiration or earlier termination of the Term, Tenant shall remove (i) all wires, cables or similar equipment which Tenant has installed in the Premises or in the risers or plenums of the Building, (ii) any Installations for which Landlord has given Tenant notice of removal in accordance with the immediately preceding sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and Tenant shall repair any damage caused by or occasioned as a result of such removal, including, without limitation, capping off all such connections behind the walls of the Premises and repairing any holes. During any restoration period beyond the expiration or earlier termination of the Term, Tenant shall pay

 

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Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. If Landlord is requested by Tenant or any lender, lessor or other person or entity claiming an interest in any of Tenant Property to waive any lien Landlord may have against any of Tenant’s Property, and Landlord consents to such waiver, then Landlord shall be entitled to be paid as administrative rent a fee of $1,000 per occurrence for its time and effort in preparing and negotiating such a waiver of lien.

For purposes of this Lease, (x) “ Removable Installations ” means any items listed on Exhibit E-1 attached hereto and any items agreed by Landlord in writing to be included on Exhibit E-1 in the future, (y) “ Tenant’s Property ” means Removable Installations and, other than Installations, any personal property or equipment of Tenant that may be removed without material damage to the Premises, and (z) “ Installations ” means all Alterations, all fixtures, and all partitions, hardware, built-in machinery, built-in casework and cabinets and other similar additions, equipment, property and improvements built into the Premises so as to become an integral part of the Premises, including, without limitation, fume hoods which penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and systems, and any power generator and transfer switch. Notwithstanding anything to the contrary contained in this Section 12 or elsewhere in this Lease, Tenant shall have no obligation to remove (i) any wires, cables or similar equipment which Tenant or any other party (including Oscient) has installed in the Premises or in the risers or plenums of the Building prior to the Effective Date; (ii) any alterations or improvements or Installations in place in Premises West as of the Effective Date (whether installed by Tenant, Oscient, or any other party); or any alterations or improvements or Installations in place in Premises East as of the Premises East Commencement Date (whether installed by Tenant or any other party). Notwithstanding anything to the contrary set forth herein, Landlord and Tenant acknowledge and agree that the personal property set forth on Exhibit E-2 attached hereto (“ Landlord’s’ Property ”) is and shall remain the property of Landlord. Tenant shall have the right to use Landlord’s Property during the Term at no cost to Tenant. Upon the expiration or earlier termination of the Lease, Tenant shall surrender Landlord’s Property in the condition received, normal wear and tear, casualty and condemnation excepted.

13. Landlord’s Repairs . Landlord, as an Operating Expense, shall maintain and repair all of the structural, exterior, parking and other Common Areas of the Project, including HVAC, plumbing, fire sprinklers, elevators and all other building systems serving the Premises and other portions of the Project (“ Building Systems ”), in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant, or by any of Tenant’s agents, servants, employees, invitees and contractors (collectively, “ Tenant Parties ”) excluded. Losses and damages caused by Tenant or any Tenant Party shall be repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole cost and expense. Landlord reserves the right to stop Building Systems services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements, which are, in the judgment of Landlord, desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed. Landlord shall have no responsibility or liability for failure to supply Building Systems services during any such period of interruption; provided , however , that Landlord shall, except in case of emergency, make a commercially reasonable effort to give Tenant 24 hours advance notice of any planned stoppage of Building Systems services for routine maintenance, repairs, alterations or improvements, and Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s business operations at the Premises. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Section, after which Landlord shall make a commercially reasonable effort to effect such repair. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written notice of the need for such repairs or maintenance. Tenant waives its rights under any state or local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the parties’ respective rights with respect to such matters shall be solely as set forth herein. Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Section 18 .

 

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14. Tenant’s Repairs . Subject to Section 13 hereof, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises, including, without limitation, entries, doors, ceilings, interior windows, interior walls, and the interior side of demising walls. Such repair and replacement may include capital expenditures and repairs whose benefit may extend beyond the Term. Should Tenant fail to make any such repair or replacement or fail to maintain the Premises, Landlord shall give Tenant notice of such failure. If Tenant fails to commence cure of such failure within 10 days after Landlord’s notice, and thereafter diligently prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant within 10 days after demand therefor; provided, however, that if such failure by Tenant creates or could create an emergency, Landlord may immediately commence cure of such failure and shall thereafter be entitled to recover the costs of such cure from Tenant. Subject to Sections 17 and 18 , Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results from damage caused by Tenant or any Tenant Party and any repair that benefits only the Premises.

15. Mechanic’s Liens . Tenant shall discharge, by bond or otherwise, any mechanic’s lien filed against the Premises or against the Project for work claimed to have been done for, or materials claimed to have been furnished to, Tenant within 20 days Tenant becomes aware (as a result of notice from Landlord or otherwise) after the filing thereof, at Tenant’s sole cost and shall otherwise keep the Premises and the Project free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant. Should Tenant fail to discharge any lien described herein, Landlord shall have the right, but not the obligation, to pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title to the Project and the reasonable cost thereof shall be immediately due from Tenant as Additional Rent. If Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code Financing Statement filed as a matter of public record by any lessor or creditor of Tenant will upon its face or by exhibit thereto indicate that such Financing Statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Project be furnished on the statement without qualifying language as to applicability of the lien only to removable personal property, located in an identified suite held by Tenant.

16. Indemnification . Tenant hereby indemnifies and agrees to defend, save and hold Landlord harmless from and against any and all Claims for (i) injury or death to persons or damage to property occurring within or about the Premises, to the extent arising directly or indirectly out of Tenant’s use or occupancy of the Premises, or (ii) a breach or default by Tenant in the performance of any of its obligations under this Lease, unless caused by the willful misconduct or gross negligence of Landlord. Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal property (including, without limitation, loss of records kept within the Premises). Landlord shall not be liable for any damages arising from any act, omission or neglect of any tenant in the Project or of any other third party. Subject to Section 36 , Landlord hereby indemnifies and agrees to defend, save and hold Tenant harmless from and against any and all Claims for injury or death to persons or damage to property that arise solely from the gross negligence or willful misconduct of Landlord while at the Project but outside the Premises, unless caused by the willful misconduct or gross negligence of Tenant or any Tenant Party.

 

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17. Insurance . Landlord shall maintain all risk property and, if applicable, sprinkler damage insurance covering the full replacement cost of the Project or such lesser coverage amount as Landlord may elect provided such coverage amount is not less than 90% of such full replacement cost. Landlord shall further procure and maintain commercial general liability insurance with a single loss limit of not less than $2,000,000 for bodily injury and property damage with respect to the Project. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, flood, environmental hazard and earthquake, loss or failure of building equipment, errors and omissions, rental loss during the period of repair or rebuilding, workers’ compensation insurance and fidelity bonds for employees employed to perform services and insurance for any improvements installed by Tenant or which are in addition to the standard improvements customarily furnished by Landlord without regard to whether or not such are made a part of the Project. All such insurance shall be included as part of the Operating Expenses. The Project may be included in a blanket policy (in which case the cost of such insurance allocable to the Project will be determined by Landlord based upon the insurer’s cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.

Tenant, at its sole cost and expense, shall maintain during the Term: all risk property insurance with business interruption and extra expense coverage, covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; workers’ compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with such limits as required by law; and commercial general liability insurance, with a minimum limit of not less than $2,000,000 per occurrence for bodily injury and property damage with respect to the Premises. The commercial general liability insurance policy shall name Alexandria Real Estate Equities, Inc., and Landlord, its officers, directors, employees, managers, agents, invitees and contractors (collectively, “ Landlord Parties ”), as additional insureds; insure on an occurrence and not a claims-made basis; be issued by insurance companies which have a rating of hot less than policyholder rating of A and financial category rating of at least Class X in “Best’s Insurance Guide”; shall not be cancelable for nonpayment of premium unless 10 days’ prior written notice shall have been given to Landlord from the insurer, contain a hostile fire endorsement and a contractual liability endorsement; and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant’s policies). Copies of such policies (if requested by Landlord), or certificates of insurance showing the limits of coverage required hereunder and showing Landlord as an additional insured, along with reasonable evidence of the payment of premiums for the applicable period, shall be delivered to Landlord by Tenant upon commencement of the Term and upon each renewal’ of said insurance. Tenant’s policy may be a “blanket policy” with an aggregate per location endorsement which specifically provides that, with respect to the property insurance; the amount of insurance shall not be prejudiced by other losses covered by the policy. Tenant shall, at least 5 days prior to the expiration of such policies, furnish Landlord with renewal certificates.

In each instance where insurance is to name Landlord as an additional insured, Tenant shall upon written request of Landlord also designate and furnish certificates so evidencing Landlord as additional insured to: (i) any lender of Landlord holding a security interest in the Project or any portion thereof, (ii) the landlord under any lease wherein Landlord is tenant of the real property on which the Project is located, if the interest of Landlord is or shall become that of a tenant under a ground or other underlying lease rather than that of a fee owner, and/or’(iii) any management company retained by Landlord to manage the Project.

The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, and their respective, officers, directors, employees, managers, agents, invitees and contractors (“ Related Parties ”), in connection with any loss or damage thereby insured against. Neither party nor its respective Related Parties shall be liable to the other for loss or damage caused by any risk insured against under property insurance required to be maintained hereunder, and each party waives any claims against the

 

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other party, and its respective Related Parties, for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever. If the foregoing waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed not released but shall be secondary to the other’s insurer.

Landlord may require insurance policy limits to be raised to conform with requirements of Landlord’s lender and/or to bring coverage limits to levels then being generally required of new tenants within the Project.

18. Restoration . If, at any time during the Term, the Project or the Premises are damaged or destroyed by a fire or other insured casualty, Landlord shall notify Tenant within 60 days after discovery of such damage as to the amount of time Landlord reasonably estimates it will take to restore the Project or the Premises, as applicable (the “ Restoration Period ”). If the Restoration Period is estimated to exceed 12 months (the “ Maximum Restoration Period ”), Landlord may, in such notice, elect to terminate this Lease as of the date that is 75 days after the date of discovery of such damage or destruction; provided, however, that notwithstanding Landlord’s election to restore, Tenant may elect to terminate this Lease by written notice to Landlord delivered within 10 business days after receipt of a notice from Landlord estimating a Restoration Period for the Premises that is longer than the Maximum Restoration Period. Unless Landlord or Tenant so elects to terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with any deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding the improvements installed by Tenant or by Landlord and paid for by Tenant), subject to delays arising from the collection of insurance proceeds, from Force Majeure events or as reasonably needed to obtain any license, clearance or other authorization of any kind required to enter into and restore the Premises issued by any Governmental Authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal or remediation of Hazardous Materials (as defined in Section 30 ) in, on or about the Premises (collectively referred to herein as “ Hazardous Materials Clearances ”); provided , however , that if repair or restoration of the Premises is not substantially complete as of the end of the Maximum Restoration Period or, if longer, the Restoration Period, Landlord may, in its sole and absolute discretion, elect not to proceed with such repair and restoration, or Tenant may be written notice to Landlord delivered within 5 business days after the expiration of the Maximum Restoration Period or, if longer, the Restoration Period, elect to terminate this Lease, in which event Landlord shall be relieved of its obligation to make such repairs or restoration and this Lease shall terminate as of the date that is 75 days after the later of: (i) discovery of such damage or destruction, or (ii) the date air required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and the right to any Rent payable by Tenant prior to such election by Landlord or Tenant.

Tenant, at its expense, shall promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure (as defined in Section 34 ) events or to obtain Hazardous Material Clearances, all repairs or restoration which is desired by Tenant and which is not required to be done by Landlord, and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, Landlord may terminate this Lease if the Premises are damaged during the last 1 year of the Term and Landlord reasonably estimates that it will take more than 2 months to repair such damage, or if insurance proceeds are not available for such restoration. Rent shall be abated from the date all required Hazardous Material. Clearances, if any, with respect to the Premises are obtained until the Premises are repaired and restored, in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises. Such abatement shall be the sole remedy of Tenant, and except as provided in this Section 18 , Tenant waives any right to terminate the Lease by reason of damage or casualty loss.

 

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The provisions of this Lease, including this Section 18 , constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, or any other portion of the Project, and any statute or regulation which is now or may hereafter be in effect shall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Project, the parties hereto expressly agreeing that this Section 18 sets forth their entire understanding and agreement with respect to such matters.

19. Condemnation . If the whole or any material part of the Premises or the Project is taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “ Taking ” or “ Taken ”), and the Taking would in Landlord’s reasonable judgment, either prevent or materially interfere with Tenant’s use of the Premises or materially interfere with or impair Landlord’s ownership or operation of the Project, then upon written notice by Landlord, this Lease shall terminate and Rent shall be apportioned as of said date if part of the Premises shall be Taken, and this Lease is not terminated as provided above, Landlord shall promptly restore the Premises and the Project as nearly as is commercially reasonable under the circumstances to their condition prior to such partial Taking and the rentable square footage of the Building, the rentable square footage of the Premises, Tenant’s Share of Operating Expenses and the Rent payable hereunder during the unexpired Term shall be reduced to such extent as may be fair and reasonable under the circumstances. Upon any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for Tenant’s Property, moving expenses and damage to Tenant’s trade fixtures, if a separate award for such items is made to Tenant. Tenant hereby waives any and all rights it might otherwise have pursuant to any provision of state law to terminate this Lease upon a partial Taking of the Premises or the Project.

20. Events of Default . Each of the following events shall be a default (“ Default ”) by Tenant under this Lease:

(a) Payment Defaults . Tenant shall fail to pay any installment of Rent or any other payment hereunder when due; provided, however, that Tenant’s first failure to pay any installment of Rent or any other payment hereunder otherwise due in any 12 calendar month period shall not constitute a Default unless such payment is not made within 5 business days after written notice from Landlord to Tenant.

(b) Insurance . Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to obtain replacement insurance at least 20 days before the expiration of the current coverage.

(c) Abandonment . Tenant shall abandon the Premises. Tenant shall not be deemed to have abandoned the Premises if Tenant continues to satisfy all of its obligations under this Lease as they come due.

(d) Improper Transfer . Tenant shall assign, sublease or otherwise transfer or attempt to transfer all or any portion of Tenant’s interest in this Lease or the Premises except as expressly permitted herein, or Tenant’s interest in this Lease shall be attached, executed upon, or otherwise judicially seized and such action is not released within 90 days of the action.

 

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(e) Liens . Tenant shall fail to discharge or otherwise obtain the release of any lien placed upon the Premises in violation of this Lease within 20 days after Tenant becomes aware (as a result of notice from Landlord or otherwise) such lien is recorded against the Premises.

(f) Insolvency Events . Tenant or any guarantor or surety of Tenant’s obligations hereunder shall: (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “ Proceeding for Relief ”); (C) become the subject of any Proceeding for Relief which is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

(g) Estoppel Certificate or Subordination Agreement . Tenant fails to execute any document required from Tenant under Sections 23 or 27 within 5 business days after a second notice requesting such document.

(h) Other Defaults . Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Section 20 , and, except as otherwise expressly provided herein, such failure shall continue for a period of 30 days after written notice Thereof from Landlord to Tenant.

Any notice given under Section 20(h) hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant’s default pursuant to Section 20(h) is such that it cannot be cured by the payment of money and reasonably requires more than 20 days to cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 20 day period and thereafter diligently prosecutes the same to completion; provided , however , that such cure shall be completed no later than 60 days from the date of Landlord’s notice.

21. Landlord’s Remedies .

(a) Payment By Landlord; Interest . During the continuance of a Default by Tenant hereunder, Landlord may, without waiving or releasing any obligation of Tenant hereunder, make such payment or perform such act. All sums so paid or incurred by Landlord, together with interest thereon, from the date such sums were paid or incurred, at the annual rate equal to 10% per annum or the highest rate permitted by law (the “ Default Rate ”), whichever is less, shall be payable to Landlord on demand as Additional Rent. Nothing herein shall be construed to create or impose a duty on Landlord to mitigate any damages resulting from Tenant’s Default hereunder.

(b) Late Payment Rent . Late payment by Tenant to Landlord of Rent and other sums due will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Such costs include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord under any Mortgage covering the Premises. Therefore, if any installment of Rent due from Tenant is not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord an additional sum equal to 6% of the overdue Rent as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In addition to the late charge, Rent not paid when due shall bear interest at the Default Rate from the 5th day after the due date until paid. Notwithstanding anything to the contrary set forth herein, Tenant shall not be liable for the late charge set forth in this Section 21(b) in regards to the first delinquent payment by Tenant in any twelve (12) calendar month period.

 

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(c) Remedies . Upon the occurrence of a Default, Landlord, at its option, without further notice or demand to Tenant, shall have in addition to all other rights and remedies provided in this Lease, at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.

(i) Terminate this Lease, or at Landlord’s option, Tenant’s right to possession only, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor,

(ii) (Upon any termination of this Lease, whether pursuant to the foregoing Section 21(c)(i) or otherwise, Landlord may recover from Tenant the following:

(A) The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus

(B) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(C) The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

(D) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including, but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and

(E) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

The term “ rent ” as used in this Section 21 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Sections 21(c)(ii)(A) and (B) , above, the “ worth at the time of award ” shall be computed by allowing interest at the Default Rate; As used in Section 21(c)(ii)(C) above, the “ worth at the time of award ” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of Sari Francisco at the time of award plus 1%.

(iii) Landlord may continue this Lease in effect after Tenant’s Default and recover rent as it becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to sublet or assign hereunder, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease following a Default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies hereunder, including the right to recover all Rent as it becomes due.

 

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(iv) Whether or not Landlord elects to terminate this Lease following a Default by Tenant, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. Upon Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, Concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.

(v) Independent of the exercise of any other remedy of Landlord hereunder or under applicable law, Landlord may conduct an environmental test of the Premises as generally described in Section 30(d) hereof, at Tenant’s expense.

(d) Effect of Exercise . Exercise by Landlord of any remedies hereunder or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, it being understood that such surrender and/or termination can be effected only by the express written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof, and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same and shall not be deemed a waiver of Landlord’s right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of Rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord’s intention to re-enter, re-take or otherwise obtain possession of the Premises as provided in any statute, or to institute legal proceedings to that end, and also waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. Any resetting of the Premises or any portion thereof shall be on such terms and conditions as Landlord in its reasonable discretion may determine. Landlord shall not be liable for, nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s failure to relet the Premises arising by reason of Tenant’s Default. Any resetting of the Premises or any portion thereof shall be on such terms and conditions as Landlord in its reasonable discretion consistent with Landlord’s or its affiliates’ leasing practices in buildings similar to the Building may determine (“ Landlord’s Leasing Terms ”). Landlord shall make a commercially reasonable effort, consistent with Landlord’s Leasing Terms, to mitigate its damages after a termination of this Lease resulting from a Default by Tenant.

22. Assignment and Subletting .

(a) General Prohibition . Unless otherwise provided in this Section 22 , without Landlord’s prior written consent (which consent shall not be unreasonably withheld or delayed), subject to and on the conditions described in this Section 22 , Tenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises, and any attempt to do any of the foregoing shall be void and of no effect. If Tenant is a corporation, partnership or limited liability company, the shares or other ownership interests thereof which, are not actively traded upon a stock

 

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exchange or in the over-the-counter market, a transfer or series of transfers whereby 50% or more of the issued and outstanding shares or other ownership interests of such corporation are, or voting control is, transferred (but excepting transfers upon deaths of individual owners) from a person or persons or entity or entities which were owners thereof at time of execution of this Lease to persons or entities who were not owners of shares or other ownership interests of the corporation, partnership or limited liability company at time of execution of this Lease, shall be deemed an assignment of this Lease requiring the consent of Landlord as provided in this Section 22 .

(b) Permitted Transfers . If Tenant desires to assign, sublease, hypothecate or otherwise transfer this Lease or sublet the Premises, then at least 15 business days, but not more than 45 business days, before the date Tenant desires the assignment or sublease to be effective (the “ Assignment Date ”), Tenant shall give Landlord a notice (the “ Assignment Notice ”) containing, such information about the proposed assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials proposed to be used, stored handled, treated, generated in or released or disposed of from the Premises, the Assignment Date, any relationship between Tenant and the proposed assignee or sublessee, and all material terms and conditions of the proposed assignment or sublease, including a copy of any proposed assignment or sublease in its final form, and such other information as Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent. Landlord may, by giving written notice to Tenant within 15 business days after receipt of the Assignment Notice: (1) grant such consent; (ii) refuse such consent, in its reasonable discretion (provided that Landlord shall further have the right to review and approve or disapprove, in Landlord’s reasonable discretion, the proposed form of sublease prior to the effective date of any such subletting); or (iii) if the proposed sublease is for substantially the balance of the Term, terminate this Lease with respect to the space described in the Assignment Notice as of the Assignment Date (an “ Assignment Termination ”). Without limitation, it shall be reasonable for Landlord to withhold its consent to any assignment of this Lease or subletting of any portion of the Premises to an assignee or subtenant whose business reputation is objectionable in Landlord’s reasonable judgment, or if Landlord reasonably determines that the assignee or subtenant does not have the ability to fulfill the assignee’s or subtenant’s obligations under the assignment or sublease regarding the applicable portion of the Premises after the assignment of sublease. If Landlord delivers notice of its election to exercise an Assignment Termination, Tenant shall have the right to withdraw such Assignment Notice by written notice to Landlord of such election within 5 business days after Landlord’s notice electing to exercise the Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease shall continue in full force and effect. If Tenant does not withdraw such Assignment Notice, this Lease, and the term and estate herein granted, shall terminate as of the Assignment Date with respect to the space described in such Assignment Notice. No failure of Landlord to exercise any such option to terminate this Lease, or to deliver a timely notice in response to the Assignment Notice, shall be deemed to be Landlord’s consent to the proposed assignment, sublease or other transfer. Tenant shall pay to Landlord a fee equal to One Thousand Five Hundred Dollars ($1,500) in connection with its consideration of any Assignment Notice and/or its preparation or review of any consent documents.

Notwithstanding the foregoing, (x) Landlord’s consent to an assignment of this Lease or a subletting of any portion of the Premises to any entity controlling, controlled by or under common control with Tenant shall not be required, provided that Landlord shall have the right to approve the form of any such sublease or assignment and (y) Tenant shall have the right to assign this Lease, upon 30 days’ prior written notice to Landlord but without obtaining Landlord’s prior written consent, to a corporation or other entity which is a successor-in-interest to Tenant, by way of merger, consolidation or corporate reorganization, or by the purchase of all or substantially all of the assets or the ownership interests of Tenant provided that (A) such merger or consolidation, or such acquisition or assumption, as the case may be, is for a good business purpose and not principally for the purpose of transferring the Lease, and (B) the assignee has the financial ability to fulfill the assignee’s obligations under this Lease after the assignment, and (C) such assignee shall agree in writing to assume all of the terms, covenants and conditions of this Lease arising after the effective date of the assignment (a “ Permitted Assignment ”).

 

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(c) Additional Conditions . As a condition to any such assignment or subletting, whether or not Landlord’s consent is required, Landlord may require:

(i) that any assignee or subtenant agree, in writing at the time of such assignment or subletting, that if Landlord gives such party notice that Tenant is in Default under this Lease, such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which payments will be received by Landlord without any liability except to credit such payment against those due under this Lease, and any such third party shall agree to attorn to Landlord or its successors and assigns should this Lease be terminated for any reason; provided , however , that in no event shall Landlord or its successors or assigns be obligated to accept such attornment; and

(ii) A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublessee intends to use, store, handle, treat, generate in or release or dispose of from the Premises, together with copies of all documents relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to the proposed assignment or subletting, including, without limitation: permits; approvals; reports and correspondence; storage and management plans; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks. Neither Tenant nor any such proposed assignee or subtenant is required, however, to provide Landlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities.

(d) No Release of Tenant, Sharing of Excess Rents . Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at all times remain fully and primarily responsible and liable for the payment of Rent and for compliance with all of Tenant’s other obligations under this Lease, Excluding Permitted Assignments, if Rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto in any form) exceeds the sum of the rental payable under this Lease (excluding however, any Rent payable under this Section), and actual and reasonable brokerage fees, legal costs and any design and construction fees directly related to and required pursuant to the terms of any such sublease) (“ Excess Rent ”), then Tenant shall be bound and obligated to pay Landlord as Additional Rent hereunder 50% of such Excess Rent within 10 days following receipt thereof by Tenant,

(e) No Waiver . The consent by Landlord to an assignment or subletting shall not relieve Tenant or any assignees of this Lease or any sublessees of the Premises from obtaining the consent of Landlord to any further assignment or subletting, nor shall it release Tenant or any assignee or sublessee of Tenant from full and primary liability under the Lease. The acceptance of Rent hereunder, or the acceptance of performance of any other term, covenant, or condition thereof, from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Lease or a consent to any subletting, assignment or other transfer of the Premises.

 

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(f) Prior Conduct of Proposed Transferee . Notwithstanding any other provision of this Section 22 , if (i) the proposed assignee or sublessee of Tenant has been required by any prior landlord, lender or Governmental Authority to take remedial action in connection with Hazardous Materials contaminating a property, where the contamination resulted from such party’s action or use of the property in question, (ii) the proposed assignee or sublessee is subject to an enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority), or (iii) because of the existence of a pre-existing environmental condition in the vicinity of or underlying the Project, the risk that Landlord would be targeted as a responsible party in connection with the remediation of such pre-existing environmental condition would be materially increased or exacerbated by the proposed use of Hazardous Materials by such proposed assignee or sublessee, Landlord shall have the absolute right to refuse to consent to any assignment or subletting to any such party.

23. Estoppel Certificate . Tenant shall, within 10 business days after written notice from Landlord, execute, acknowledge and deliver a statement in writing in any form reasonably requested by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which the rental and other charges are paid in advance, if any; (ii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord or Tenant hereunder, or specifying such defaults if any are claimed; and (iii) setting forth such further factual information with respect to the status of this Lease or the Premises as may be reasonably requested thereon. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part. Tenant’s failure to deliver such statement within such time shall, at the option of Landlord, constitute a Default under this Lease (subject to the terms of Section 20(q) ), and, in any event, shall be conclusive upon Tenant that this Lease is in full force and effect and without modification except as may be represented by Landlord in any certificate prepared by Landlord and delivered to Tenant for execution.

24. Quiet Enjoyment . So long as Tenant is not in Default under this Lease, Tenant shall, subject to the terms of this Lease, at all times during the Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

25. Prorations . All prorations required or permitted to be made hereunder shall be made on the basis of a 360 day year and 30 day months.

26. Rules and Regulations . Tenant shall, at all times during the Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project provided the same do not unreasonably and materially interfere with the Permitted Use. The current rules and regulations are attached hereto as Exhibit D. If there is any conflict between said rules and regulations and other provisions of this Lease, the terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project and shall not enforce such rules and regulations in a discriminatory manner.

27. Subordination . This Lease, and Tenant’s interest and rights hereunder are hereby made and shall be subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant; provided , however , that so long as there is no Default hereunder, Tenant’s right to possession of the Premises shall not be disturbed by the Holder of any such

 

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Mortgage. Tenant agrees, at the election of the Holder of any such Mortgage, to attorn to any such Holder. Tenant agrees upon demand to execute, acknowledge and deliver commercially reasonable instruments confirming such subordination, and such commercially reasonable instruments of attornment as shall be requested by any such Holder, provided any such instruments contain appropriate non-disturbance provisions assuring Tenant’s quiet enjoyment of the Premises as set forth in Section 24 hereof. Notwithstanding the foregoing, any such Holder may at any time subordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective dates of execution, delivery or recording and in that event such Holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such Mortgage and had been assigned to such Holder. The term “ Mortgage ” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the “ Holder ” of a Mortgage shall be deemed to include the beneficiary under a deed of trust. Promptly, after execution of this Lease, Landlord shall use commercially reasonably efforts to procure from the Holder of any Mortgage existing as of the Lease Date, a Subordination, Non-Disturbance and Attornment Agreement (an “ SNDA ”) in the form attached as Exhibit G attached hereto, or, an agreement from such Holder that any SNDA executed by such Holder with respect to the Existing Lease is ratified and confirmed with respect to this Lease, with no loss of priority caused by the amending and restating of the Existing Lease by this Lease.

28. Surrender . Upon the expiration of the Term or earlier termination of Tenant’s right of possession, Tenant shall surrender to Landlord (i) Premises West substantially in the same condition as existed on August 1, 2004 ( i.e. , the commencement date under the Oscient Sublease), subject to any Alterations or Installations permitted by Landlord to remain in Premises West pursuant to Section 12 above, free of Hazardous Material’s brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, Premises West on or after August 1, 2004 by Tenant or any Tenant Party, or other person or entity (exclusive of Landlord or any of Landlord’s officers, directors, agents, representatives, servants, employees, invitees and contractors) after entering the Premises with Tenant’s consent (collectively, “ Premises West Tenant HazMat Operations ”) and released of all Hazardous Materials Clearances, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and 19 and Landlord’s repair obligations under this Lease excepted; and (ii) Premises East substantially in the same condition as existed on the Premises East Commencement Date, subject to any Alterations or Installations permitted by Landlord to remain in Premises East pursuant to Section 12 above, free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, Premises East on or after the Premises East Commencement Date by Tenant, or any Tenant Party, or other person or entity (exclusive of Landlord or any of Landlord’s officers, directors, agents, representatives, servants, employees, invitees and contractors) after entering the Premises with Tenant’s consent (collectively, “ Premises East Tenant HazMat Operations ” and together with Premises West Tenant HazMat operations, “ Tenant HazMat Operations ”) and released of all Hazardous Materials Clearances, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and 19 and Landlord’s repair obligations under this Lease excepted. At least 3 months prior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by any Governmental Authority) to be taken by Tenant in order to surrender the Premises (including any Installations permitted by Landlord to remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and otherwise released for unrestricted use and occupancy (the “ Surrender Plan ”). Such Surrender Plan shall be accompanied by a current listing of (i) all Hazardous Materials licenses and permits held by or on behalf of any Tenant Party with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated, generated, released or disposed of from the Premises by Tenant or any Tenant Party, and shall be subject to the review and approval of Landlord’s environmental consultant. In connection with the review and approval of the Surrender Plan, upon the

 

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request of Landlord, Tenant shall deliver to Landlord or its consultant such additional non-proprietary information concerning Tenant HazMat Operations as Landlord shall request. On or before such surrender, Tenant shall deliver to Landlord evidence that the approved Surrender Plan shall have been satisfactorily completed and Landlord shall have the right, subject to reimbursement at Tenant’s expense as set forth below, to cause Landlord’s environmental consultant to inspect the Premises and perform such additional procedures as may be deemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of this Lease, free from any residual impact from Tenant HazMat Operations. Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred by Landlord for Landlord’s environmental consultant to review and approve the Surrender Plan and to visit the Premises and verify satisfactory completion of the same, which cost shall not exceed $5,000. Landlord shall have the unrestricted right to deliver such Surrender Plan and any report by Landlord’s environmental consultant with respect to the surrender of the Premises to third parties.

If Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord, or if Tenant shall fail to complete the approved Surrender Plan, or if such Surrender Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or about the Premises, Landlord shall have the right to take such actions as Landlord may deem reasonable or appropriate to assure that the Premises and the Project are surrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent, without regard to the limitation set forth in the first paragraph of this Section 28 .

Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by Tenant. If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord’s election, either the cost of replacing such lost access card or key or the cost of reprogramming the access security system in which such access card was used or changing the lock or locks opened by such lost key. Any Tenant’s Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and/or disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises.

29. Waiver of Jury Trial . TO THE EXTENT PERMITTED BY LAW, TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

30. Environmental Requirements .

(a) Prohibition/Compliance/Indemnity . Tenant shall not cause or permit any Hazardous Materials (as hereinafter defined) to be brought upon, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises or the Project In violation of applicable Environmental Requirements (as hereinafter defined) by Tenant or any Tenant Party. If Tenant breaches the obligation stated in the preceding sentence, or if the presence of Hazardous Materials in the Premises results in contamination of the Premises, the Project or any adjacent property or if contamination of the Premises, the Project or any adjacent property by Hazardous Materials brought into, kept, used, stored,

 

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handled, treated, generated in or about, or released or disposed of from, the Premises by anyone other than Landlord and Landlord’s employees, agents and contractors otherwise occurs during the Term or any holding over, Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages and damages based upon diminution in value of the Premises or the Project, or the loss of, or restriction on, use of the Premises or any portion of the Project), expenses (including, without limitation, attorneys’, consultants’ and experts’ fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses (collectively, “ Environmental Claims ”) which arise as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration work required by any federal, state or local Governmental Authority because of Hazardous Materials present in the air, soil or ground water above, on, or under the Premises. Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises, the Project or any adjacent property caused by or permitted by Tenant or any Tenant Party results in any contamination of the Premises, the Project or any adjacent property, Tenant shall promptly take all actions at its sole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises, the Project or any adjacent property to the condition existing prior to the time of such contamination, provided that Landlord’s approval of such action shall first be obtained, which approval shall not unreasonably be withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises or the Project.

(b) Business . Landlord acknowledges that it is not the intent of this Section 30 to prohibit Tenant from using the Premises for the Permitted Use. Tenant may operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitored according to all then applicable Environmental Requirements. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord prior to the Effective Date, with respect to Premises West, and prior to the Premises East Commencement Date, with respect to Premises East, a list identifying each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises and setting forth any and all governmental approvals or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous. Materials on or from the Premises (“ Hazardous Materials List ”). Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver to Landlord a summary of any new Hazardous Materials that are brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises, with the requirement to submit the Hazardous Materials List and the summary to be satisfied by Tenant delivering to Landlord the Hazardous Material Business Plan which Tenant submits annually to the South San Francisco Fire Department and the County of San Mateo. Tenant shall deliver to Landlord true and correct copies of the following documents (the “ Haz Mat Documents ”) relating to the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials prior to the Effective Date, with respect to Premises West, and prior to the Premises East Commencement Date, with respect to Premises East, or if unavailable at that time, concurrent with the receipt from or submission to a Governmental Authority: permits; approvals; reports and correspondence; storage and management plans, notice of violations of any Legal Requirements; plans relating to the installation of any storage tanks to be installed in or under the Project (provided said installation of tanks shall only be permitted after Landlord has given Tenant its written consent to do so,

 

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which consent may be withheld in Landlord’s sole and absolute discretion); all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks; and a Surrender Plan (to the extent surrender in accordance with Section 28 cannot be accomplished in 3 months). Tenant is not required, however, to provide Landlord with any portion(s) of the Haz Mat Documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. It is not the intent of this Section to provide Landlord with information which could be detrimental to Tenant’s business should such information become possessed by Tenant’s competitors.

(c) Tenant Representation and Warranty . Tenant hereby represents and warrants to Landlord that (i) neither Tenant nor any of its legal predecessors has been required by any prior landlord, lender or Governmental Authority at any time to take remedial action in connection with Hazardous Materials contaminating a property which contamination was permitted by Tenant of such predecessor or resulted from Tenant’s or such predecessor’s action or use of the property in question, and (ii) Tenant is not subject to any enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority). If Landlord determines that this representation and warranty was not true as of the date of this Lease, Landlord shall have the right to terminate this Lease in Landlord’s sole and absolute discretion.

(d) Testing . Landlord shall have the right to conduct annual tests of the Premises to determine whether any contamination of the Premises or the Project has occurred as a result of Tenant’s use. Tenant shall be required to pay the cost of such annual test of the Premises; provided, however, that if Tenant conducts its own tests of the Premises using third party contractors and test procedures acceptable to Landlord which tests are certified to Landlord, Landlord shall accept such tests in lieu of the annual tests to be paid for by Tenant. In addition; at any time, and from time to time, prior to the expiration or earlier termination of the Term, Landlord shall have the right to conduct appropriate tests of the Premises and the Project to determine if contamination has occurred as a result of Tenant’s use of the Premises. In connection with such testing, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such non-proprietary information concerning the use of Hazardous Materials in or about the Premises by Tenant or any Tenant Party. If contamination has occurred for which Tenant is liable under this Section 30 , Tenant shall pay all costs to conduct such tests. If no such contamination is found, Landlord shall pay the costs of such tests (which shall not constitute an Operating Expense). Landlord shall provide Tenant with a copy of all third party, non-confidential reports and tests of the Premises made by or on behalf of Landlord during the Term without representation or warranty and subject to a confidentiality agreement. Tenant shall, at its sole cost and expense, promptly and satisfactorily remediate any environmental condition for which Tenant is responsible under this Lease that is identified by such testing in accordance with all Environmental Requirements. Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights which Landlord may have against Tenant.

(e) Underground Tanks . If underground or other storage tanks storing Hazardous Materials located on the Premises or the Project are used by Tenant or are hereafter placed on the Premises or the Project by Tenant, Tenant shall install, use, monitor, operate, maintain, upgrade and manage such storage tanks, maintain appropriate records, obtain and maintain appropriate insurance, implement reporting procedures, properly close any underground storage tanks, and take or cause to be taken all other actions necessary or required under applicable state and federal Legal Requirements, as such now exists or may hereafter be adopted or amended in connection with the installation, use, maintenance, management, operation, upgrading and closure of such storage tanks.

 

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(f) Tenant’s Obligations . Tenant’s obligations under this Section 30 shall survive the expiration or earlier termination of this Lease. During any period of time after the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials (including, without limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of the approved Surrender Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord’s sole discretion, which Rent shall be prorated daily.

(g) Definitions . As used herein, the term “ Environmental Requirements ” means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any Governmental Authority regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the Project, or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. As used herein, the term “ Hazardous Materials ” means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, or regulated by reason of its impact or potential impact on humans, animals and/or the environment under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall ‘ be deemed to be the “ operator ” of Tenant’s “ facility ” and the “ owner ” of all Hazardous Materials brought on the Premises by Tenant or any Tenant Party, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

31. Tenants Remedies/Limitation of Liability . Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). Upon any default by Landlord, Tenant shall give notice of such default by registered or certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease of property in or on which the Premises are located and Tenant shall offer such Holder and/or landlord a reasonable opportunity to cure the default, including, provided that such Holder and/or landlord is diligently pursuing obtaining possession of the Project, time to obtain possession of the Project by power of sale or a judicial action if such should prove necessary to effect a cure; provided Landlord shall have furnished to Tenant in writing the names and addresses of all such persons who are to receive such notices. All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder.

All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term “ Landlord ” in this Lease shall mean only the owner for the time being of the Premises. Upon the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing provided that the successor landlord assumes this Lease in writing, but such obligations shall be binding during the Term upon each new owner for the duration of such owner’s ownership.

32. Inspection and Access . Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Landlord and Landlord’s representatives may enter the Premises during business hours on not less than 48 hours advance written

 

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notice (except in the case of emergencies in which case no such notice shall be required and such entry may be at any time) for the purpose of effecting any such repairs, inspecting the Premises, showing the Premises to prospective purchasers and, during the last year of the Term, to prospective tenants or for any other business purpose, Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale. Landlord may grant easements, make public dedications, designate Common Areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction materially and adversely affects Tenant’s use or occupancy of the Premises for the Permitted Use. At Landlord’s request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions. Tenant shall at all times, except in the case of emergencies, have the right to escort Landlord or its agents, representatives, contractors or guests while the same are in the Premises, provided such escort does not materially and adversely affect Landlord’s access rights hereunder.

33. Security . Tenant acknowledges and agrees that security devices and services, if any, while intended to deter crime may not in given instances prevent theft or other criminal acts and that Landlord is not providing any security services with respect to the Premises. Tenant agrees that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises Tenant shall be solely responsible for the personal safety of Tenant’s officers, employees, agents, contractors, guests and invitees while any such person is in, on or about the Premises and/or the Project.

34. Force Majeure . Neither Landlord nor Tenant shall be responsible or liable for delays in the performance of its obligations hereunder (except any obligation to pay a sum of money) when caused by, related to, or arising out of acts of God, sinkholes or subsidence, strikes, lockouts, or other labor disputes, embargoes, quarantines, weather, national, regional, or local disasters, calamities, or catastrophes, inability to obtain labor or materials (or reasonable substitutes therefor) at reasonable costs or failure of, or inability to obtain, utilities necessary for performance, governmental restrictions, orders, limitations, regulations, or controls, national emergencies, delay in issuance or revocation of permits, enemy or hostile governmental action, terrorism, insurrection, riots, civil disturbance or commotion, fire or other casualty, and other causes or events beyond the reasonable control of Landlord or Tenant (“ Force Majeure ”). Notwithstanding the foregoing, the obligation of either .party to pay a sum of money to the other party within a specified period of time under this Lease shall not be subject to extension as the result of Force Majeure.

35. Brokers . Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “ Broker ”) in connection with this transaction and that no Broker brought about this transaction. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction.

36. Limitation on Landlord’s Liability . NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO: TENANT’S PERSONAL PROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND

 

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AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTED AGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM.

37. Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in effect to such illegal, invalid or unenforceable clause or provision as shall be legal, valid and enforceable.

38. Signs; Exterior Appearance. Tenant shall not, without the prior written consent of Landlord, which may be granted or withheld in Landlord’s sole discretion: (i) attach any awnings, exterior lights, decoration’s, balloons, flags, pennants, banners, painting or other projection to any outside wall of the Project, (ii) use any curtains, blinds, shades or screens other than Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any equipment, furniture or other items of personal property on any exterior balcony, or (vi) paint, affix or exhibit on any part of the Premises or the Project any signs, notices, window or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises. Interior signs on doors and the directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost and expense of Tenant, and shall be of a size, color and type reasonably acceptable to Landlord. Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord’s standard lettering. The directory tablet shall be provided exclusively for the display of the name and location of tenants.

39. Intentionally Omitted .

40. Right to Extend Term . Tenant shall have the right to extend the Term of this Lease upon the following terms and conditions:

(a) Extension Right . Tenant shall have 1 right (the “ Extension Right ”) to extend the term of this Lease with respect to the entire Premises subject to this Lease at the time the Extension Right is exercised for 5 years (the “ Extension Term ”) ( i.e. , April 1, 2014 through March 31, 2019) on the same terms and conditions as this Lease (other than with respect to Base Rent) by giving Landlord written notice of its election to exercise the Extension Right at least 9 months prior to the expiration of the Base Term ( i.e. , not later than June 30, 2013). If Tenant fails to timely exercise the Extension Right, then the Extension Right shall automatically lapse and be of no further force and effect.

 

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Base Rent shall be increased on the commencement date of the Extension Term ( i.e ., April 1, 2014) to $3.15 per rentable square foot per month (NNN) for the first 12 Months of the Extension Term ( i.e ., April 1, 2014 through March 31, 2015), and on each annual anniversary of the commencement of the Extension Term ( i.e ., each April 1st) by multiplying the Base Rent payable immediately before such adjustment by 3% and adding the resulting amount to the Base Rent payable immediately before such adjustment.

(b) Rights Personal . The Extension Right is personal to Tenant and is not assignable to any other person (except in connection with a Permitted Assignment) without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in this Lease.

(c) Exceptions . Notwithstanding anything set forth above to the contrary, the Extension Right shall not be in effect and Tenant may not exercise the Extension Right

(i) during any period of time that Tenant is in Default under any provision of this Lease; or

(ii) if Tenant has been in Default under any provision of this Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period immediately prior to the date that Tenant intends to exercise the Extension Right whether or not the Defaults are cured.

(d) No Extensions. The period of time within which the Extension Right may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Extension Right

(e) Termination. The Extension Right shall terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (1) Tenant fails to timely cure any default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Extension Right to the date of the commencement of the Extension Term, whether or not such Defaults are cured.

The Extension Right shall terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Extension Right to the date of the commencement of the Extension Term, whether or not such Defaults are cured.

41. Intentionally Omitted .

42. Intentionally Omitted.

43. Miscellaneous.

(a) Notices. All notices or other communications between the parties shall be in writing and shall be deemed duly given upon delivery or refusal to accept delivery by the addressee thereof if delivered in person, or upon actual receipt if delivered by reputable overnight guaranty courier, addressed and sent to the parties at their addresses set forth above. Landlord and Tenant may from time to time by written notice to the other designate another address, within the continental United States, for receipt of future notices.

 

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(b) Joint and Several Liability. If and when included within the term “ Tenant ,” as used in this instrument, there is more than one person or entity, each shall be jointly and severally liable for the obligations of Tenant.

(c) Financial Information. Tenant shall furnish Landlord in electronic format true and complete copies of (i) Tenant’s most recent audited annual financial statements within 30 days after the annual audited financial statements are approved by Tenant’s Board of Directors, (ii) at Landlord’s request from time to time, updated business plans, including cash flow projections and/or pro forma balance sheets and income statements, all of which shall be treated by Landlord as confidential information belonging to Tenant, (iii) corporate brochures and/or profiles prepared by Tenant for prospective investors, and (iv) any other financial information or summaries that Tenant typically provides to its lenders or shareholders.

(d) Recordation. Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.

(e) Interpretation. The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Lease or any exhibits or amendments hereto. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

(f) Not Binding Until Executed. The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

(g) Limitations on Interest. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any Interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord’s and Tenant’s express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.

(h) Choice of Law. Construction and interpretation of this Lease shall be governed by the internal laws of the state in which the Premises are located, excluding any principles of conflicts of laws.

(i) Time. Time is of the essence as to the performance of Landlord’s and Tenant’s obligations under this Lease.

(j) OFAC. Each of Landlord and Tenant is currently (a) in compliance with and shall at all times during the Term of this Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“ OFAC ”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “ OFAC Rules ”), (b) not listed on, and shall not during the Term of this Lease be listed on, the Specially Designated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

 

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(k) Incorporation by Reference. All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof if there is any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.

(l) No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Base Rent or any Additional Rent will be other than on account of the earliest stipulated Base Rent and Additional Rent, nor will any endorsement or statement on any check or letter accompanying a check for payment of any Base Rent or Additional Rent be an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or to pursue any other remedy provided in this Lease.

(m) Hazardous Activities. Notwithstanding any other provision of this Lease, Landlord, for itself and its employees, agents and contractors, reserves the right to refuse to perform any repairs or services in any portion of the Premises which, pursuant to Tenant’s routine safety guidelines, practices or custom or prudent industry practices, require any form of protective clothing or equipment other than safety glasses. In any such case, Tenant shall contract with parties who are acceptable to Landlord, in Landlord’s reasonable discretion, for all such repairs and services, and Landlord shall, to the extent required, equitably adjust Tenant’s Share of Operating Expenses in respect of such repairs or services to reflect that Landlord is not providing such repairs or services to Tenant.

(n) Project Specific Requirements. Tenant acknowledges that the use and operation of the Project are governed by, among other things, CC&Rs and Environmental CC&Rs, and Tenant acknowledges having reviewed copies of the same. Tenant agrees to comply with all of the terms of the CC&Rs and Environmental CC&Rs which are applicable to tenants of the Project including, without limitation, maintaining the insurance required under the Environmental CC&Rs. As used herein, (i) “ CC&Rs ” mean that certain Amended and Restated Declaration of Covenants, Conditions and Restrictions for Sierra Point recorded in the Official Records of San Mateo County on October 23, 1998, as amended; and (ii) “ Environmental CC&Rs ” mean that certain First Amended and Restated Declaration of Covenants, Conditions and Environmental Restrictions Relating to Environmental Compliance for Sierra Point, recorded in the Official Records of San Mateo County on October 20, 1999 as Instrument No. 1999-176058.

[Signatures on next page ]

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

 

TENANT:
ACHAOGEN, INC.,
a Delaware corporation
By:  

/s/ John C. Doyle

Its:   Chief Financial Officer
LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company.

By:   ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware Limited partnership, its managing member
  By:   ARE-QRS CORP.,
   

a Maryland corporation,

its general partner

    By:  

/s/ Eric S. Johnson

    Its:   Vice President
      Real Estate Legal Affairs

 

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EXHIBIT A-1 TO LEASE

DESCRIPTION OF PREMISES WEST

(See attached)

 

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EXHIBIT A-2 TO LEASE

DESCRIPTION OF PREMISES EAST

(See attached)

 

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EXHIBIT B TO LEASE

DESCRIPTION OF PROJECT

CITY OF SOUTH SAN FRANCISCO

PARCEL 1 :

PARCEL C, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP 98-044 LANDS OF SIERRA POINT, LLC, CITY OF SOUTH SAN FRANCISCO”, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN MATEO COUNTY, STATE OF CALIFORNIA, ON AUGUST 6, 1999, IN BOOK 71 OF PARCEL MAPS, AT PAGE(S) 71 AND 72.

PARCEL 2 :

THOSE CERTAIN ACCESS EASEMENTS AS DESCRIBED IN THE FIRST AMENDMENT TO AMENDED AND RESTATED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR SIERRA POINT RECORDED AUGUST 6, 1999, AS DOCUMENT NO. 1999-134787, AND RERECORDED OCTOBER 20 1999, AS DOCUMENT NO. 1999-176057.

ASSESSOR’S PARCEL NO. 015-010-570 JOINT PLANT NO. 015-001-010-02.04A

 

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EXHIBIT C TO LEASE

RELINQUISHED SPACE

(See attached)

 

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EXHIBIT D TO LEASE

RULES AND REGULATIONS

1. The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or any Tenant Party, or used by them for any purpose other than ingress and egress to and from the Premises.

2. Other than as expressly provided for in the Lease, Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the Project.

3. Except for animals assisting the disabled, no animals shall be allowed in the offices, halls, or corridors in the Project.

4. Tenant shall not disturb the occupants of the Project or adjoining buildings by the use of any radio or musical instrument or by the making of loud or improper noises.

5. If Tenant desires telegraphic, telephonic or other electric connections in the Premises, promptly upon Tenant’s request, Landlord or its agent will direct the electrician as to where and how the wires may be introduced; and, without such direction, no boring or cutting of wires will be permitted. Any such installation or connection shall be made at Tenant’s expense.

6. Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Premises, except as specifically approved in the Lease; provided, however, that Tenant shall have the right to install customary equipment that is used for research and is part of scientific equipment (e.g., Autoclaves, washers with boilers built into them). The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Project.

7. Parking any type of recreational vehicles is specifically prohibited on or about the Project. Except for the overnight parking of operative vehicles, no vehicle of any type shall be stored in the parking areas at any time. In the event that a vehicle is disabled, it shall be removed within 48 hours. There shall be no “For Sale” or other advertising signs on or about any parked vehicle. All vehicles shall be parked in the designated parking areas in conformity with all signs and other markings. All parking will be open parking, and no reserved parking, numbering or lettering of individual spaces will be permitted except as specified by Landlord.

8. Tenant shall maintain the Premises free from rodents, insects and other pests.

9. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in material violation of the Rules and Regulations of the Project.

10. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitors or any other employee or person.

 

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11. Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service equipment affecting the Premises.

12. Tenant shall not permit storage outside the Premises, including without limitation, outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Premises.

13. All moveable trash receptacles provided by the trash disposal firm for the Premises must be kept in the trash enclosure areas, If any, provided for that purpose.

14. No auction, public or private, will be permitted on the Premises or the Project.

15. No awnings shall be placed over the windows in the Premises except with the prior written consent of Landlord.

16. The Premises shall not be used for lodging, sleeping or cooking or for any immoral or illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall be operated in the Premises.

17. Tenant shall ascertain from Landlord the maximum amount of electrical current which can safely be used in the Premises, taking into account the capacity of the electrical wiring in the Project and the Premises and the needs of other tenants, and shall not use more than such safe capacity. Landlord’s consent to the installation of electric equipment shall not relieve Tenant from the obligation not to use more electricity than such safe capacity.

18. Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.

19. Tenant shall not install or operate on the Premises any machinery or mechanical devices of a nature not directly related to Tenant’s Permitted Use of the Premises and shall keep all such machinery free of material vibration, noise and air waves which may be transmitted beyond the Premises.

 

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EXHIBIT E-1 TO LEASE

REMOVABLE INSTALLATIONS

None.

 

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EXHIBIT E-2 TO LEASE

LANDLORD’S PERSONAL PROPERTY

To be determined

 

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7000 Shoreline/Achaogen - Page 1

EXHIBIT F TO LEASE

WORK LETTER

THIS WORK LETTER (this “ Work Letter ”) is made and entered into by and between ARE-SAN FRANCISCO NO. 17, LLC, a Delaware limited liability company (“Landlord”), and ACHAOGEN, INC., a Delaware corporation (“ Tenant ”), and is attached to and made a part of the Amended and Restated Lease Agreement by and between Landlord and Tenant. Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.

1. General Requirements.

(a) Tenant’s Authorized Representative. Tenant designates Zeryn Sarpangal (“ Tenant’s Representative ”) as the only person authorized to act for Tenant pursuant to this Work Letter. Landlord shall not be obligated to respond to or act upon any request, approval, inquiry or other communication (“ Communication ”) from or on behalf of Tenant in connection with this Work Letter unless such Communication is in writing from Tenant’s Representative. Tenant may change Tenant’s Representative at any time upon not less than 5 business days advance written notice to Landlord. Neither Tenant nor Tenant’s Representative shall be authorized to direct Landlord’s contractors in the performance of Landlord’s Work (as hereinafter defined).

(b) Landlord’s Authorized Representative. Landlord designates Todd Miller and Greg Gehlen (any such individual acting alone, “ Landlord’s Representative ”) as the only persons authorized to act for Landlord pursuant to this Work Letter. Tenant shall not be obligated to respond to or act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in connection with this Work Letter unless such Communication is in writing from Landlord’s Representative. Landlord may change any Landlord’s Representative at any time upon not less than 5 business days advance written notice to Tenant. Landlord’s Representative shall be the sole persons authorized to direct Landlord’s contractors in the performance of Landlord’s Work.

(c) Architects, Consultants and Contractors. Landlord and Tenant hereby acknowledge and agree that the architect, general contractor and any subcontractors for the Tenant Improvements shall be selected by Landlord.

2. Tenant Improvements. As used herein, “ Tenant Improvements ” shall mean the improvements described on Schedule 1 attached hereto. The Tenant Improvements are further described on the construction budget attached hereto as Schedule 2. Other than Landlord’s Work (as defined in Section 3(a) below, Landlord shall not have any obligation whatsoever with respect to the finishing of the Premises for Tenant’s use and occupancy. For informational purposes only, a construction schedule for the Tenant Improvements is attached hereto as Schedule 3. Landlord and Tenant acknowledge and agree that (i) a portion of the Tenant Improvements will include separately demising the Premises (the “ Demising Work ”), (ii) the Demising Work will be performed after the Premises East Commencement Date, (ii) the Demising Work will be performed during Tenant’s occupancy of the Premises. Tenant shall permit access to the Premises at all reasonable times to allow Landlord to perform the Demising Work. The completion of the Demising Work may have a material adverse effect on Tenant’s use and quiet enjoyment of the Premises and the operation of Tenant’s business at the Premises, including, without limitation, the creation of dust, noise and vibrations, none of which shall constitute a constructive eviction of Tenant, an interruption of Tenant’s use and quiet enjoyment of the Premises or result in any offset or abatement of Rent whatsoever, provided, that, Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s business in the Premises while performing the Demising Work.

 

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3. Performance of Landlord’s Work .

(a) Definition of Landlord’s Work . As used herein, “ Landlord’s Work ” shall mean the work of designing, permitting and constructing the Tenant Improvements.

(b) Commencement and Permitting . After the Effective Date, Landlord shall promptly commence construction of the Tenant Improvements upon obtaining a building permit (the “ TI Permit ”) authorizing the construction of the Tenant Improvements and thereafter diligently prosecute such construction to completion. The cost of obtaining the TI Permit shall be payable by Landlord. Tenant shall reasonably assist Landlord in obtaining the TI Permit. If any Governmental Authority having jurisdiction over the construction of Landlord’s Work or any portion thereof shall impose terms or conditions upon the construction thereof that: (i) are inconsistent with Landlord’s obligations hereunder, (ii) increase the cost of constructing Landlord’s Work, or (iii) will materially delay the construction of Landlord’s Work, Landlord and Tenant shall reasonably and in good faith seek means by which to mitigate or eliminate any such adverse terms and conditions.

(c) Completion of Landlord’s Work . Landlord shall substantially complete or cause to be substantially completed Landlord’s Work in a good and workmanlike manner, in accordance with the TI Permit subject, in each case, to Minor Variations and normal “punch list” items of a non-material nature that do not interfere with the use of the Premises (“ Substantial Completion ” or “ Substantially Complete ”). Upon Substantial Completion of Landlord’s Work, Landlord shall require the general contractor to execute and deliver, for the benefit of Tenant and Landlord, a Certificate of Substantial Completion in the form of the American Institute of Architects (“ AIA ”) document G704. For purposes of this Work Letter, “ Minor Variations ” shall mean any modifications reasonably required: (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with any required permit (including the TI Permit); (ii) to comply with any request by Tenant for modifications to Landlord’s Work; (iii) to comport with good design, engineering, and construction practices that are not material; or (iv)to make reasonable adjustments for non-material field deviations or conditions encountered during the construction of Landlord’s Work.

(d) Selection of Materials . As to all building materials and equipment that Landlord is obligated to supply under this Work Letter, Landlord shall select the manufacturer thereof in its sole and absolute discretion.

(e) Construction Defects . When Landlord’s Work is Substantially Complete, subject to the remaining terms and provisions of this Section 3(e) , Tenant shall accept Landlord’s Work. Tenant’s acceptance of Landlord’s Work shall not constitute a waiver of: (i) any warranty with respect to workmanship (including installation of equipment) or material (exclusive of equipment provided directly by manufacturers) or (ii) any non-compliance of Landlord’s Work with applicable Legal Requirements (collectively, a “ Construction Defect ”). Tenant shall have one year after Substantial Completion within which to notify Landlord of any such Construction Defect discovered by Tenant, and Landlord shall use reasonable efforts to remedy or cause the responsible contractor to remedy any such Construction Defect within 30 days thereafter. Notwithstanding the foregoing, Landlord shall not be in default under the Lease if the applicable contractor, despite Landlord’s reasonable efforts, fails to remedy such Construction Defect within such 30-day period, in which case Landlord shall have no further obligation with respect to such Construction Defect other than to cooperate, at no cost to Landlord, with Tenant should Tenant elect to pursue a claim against such contractor, provided that Tenant shall defend with counsel reasonably acceptable to Landlord, indemnify and hold Landlord harmless from and against any claims arising out of or in connection with any such claim.

 

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Tenant shall be entitled to receive the benefit of all construction warranties and manufacturer’s equipment warranties relating to equipment installed in the Premises. If requested by Tenant, Landlord shall attempt to obtain extended warranties from manufacturers and suppliers of such equipment, but the cost of any such extended warranties shall be borne solely by Tenant. Landlord shall promptly undertake and complete, or cause to be completed, all punch list items.

4. Changes . Any changes requested by Tenant to the Tenant Improvements shall be requested and instituted in accordance with the provisions of this Section 4 and shall be subject to the written approval of Landlord, such approval not to be unreasonably withheld, conditioned or delayed.

(a) Tenant’s Request For Changes. If Tenant shall request changes to the Tenant Improvements (“ Changes ”), Tenant shall request such Changes by notifying Landlord in writing in substantially the same form as the AIA standard change order form (a “ Change Request ”), which Change Request shall detail the nature and extent of any such Change. Such Change Request must be signed by Tenant’s Representative. Landlord shall, before proceeding with any Change, use commercially reasonable efforts to respond to Tenant as soon as is reasonably possible with an estimate of: (i) the time it will take, and (ii) the architectural and engineering fees and costs that will be incurred, to analyze such Change Request (which costs shall be paid by Tenant to the extent actually incurred, whether or not such change is implemented). Landlord shall thereafter submit to Tenant in writing, within 5 business days of receipt of the Change Request (or such longer period of time as is reasonably required depending on the extent of the Change Request), an analysis of the additional cost or savings involved, including, without limitation, architectural and engineering costs and the period of time, if any, that the Change will extend the date on which Landlord’s Work will be Substantially Complete.

(b) Implementation of Changes. If Tenant: (i) approves in writing the cost or savings and the estimated extension in the time for completion of Landlord’s Work, if any, and (ii) deposits with Landlord any Excess TI Costs required in connection with such Change, Landlord shall cause the approved Change to be instituted.

5. Costs .

(a) TI Costs . Except as otherwise provided in Section 5(13) below, Landlord shall be responsible for the payment of design, permits and construction costs in connection with the construction of the Tenant Improvements, including, without limitation, the cost of electrical power and other utilities used in connection with the construction of the Tenant Improvements and Landlord’s out-of-pocket expenses and all of Landlord’s project management fees (collectively, “ TI Costs ”). Notwithstanding anything to the contrary contained herein, in no event shall Landlord be required to pay for any furniture, personal property or other non-Building system materials or equipment, including, but not limited to, Tenant’s voice or data cabling, non-ducted biological safety cabinets and other scientific equipment not incorporated into the Tenant Improvements.

(b) Excess TI Costs. Notwithstanding anything to the contrary contained herein, Tenant acknowledges and agrees that, Landlord shall have no obligation to bear any costs arising from or related to Tenant’s Changes to the Tenant Improvements, and the cost of Changes and Change Requests (collectively, “ Excess TI Costs ”). Upon Landlord’s request from time to time, Tenant shall deposit with Landlord, as a condition precedent to Landlord’s obligation to complete the Tenant Improvements, 100% of the Excess TI Costs. If Tenant fails to deposit any Excess TI Costs with Landlord, Landlord shall have all of the rights and remedies set forth in the Lease for nonpayment of Rent (including, but not limited to, the right to interest at the Default Rate and the right to assess a late charge). For purposes of any litigation instituted with regard to such amounts, those amounts will be deemed Rent under the Lease.

 

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6. No Interference . Neither Tenant nor any Tenant Party (as defined in the Lease) shall interfere with the performance of Landlord’s Work, nor with any inspections or issuance of final approvals by applicable Governmental Authorities.

7. Miscellaneous .

(a) Consents. Whenever consent or approval of either party is required under this Work Letter, that party shall not unreasonably withhold, condition or delay such consent or approval, unless expressly set forth herein to the contrary.

(b) Modification. No modification, waiver or amendment of this Work Letter or of any of its conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by Landlord and Tenant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

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SCHEDULE 1 TO WORK LETTER

SPACE PLAN

(See attached)

 

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SCHEDULE 2 TO WORK LETTER

CONSTRUCTION BUDGET

(See attached)

 

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SCHEDULE 3 TO WORK LETTER

CONSTRUCTION SCHEDULE

(See attached)

 

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EXHIBIT G TO LEASE

FORM SNDA

(see attached)

 

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Recording Requested by

and when Recorded return to:

WELLS FARGO BANK, NA.

Commercial Mortgage Servicing

1320 Willow Pass Road, Suite 300

Concord, CA 94520

Attention: CMS Portfolio Services

Loan No.: 85-0203117

SUBORDINATION AGREEMENT

and

ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

Tenant’s Trade Name: ACHAOGEN, INC.

NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF THE MORTGAGE-(DEFINED BELOW).

This SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (“Agreement”) is made as of December             , 2010 by and between Achaogen, Inc., a Delaware corporation (“Tenant”) and Bank of America, National Association, as successor by merger to LaSalle Bank, National Association, as Trustee for the registered holders of Bear Steams Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, 2006-PWR13 (“Lender”), with reference to the following facts and intentions of the parties:

RECITALS

 

A. ARE-San Francisco No. 17, LLC, a Delaware limited liability company (“Owner”) is the owner of the land and improvements commonly known as 7000 Shoreline Court, South San Francisco, California and more specifically described in Exhibit B attached hereto (“Property”) and the owner of the Landlord’s interest in the lease identified in Recital B below (“Lease”).

 

B. Tenant is the owner of the tenant’s interest in that lease dated December 2010 executed by Owner, as landlord, and Tenant, as tenant (the “Lease”), which amends and restates that certain lease dated October 12, 2009 by and between Owner and Tenant related to certain space at the Property (the “Existing Lease”). Initially capitalized terms used and not defined herein shall have the meanings set forth in the Lease.

 

C. Owner is indebted to Lender under a promissory note in the original principal amount of $146,000,000.00 which note is secured by, among other things, a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing encumbering the Property (“Mortgage”), dated July 21, 2006 and recorded July 21, 2006 in the Official Records of the County of San Mateo, State of California as Instrument No. 2006-109313 (“Mortgage”).

THEREFORE, the parties agree as follows:

 

1


1. SUBORDINATION .

 

  1.1 Prior Lien . The Mortgage, and any modifications, renewals or extensions thereof, shall unconditionally be and at all times remain a lien or charge on the Property prior and superior to the Lease.

 

  1.2 Entire Agreement. This Agreement shall be the whole agreement and only agreement with regard to the subordination of the Lease to the lien or charge of the Mortgage, and shall supersede and cancel, but only insofar as would affect the priority between the Mortgage and the Lease, any prior agreements as to such subordination, including, without limitation, those provisions, if any, contained in the Lease which provide for the subordination of the Lease to a deed or deeds of trust, a mortgage or mortgages, a deed or deeds to secure debt or a trust indenture or trust indentures.

 

  1.3 Disbursements . Lender, in making disbursements pursuant to the Note, the Mortgage or any loan agreements with respect to the Property, is under no obligation or duty to, nor has Lender represented that it will, see to the application of such proceeds by the person or persons to whom Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat this agreement to subordinate in whole or in part.

 

  1.4 Subordination . Tenant intentionally and unconditionally waives, relinquishes and subordinates all of Tenant’s right, title and interest in and to the Property, to the lien of the Mortgage.

 

2. NON-DISTURBANCE AND ATTORNMENT .

 

  2.1 Non-Disturbance . Notwithstanding anything to the contrary contained in the Lease, so long as there shall exist no breach, default or event of default (beyond any period given to Tenant in the Lease to cure such default) on the part of Tenant under the Lease at the time of any foreclosure of the Mortgage, Lender agrees that the leasehold interest of Tenant under the Lease shall not be terminated by reason of such foreclosure, but rather the Lease shall continue in full force and effect and Lender shall recognize and accept Tenant as tenant under the Lease subject to the provisions of the Lease.

 

  2.2 Attornment . Notwithstanding anything to the contrary contained in the Lease, should title to the leased premises and the landlord’s interest in the Lease be transferred to Lender or any other person or entity (“New Owner”) by, or in-lieu of judicial or non-judicial foreclosure of the Mortgage, Tenant agrees, for the benefit of New Owner and effective immediately and automatically upon the occurrence of any such transfer, that: (a) Tenant shall pay to New Owner all rental payments required to be made by Tenant pursuant to the terms of the Lease for the remainder of the Lease term; (b) Tenant shall be bound to New Owner in accordance with all of the provisions of the Lease for the remainder of the Lease term; (c) Tenant hereby attorns to New Owner as its landlord, such attornment to be effective and self-operative without the execution of any further instrument; (d) New Owner shall not be liable for any default of any prior landlord under the Lease, including, without limitation, Owner, except where such default is continuing at the time New Owner acquires title to the leased premises and New Owner fails to cure same after receiving notice thereof; (e) New Owner shall not be subject to any offsets or defenses which Tenant may have against any prior landlord under the Lease, including, without limitation, Owner, except where such offsets or defenses arise out of a default of the prior landlord which is continuing at the time New Owner acquires title to the leased premises and New Owner fails to cure same after receiving notice thereof; and (f) New Owner shall not be liable for any obligations of landlord arising under’ the Lease following any subsequent transfer of the title to the leased premises by New Owner.

 

2


3. ESTOPPEL. Tenant warrants and represents to Lender, as of the date hereof, that:

 

  3.1 Lease Effective . The Lease has been duly executed and delivered by Tenant and, subject to the terms and conditions thereof the Lease is in full force and effect, the obligations of Tenant thereunder are valid and binding, and there have been no modifications or additions to the Lease, written or oral, other than those, if any, which are referenced above in Recital B.

 

  3.2 No Default . To the best of Tenant’s knowledge: (a) there exists no breach, default, or event or condition which, with the giving of notice or the passage of time or both, would constitute a breach or default under the Lease either by Tenant or Owner; and (b) Tenant has no existing claims, defenses or offsets against rental due or to become due under the Lease.

 

  3.3 Entire Agreement . The Lease and the Existing Lease together constitute the entire agreement between Owner and Tenant with respect to the Property, and Tenant claims no rights of any kind whatsoever with respect to the Property, other than as set forth in, the Lease and the Existing Lease.

 

  3.4 Minimum Rent . As of the Premises East Commencement Date, the annual minimum rent under the Lease is $977,343.60, subject to any escalation, percentage rent and/or common area maintenance charges provided in the Lease.

 

  3.5 Rental Payment Commencement Date . The rents stated in Section 3.4 above will begin upon the Premises East Commencement Date.

 

  3.6 Rentable area . As of the Premises East Commencement Date, the rentable area of the leased premises will be 35,411 square feet.

 

  3.7 Commencement Date . The term of the Lease will commence upon the mutual execution and delivery of the Lease.

 

  3.8 Expiration Date . The term of the Lease will expire on March 31, 2014, subject to the extension options set forth in the Lease.

 

  3.9 No Deposits or Prepaid Rent . No deposits or prepayments of rent have been made in connection with the Lease, except as follows: A security deposit in the amount of $175,937.00, in the form of a letter of credit.

 

  3.10 No Other Assignment . Tenant has received no notice, and is not otherwise aware of, any other assignment of the landlord’s interest in the Lease.

 

  3.11 No Purchase Option or Refusal Rights . Tenant does not have any option or preferential right to purchase all or any part of the Property.

 

3


4. MISCELLANEOUS .

 

  4.1 Heirs, Successors and Assigns . The covenants herein shall be binding upon, and inure to the benefit of, the heirs, successors and assigns of the parties hereto. Whenever necessary or appropriate to give logical meaning to a provision of this Agreement, the term “Owner” shall be deemed to mean the then current owner of the Property and the landlord’s interest in the Lease.

 

  4.2 Addresses; Request for Notice . All notices and other communications that are required or permitted to be given to a party under this Agreement shall be in writing and shall be sent to such party, either by personal delivery, by overnight delivery service, by certified first class mail, return receipt requested, or by facsimile transmission, to the address or facsimile number below. All such notices and communications shall be effective upon receipt of such delivery or facsimile transmission. The addresses and facsimile numbers of the parties shall be:

 

   

Tenant:

  

Lender:

 

Achaogen, Inc.

7000 Shoreline Court

South San Francisco, CA 94080

Attention: Finance Department

  

Wells Fargo, N.A., as Master Servicer

Attn: Portfolio Services

1320 Willow Pass Road, Ste 300 Concord,

California 94520

 

FAX No.: 650-266-1130

   FAX No.: 925-674-0567

provided , however , any party shall have the right to change its address for notice hereunder by the giving of written notice thereof to the other party in the manner set forth in this Agreement.

 

  4.3 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute and be construed as one and the same instrument.

 

  4.4 Section Headings . Section headings in this Agreement are for convenience only and are not to be construed as part of this Agreement or in any way limiting or applying the provisions hereof.

 

  4.5 Attorneys’ Fees . If any legal action, suit or proceeding is commenced between Tenant and Lender regarding their respective rights and obligations under this Agreement, the prevailing party shall be entitled to recover, in addition to damages or other relief, costs and expenses, attorneys’ fees and court costs (including, without limitation, expert witness fees). As used herein, the term “prevailing party” shall mean the party which obtains the principal relief it has sought, whether by compromise settlement or judgment. If the party which commenced or instituted the action, suit or proceeding shall dismiss or discontinue it without the concurrence of the other party, such other party shall be deemed the prevailing party.

 

  4.6 INCORPORATION . Exhibit A , the owner’s consent is attached hereto and incorporated herein by this reference.

 

4


IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

“LENDER”

 

Bank of America, National Association, as successor by merger to LaSalle Bank, National Association, as Trustee for the registered holders of Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, 2006-PWR13
By:   Wells Fargo Bank, National Association, as Master Servicer under the Pooling and Servicing Agreement dated as of September 1, 2006, among BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC., as Depositor, PRUDENTIAL ASSET RESOURCES, INC., as a Master Servicer, WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Master Servicer, BELIOS AMC, LLC, as successor to LNR PARTNERS, INC., as General Special Servicer, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Certificate Administrator and as Tax Administrator, and BANK OF AMERICA, NATIONAL ASSOCIATION, as successor by merger to LASALLE BANK, NATIONAL ASSOCIATION, as Trustee
  By:  

 

  Name:  

 

  Title:  

 

    “TENANT”
Achaogen, Inc., a Delaware corporation
By:  

 

Its:  

 

IT IS RECOMMENDED THAT PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE

PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.

ALL SIGNATURES MUST BE ACKNOWLEDGED.


EXHIBIT A

OWNER’S CONSENT

The undersigned, which owns the Property and the landlord’s interest in the Lease, hereby consents to the execution of the foregoing SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, and to implementation of the agreements and transactions provided for therein.

 

“OWNER”

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:  

ALEXANDRIA REAL ESTATE EQUITIES,

L.P., a Delaware limited partnership, its

managing member

  By:   ARE-QRS. CORP.,
   

a Maryland corporation,

its general partner

    By:  

 

    Its:  

 


County of  

 

 

On   

 

   before me,   

 

  ,
               Date                   Here Insert Name and Title of Officer  

 

personally appeared   

 

  ,
   Name(s) of Signer(s)  

 

 

 

who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.   
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.    Place Notary Seal Above

WITNESS my hand and official seal.

 

Signature  

 

  Signature of Notary Public


EXHIBIT B

(Description of Property)

EXHIBIT B to SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT AGREEMENT dated as of October 12, 2009, executed by Achaogen, Inc., a Delaware corporation, as “Tenant”, and Bank of America, National Association, as successor by merger to LaSalle Bank, National Association, as Trustee for the registered holders of Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, 2006-PWR13 “Lender”.

All that certain land located in the County of San Mateo, State of California, described as follows:

PARCEL 1:

PARCEL C, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL MAP 98-044 LANDS OF SIERRA POINT, LLC, CITY OF SOUTH SAN FRANCISCO”, PILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN MATEO COUNTY, STATE OF CALIFORNIA, ON AUGUST 6, 1999, IN BOOK 71 OF PARCEL MAPS, AT PAGE(S) 71 AND 72.

PARCEL 2:

THOSE CERTAIN ACCESS EASEMENTS, PARKING LOT EASEMENTS, SEWER EASEMENTS AND STORM DRAIN EASEMENTS, AS DESCRIBED IN THE FIRST AMENDMENT TO AMENDED AND RESTATED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR SIERRA POINT-RECORDED AUGUST 6, 1999, AS DOCUMENT NO. 1999-334787, AND-RERECORDED OCTOBER 20-1999, AS DOCUMENT NO. 1999-176057.

ASSESSOR’S PARCEL NO. 015-010-570


   7000 Shoreline/Achaogen

 

EXHIBIT H TO LEASE

ACKNOWLEDGMENT OF COMMENCEMENT DATE

This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made as of this             day of             , between ARE-SAN FRANCISCO NO. 17, LLC, a Delaware limited liability company (“ Landlord ”), and ACHAOGEN, INC., a Delaware corporation (“ Tenant ”), and is attached to and made a part of the Lease dated as of             , 2010 (the “ Lease ”), by and between Landlord and Tenant. Any initially capitalized terms used but not defined herein, shall have the meanings given them in the Lease.

Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the Premises East Commencement Date is             ,             and the termination date of the Base Term of the Lease shall be midnight on             ,             . In case of a conflict between this Acknowledgment of Commencement Date and Lease, this Acknowledgment of Commencement Date shall control for all purposes.

IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE to be effective on the date first above written.

 

TENANT:
ACHAOGEN, INC.,
a Delaware corporation
By:  

 

Its:  

 

LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:   ALEXANDRIA REAL ESTATE EQUITIES, L.P., a Delaware limited partnership, its managing member
  By:   ARE-QRS CORP.,
   

a Maryland corporation,

its general partner

    By:  

 

    Its:  

 

 

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Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

Copy or Distribute. Alexandra and the Alexandria Logo are

registered trademark of Alexandria Real Estate Equities, Inc.

Exhibit 10.9(B)

ARE-SAN FRANCISCO NO. 17, LLC

c/o Alexandria Real Estate Equities, Inc.

385 E. Colorado Boulevard, Suite 299

Pasadena, California 91101

January 4, 2011

Achaogen, Inc.

7000 Shoreline Court

South San Francisco, CA 94080

Attention: Finance Department

 

Re: 7000 Shoreline Court, South San Francisco, California

Ladies and Gentlemen:

Achaogen, Inc. (“Tenant”) and ARE-San Francisco No. 17, LLC (“Landlord”) are parties to that certain Amended and Restated Lease Agreement dated December 29, 2010 (“Lease”) whereby Tenant leases certain premises at the above-referenced building. Initially capitalized terms used and not defined herein shall have the meanings set forth in the Lease.

Notwithstanding anything in the Lease to the contrary, Landlord and Tenant agree that (i) Base Rent for the month of March 2011 shall be $51,032.40 and (ii) Tenant’s Share of Operating Expenses for the month of March 2011 shall be 16.27%. Tenant shall continue to occupy and pay rent for Premises East (as defined in the Existing Lease) for the month of March 2011 under the MJ Research Sublease (as defined in the Existing Lease).

Except as specifically modified by this letter, all of the other terms and provisions of the Lease shall remain in full force and effect and unmodified by this letter. If there is a conflict between the terms of this letter and the terms of the Lease, then the terms of this letter shall govern and control in all respects.

[SIGNATURES ON NEXT PAGE]


IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

 

TENANT:
ACHAOGEN, INC.,
a Delaware corporation
By:   /s/ John C. Doyle
Its:   CFO & VP, Operations
LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:   ALEXANDRIA REAL ESTATE EQUITIES, L.P.,
  a Delaware limited partnership, its managing member
  By:   ARE-QRS CORP.,
   

a Maryland corporation,

its general partner

    By:   /s/ Eric S. Johnson
    Its:   Vice President
      Real Estate Legal Affairs

Exhibit 10.9(C)

ARE-SAN FRANCISCO NO. 17, LLC

c/o Alexandria Real Estate Equities, Inc.

385 E. Colorado Blvd., Suite 299

Pasadena, CA 91101

June 15, 2011

Achaogen, Inc.

7000 Shoreline Court

South San Francisco, CA 94080

Attention: Finance Department

 

  Re: 7000 Shoreline Court, South San Francisco, California

To Whom It May Concern:

The undersigned (“Landlord”) and Achaogen, Inc., a Delaware corporation (“Tenant”) are parties to that certain Amended and Restated Lease Agreement, dated as of December 29, 2010 (the “Lease”), with respect to certain premises located at 7000 Shoreline Court, South San Francisco, California. Landlord and Tenant desire to amend the Lease to provide for the installation and maintenance of the Roof Equipment (defined below) as further set forth herein. Capitalized terms used but not defined herein shall have the meanings given thereto in the Lease.

Subject to the provisions of the Lease and provided that Tenant is not in Default under the Lease, Tenant may, at its sole cost, install, maintain, and from time to time replace a telecommunications dish antenna or other related equipment on the roof of the Building (collectively, “Roof Equipment”) in a location selected by Landlord and reasonably acceptable to Tenant for Tenant’s own communication purposely use only; provided, however, that (i) Tenant shall obtain Landlord’s prior written approval with respect to the installation of such Roof Equipment which approval shall not be unreasonably withheld, conditioned or delayed and shall include consideration of all relevant factors including, without limitation, the proposed size, weight and location of the Roof Equipment and method for fastening the same to the roof (ii) Tenant shall, at its sole cost, comply with any reasonable requirements imposed by Landlord and all Legal Requirements and the conditions of any bond or warranty maintained by Landlord on the roof, (iii) Tenant shall be responsible for paying for any structural upgrades that may be required by Landlord in connection with the Roof Equipment, (iv) Tenant shall remove, at its expense, at the expiration or earlier termination of this Lease, any Roof Equipment which Landlord requires to be removed, (v) if Landlord’s insurance premium or tax assessment is increased as result of the Roof Equipment, Tenant shall pay such increase to Landlord as Additional Rent within 10 days after receipt of invoice from Landlord, and (vi) Landlord shall have the right to supervise any roof penetration. Tenant may not access the roof without a representative of Landlord (who shall be reasonably available) being present. Tenant shall repair any damage to the Building caused by Tenant’s installation, maintenance, replacement, use or removal of the Roof Equipment. Tenant shall remove any Roof Equipment at its cost upon expiration or termination of the Lease or sooner, at the request of Landlord, if any of the same unreasonably interferes, as reasonably determined by Landlord, with the operation of any other tenant’s use of the Project. Tenant shall install, use, maintain and repair the Roof Equipment, and use the access areas, so as not to damage or interfere with the operation of the Building. Tenant shall not be entitled to any abatement or reduction in the amount of Rent payable under the Lease if for any reason Tenant is unable to use the Roof Equipment. In no event shall the installation, operation, maintenance, or removal of Roof Equipment by Tenant or its agents void, terminate or invalidate any applicable roof warranty.


Archaogen, Inc., - Page 2

June 15, 2011

 

The right to use the Roof Equipment shall be personal solely to Achaeogen., a Delaware corporation and, (i) no other person or entity shall have any right to use or operate the Roof Equipment, and (ii) Tenant shall not assign, convey or otherwise transfer to any person or entity any right, title or interest in all or any portion of the Roof Equipment.

In the exercise of its rights hereunder, Tenant shall comply with all rules and regulations in the CC&R’s (as defined in Section 43(n) of the Lease) as amended from time to time and all rules and regulations imposed by any governing body under the CC&R’s (including, without limitation, the Sierra Point Owners Association (“Association”)) as such rules and regulations may be in effect from time to time. Tenant’s exercise of its rights hereunder is conditioned upon Landlord’s receipt of approval thereof from the Association. If required, Tenant shall cooperate with Licensor, at Tenant’s sole cost and expense, to obtain such approval from the Association.

Tenant shall protect, defend, indemnify and hold harmless Landlord from and against claims, damages, liabilities, costs and expenses of every kind and nature, including reasonable attorneys’ fees, incurred by or asserted against Landlord arising out of Tenant’s installation, maintenance, replacement, use or removal of the Roof Equipment.

The rights granted to Tenant under this letter amendment are not exclusive and Tenant shall cooperate and coordinate as necessary with any other tenants with Roof Equipment. Tenant shall be responsible for reimbursing Landlord for any reasonable costs actually incurred by Landlord in connection with the exercise by Tenant of any rights granted to Tenant under this letter amendment.

The undersigned agree that the Lease is in full force and effect and unmodified except as set forth herein.

 

ARE- SAN FRANCISCO NO. 17, LLC,
a Delaware limited liability company
By:  

ALEXANDRIA REAL ESTATE EQUITIES,

L.P., a Delaware limited partnership,

  managing member
  By:   ARE-QRS CORP.,
   

a Maryland corporation

general partner

    By:  

/s/ Eric S. Johnson

      Eric S. Johnson
      Vice President
      Real Estate legal Affairs

 

ACKNOWLEDGED AND AGREED BY

 

ACHAOGEN, INC.,

a Delaware corporation

By:  

/s/ John C. Doyle

  Name: John C. Doyle
  Title: Chief Operating Officer

Exhibit 10.9(D)

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (this “ First Amendment ”) is made and entered into as of April 1, 2013, by and between ARE-SAN FRANCISCO NO. 17, LLC , a Delaware limited liability company (“ Landlord ”), and ACHAOGEN, INC. , a Delaware corporation (“ Tenant ”).

RECITALS

A. Landlord and Tenant are parties to that certain Amended and Restated Lease Agreement dated as of December 29, 2010, as amended by that certain letter agreement dated January 4, 2011, and as further amended by that certain letter agreement dated June 15, 2011 (as amended, the “ Lease ”). Pursuant to the Lease, Tenant leases certain premises (“ Premises ”), in a building located at 7000 Shoreline Court, South San Francisco, California. The Premises are more particularly described in the Lease. Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease.

B. The Base Term of the Lease is currently scheduled to expire on March 31, 2014 (“ Expiration Date ”).

C. Tenant has subleased a portion of the Premises consisting of approximately 19,177 rentable square feet, as shown on Exhibit A attached hereto (“ Sublease Premises ”) to Fluidigm Corporation, a Delaware corporation (“Fluidigm”), pursuant to that certain Sublease Agreement dated April 5, 2013.

D. Concurrent with the execution of this First Amendment by Landlord and Tenant, Landlord has entered into an agreement with Fluidigm, pursuant to which Fluidigm has agreed to lease the Sublease Premises directly from Landlord immediately upon the expiration of the Lease.

E. Landlord and Tenant desire, subject to the terms and conditions set forth herein, to amend the Lease as provided below.

NOW, THEREFORE , in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1. Right to Extend Term . Notwithstanding anything to the contrary contained in the Lease, Section 40 of the Lease shall be null and void with respect to the Sublease Premises and Tenant shall have no right to extend the Term of the Lease with respect to the Sublease Premises beyond the Expiration Date. Tenant shall continue to have the right to extend the Term of the Lease pursuant to Section 40 with respect to the balance of the Premises.

 

2. Brokers . Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “ Broker ”) in connection with the transaction reflected in this First Amendment and that no Broker brought about this transaction, other than Cresa. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this First Amendment.

 

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Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

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registered trademark of Alexandria Real Estate Equities, Inc.

 

1


3. Miscellaneous .

a. This First Amendment is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This First Amendment may be amended only by an agreement in writing, signed by the parties hereto.

b. This First Amendment is binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns.

c. This First Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this First Amendment attached thereto.

d. Except as amended and/or modified by this First Amendment, the Lease is hereby ratified and confirmed and all other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this First Amendment. In the event of any conflict between the provisions of this First Amendment and the provisions of the Lease, the provisions of this First Amendment shall prevail. Whether or not specifically amended by this First Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this First Amendment.

[Signatures are on the next page.]

 

   LOGO   

Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

Copy or Distribute. Alexandra and the Alexandria Logo are

registered trademark of Alexandria Real Estate Equities, Inc.

 

2


IN WITNESS WHEREOF , the parties hereto have executed this First Amendment as of the day and year first above written.

 

TENANT:
ACHAOGEN, INC.,
a Delaware corporation
By:  

/s/ Dennis Hom

Its:   VP Finance & Corp Dev
LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:  

ALEXANDRIA REAL ESTATE EQUITIES,

L.P., a Delaware limited partnership, managing member

  By:   ARE-QRS CORP.,
   

a Maryland corporation,

general partner

    By:  

/s/ Eric S. Johnson

      Vice President
    Its:   Real Estate Legal Affairs

 

   LOGO   

Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

Copy or Distribute. Alexandra and the Alexandria Logo are

registered trademark of Alexandria Real Estate Equities, Inc.

 

3


 

LOGO

 

   LOGO   

Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

Copy or Distribute. Alexandra and the Alexandria Logo are

registered trademark of Alexandria Real Estate Equities, Inc.

 

Exhibit 10.9(E)

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE (this “Second Amendment”) is made and entered into as of June 28, 2013, by and between ARE-SAN FRANCISCO NO. 17, LLC , a Delaware limited liability company (“ Landlord ”), and ACHAOGEN, INC. , a Delaware corporation (“ Tenant ”).

RECITALS

A. Landlord and Tenant are parties to that certain Amended and Restated Lease Agreement dated as of December 29, 2010, as amended by that certain letter agreement dated January 4, 2011, as further amended by that certain letter agreement dated June 15, 2011, and as further amended by that certain First Amendment dated as of April 1, 2013 (as amended, the “ Lease ”). Pursuant to the Lease, Tenant leases certain premises (“ Existing Premises ”), in a building located at 7000 Shoreline Court, South San Francisco, California. The Premises are more particularly described in the Lease. Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease.

B. The Base Term of the Lease is scheduled to expire on March 31, 2014 (“ Expiration Date ”).

C. Tenant desires to extend the Base Term of the Lease with respect to only a portion of the Existing Premises, consisting of approximately 16,234 rentable square feet located on the 3 rd floor of the Building, as shown on Exhibit A attached hereto (“ Remaining Premises ”).

D. Landlord and Tenant desire, subject to the terms and conditions set forth herein, to extend the Lease with respect to the Remaining Premises.

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1. Base Term . The Base Term with respect to the Remaining Premises only is hereby extended through April 14, 2017. The Base Term of the Lease with respect to the balance of the Premises shall expire on the Expiration Date in accordance with the terms of the Lease.

 

2. Base Rent . Tenant shall continue to pay Base Rent for the Existing Premises as provided for in the Lease through the Expiration Date. Commencing on April 1, 2014, Tenant shall pay Base Rent for the Remaining Premises in the amount of $2.90 per rentable square foot of the Remaining Premises per month. Base Rent shall be increased on April 1, 2015, and thereafter on each subsequent April 1st during the Term (each an “ Adjustment Date ”) by multiplying the Base Rent payable immediately before such Adjustment Date by 3% and adding the resulting amount to the Base Rent payable immediately before such Adjustment Date. Base Rent, as so adjusted, shall thereafter be due as provided herein. Base Rent adjustments for any fractional calendar month shall be prorated.

Notwithstanding anything to the contrary contained herein, Tenant shall not be required to pay any Base Rent for the Remaining Premises for the period commencing on April 1, 2014, through August 15, 2014 (“ Rent Abatement Period ”). Subject to the terms of the last paragraph of Section 5(b) of the Work Letter attached to this Second Amendment as Exhibit B , Tenant shall resume paying full Base Rent for the Remaining Premises on August 16, 2014.

 

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3. Operating Expenses . Commencing on April 1, 2014, the definition of “ Tenant’s Share of Operating Expenses ” on Page 2 of the Lease is deleted and replaced with the following:

Tenant’s Share of Operating Expenses : 11.90%”

Notwithstanding anything to the contrary contained herein, (i) Tenant shall continue to pay Operating Expenses for the entire Existing Premises through the Expiration Date, and (ii) Tenant shall not be required to pay Operating Expenses for the period commencing April 1, 2014, through April 30, 2014 (“ OPEX Abatement Period ”). Commencing on May 1, 2014, Tenant shall commence paying Tenant’s Share of Operating Expenses as provided above with respect to the Remaining Premises.

 

4. Tenant Improvement Allowance . Following the mutual execution and delivery of this Second Amendment by the parties, Landlord shall provide to Tenant the Tenant Improvement Allowance (as defined in the Work Letter attached to this Second Amendment as Exhibit B ) pursuant to the terms of the Work Letter.

 

5. Right to Extend Term . Tenant shall have the right to extend the Term of this Lease upon the following terms and conditions:

(a) Extension Right . Tenant shall have 1 right (an “ Extension Right ”) to extend the term of this Lease for 3 years (an “ Extension Term ”) with respect to the Premises (which, if Tenant has exercised its Expansion Right under Section 6 of this Second Amendment, shall include the Expansion Space), on the same terms and conditions as this Lease (other than with respect to Base Rent and the Work Letter) by giving Landlord written notice of its election to exercise the Extension Right at least 9 months prior, and no earlier than 12 months prior, to the expiration of the Base Term of the Lease.

Upon the commencement of the Extension Term, Base Rent shall be payable at the Market Rate (as defined below). As used herein, “ Market Rate ” shall mean the then market rental rate for triple-net leases for comparable life sciences/laboratory space in comparable projects in the City of South San Francisco and surrounding areas (which Market Rate may include annual increases of Base Rent), taking into consideration all relevant factors.

If, on or before the date which is 180 days prior to the expiration of the Base Term of this Lease, Tenant has not agreed with Landlord’s determination of the Market Rate during the Extension Term after negotiating in good faith, Tenant shall be deemed to have elected arbitration as described in Section 5(b) . Tenant acknowledges and agrees that, if Tenant has elected to exercise the Extension Right by delivering notice to Landlord as required in this Section 5(a) , Tenant shall have no right thereafter to rescind or elect not to extend the term of the Lease for the Extension Term.

 

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  (b) Arbitration .

(i) Within 10 days of Tenant’s notice to Landlord of its election (or deemed election) to arbitrate the Market Rate, each party shall deliver to the other a proposal containing the Market Rate that the submitting party believes to be correct (“ Extension Proposal ”). If either party fails to timely submit an Extension Proposal, the other party’s submitted proposal shall determine the Base Rent for the Extension Term. If both parties submit Extension Proposals, then Landlord and Tenant shall meet within 7 days after delivery of the last Extension Proposal and make a good faith attempt to mutually appoint a single Arbitrator (and defined below) to determine the Market Rate. If Landlord and Tenant are unable to agree upon a single Arbitrator, then each shall, by written notice delivered to the other within 10 days after the meeting, select an Arbitrator. If either party fails to timely give notice of its selection for an Arbitrator, the other party’s submitted proposal shall determine the Base Rent for the Extension Term. The 2 Arbitrators so appointed shall, within 5 business days after their appointment, appoint a third Arbitrator. If the 2 Arbitrators so selected cannot agree on the selection of the third Arbitrator within the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any state court of general jurisdiction in the jurisdiction in which the Premises are located, upon 10 days prior written notice to the other party of such intent.

(ii) The decision of the Arbitrator(s) shall be made within 30 days after the appointment of a single Arbitrator or the third Arbitrator, as applicable. The decision of the single Arbitrator shall be final and binding upon the parties. The average of the two closest Arbitrators in a three Arbitrator panel shall be final and binding upon the parties. Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the third Arbitrator shall be borne equally by both parties. If the Market Rate is not determined by the first day of the Extension Term, then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent in effect immediately prior to the Extension Term and increased by 103% until such determination is made. After the determination of the Market Rate, the parties shall make any necessary adjustments to such payments made by Tenant. Landlord and Tenant shall then execute an amendment recognizing the Market Rate for the Extension Term.

(iii) An “ Arbitrator ” shall be any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be (A) a member of the American Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of improved office and high tech industrial real estate in the greater San Francisco metropolitan area, or (B) a licensed commercial real estate broker with not less than 15 years experience representing landlords and/or tenants in the leasing of high tech or life sciences space in the greater San Francisco metropolitan area, (ii) devoting substantially all of their time to professional appraisal or brokerage work, as applicable, at the time of appointment and (iii) be in all respects impartial and disinterested.

(c) Rights Personal . The Extension Rights is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease.

(d) Exceptions . Notwithstanding anything set forth above to the contrary, the Extension Right shall, at Landlord’s option, not be in effect and Tenant may not exercise the Extension Right:

 

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(i) during any period of time that Tenant is in Default under any provision of this Lease; or

(ii) if Tenant has been in Default under any provision of this Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period immediately prior to the date that Tenant intends to exercise the Extension Right, whether or not the Defaults are cured.

(e) No Extensions . The period of time within which the Extension Right may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Extension Right.

(f) Termination . The Extension Right shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Extension Right to the date of the commencement of the Extension Term, whether or not such Defaults are cured.

 

6. Right to Expand .

(a) Expansion Right . Any time prior to December 15, 2013 (the “ Expansion Right Expiration Date ”), Tenant may deliver written notice to Landlord (“ Expansion Election Notice ”) of its election to expand the then-existing Premises to include the Expansion Space. For purposes of this Section 6(a) , “ Expansion Space ” shall mean that space on the third floor of the Building contiguous to the Premises, as shown on Exhibit C attached hereto. Tenant may only deliver an Expansion Election Notice with respect to the entire Expansion Space. Tenant acknowledges that its right to elect to expand the then-current Premises pursuant to this paragraph (“ Expansion Right ”) is subject to the terms of Section 6(e) below. If Tenant elects to lease the Expansion Space by delivering the Expansion Election Notice prior to the Expansion Right Expiration Date, Tenant shall be deemed to agree to lease the Expansion Space on the same general terms and conditions as this Lease except that: (i) the term of the lease with respect to the Expansion Space shall commence upon delivery of the Expansion Space to Tenant (“ Expansion Space Commencement Date ”); (ii) Tenant shall continue to pay Base Rent for the then-current Premises as provided for in the Lease and, in addition thereto, beginning on the Expansion Space Commencement Date, Tenant shall pay Base Rent for the Expansion Space at the same Base Rent per rentable square foot that Tenant is paying for the then-current Premises, as adjusted pursuant to Section 2 of this Second Amendment; provided, that Tenant shall not be required to pay any Base Rent for the Expansion Space during the first four and one half (4%) months following the Expansion Space Commencement Date; (iii) Tenant’s Share of Operating Expenses shall be proportionately adjusted; (iv) Tenant shall commence paying Tenant’s Share of Operating Expenses with respect to the Expansion Space upon the Expansion Space Commencement Date; provided, however, that Tenant shall not be required to pay Operating Expenses with respect to the Expansion Space during the first (1st) month following the Expansion Space Commencement Date; (v) Landlord shall provide to Tenant a tenant improvement allowance in the amount of $10.00 per rentable square foot of the Expansion Space for the construction by Tenant of tenant improvements in the Expansion Space pursuant to the terms of a work letter in substantially the same form as the Work Letter attached to this Second Amendment, and (vi) Tenant shall accept the Expansion Space is its “as-is” condition as of the Expansion Space Commencement Date. No additional Security Deposit shall be required in connection with Tenant’s expansion of the Premises pursuant to this Section 6 . If Tenant elects to exercise its Expansion Right under this

 

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Section 6 , Landlord shall cause the rentable square footage of the Expansion Space to be measured by an architect or engineer reasonably acceptable to Landlord and Tenant in accordance with the BOMA 2010 definition for multi-tenant buildings. Tenant acknowledges that following the measurement of the Expansion Space pursuant to the immediately preceding sentence, the square footage of the Premises shall not be subject to further re-measurement. If Tenant fails to deliver an Expansion Election Notice to Landlord prior to the Expansion Right Expansion Date, Tenant shall be deemed to have forever waived its rights under this Section 6(a) to lease the Expansion Space and Landlord shall have the right to lease the Expansion Space to any third party on any terms and conditions acceptable to Landlord.

(b) Amended Lease . Following Tenant’s timely delivery to Landlord of an Expansion Election Notice, if, after the expiration of a period of 10 days from Landlord’s delivery to Tenant of a lease amendment memorializing the expansion of the then-existing Premises to include the Expansion Space which is generally consistent with the terms set forth in Section 6(a) , Tenant fails to execute such a lease amendment, Tenant shall be deemed to have forever waived its right to lease the Expansion Space.

(c) Exceptions . Notwithstanding the above, the Expansion Right shall, at Landlord’s option, not be in effect and may not be exercised by Tenant:

(i) during any period of time that Tenant is in Default under any provision of this Lease; or

(ii) if Tenant has been in default under any provision of this Lease 3 or more times, whether or not the defaults are cured, during the 12 month period prior to the date on which Tenant seeks to exercise the Expansion Right.

(d) Termination . The Expansion Right shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Expansion Right, if, after such exercise, but prior to the commencement date of the lease of the Expansion Space, (i) Tenant fails to timely cure any default by Tenant under the Lease; or (ii) Tenant has defaulted 3 or more times during the period from the date of the exercise of the Expansion Right, to the date of the commencement of the lease of the Expansion Space whether or not such defaults are cured.

(e) Subordinate . Tenant’s rights in connection with the Expansion Right are and shall be subject to and subordinate to the rights of Ion Torrent Systems Incorporated, a Delaware corporation (“ Ion Torrent ”), the tenant currently leasing the Expansion Space from Landlord (but not any subtenant of Ion Torrent), existing on the date hereof to continue to lease the Expansion Space. Tenant acknowledges that Ion Torrent has the right to extend the term of its lease for 1 year until March 31, 2015, by delivery of written notice to Landlord on or before September 30, 2013. Tenant further acknowledges that if Tenant elects to exercise its Expansion Right pursuant to this Section 6 , Landlord shall have no obligation to deliver the Expansion Space to Tenant until the term (as may be extended) of Ion Torrent’s lease expires and Ion Torrent surrenders the Expansion Space as required under its lease.

(f) Rights Personal . The Expansion Right is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease.

 

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(g) No Extensions . The period of time within which the Expansion Right may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Expansion Right.

 

7. Brokers . Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “ Broker ”) in connection with the transaction reflected in this Second Amendment and that no Broker brought about this transaction, other than Studley, Inc. Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this Second Amendment.

 

8. Miscellaneous .

a. This Second Amendment is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This Second Amendment may be amended only by an agreement in writing, signed by the parties hereto.

b. This Second Amendment is binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns.

c. This Second Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this Second Amendment attached thereto.

d. Except as amended and/or modified by this Second Amendment, the Lease is hereby ratified and confirmed and all other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this Second Amendment. In the event of any conflict between the provisions of this Second Amendment and the provisions of the Lease, the provisions of this Second Amendment shall prevail. Whether or not specifically amended by this Second Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this Second Amendment.

[Signatures are on the next page.]

 

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IN WITNESS WHEREOF , the parties hereto have executed this Second Amendment as of the day and year first above written.

 

TENANT:
ACHAOGEN, INC.,
a Delaware corporation
/s/ Dennis Hom
By:   Dennis Hom
Its:   VP Finance & Corporate Development
LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:  

ALEXANDRIA REAL ESTATE EQUITIES,

L.P., a Delaware limited partnership, managing member

  By:   ARE-QRS CORP.,
   

a Maryland corporation,

general partner,

    By:  

/s/ Eric S. Johnson

      Vice President
    Its:     Real Estate legal Affairs

 

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EXHIBIT B

Work Letter

THIS WORK LETTER (this “ Work Letter ”) is incorporated into that certain Amended and Restated Lease Agreement dated as of December 29, 2010, as amended by that certain letter agreement dated January 4, 2011, as further amended by that certain letter agreement dated June 15, 2011, and as further amended by that certain First Amendment dated as of April 1, 2013, and as further amended by that certain Second Amendment to Lease dated June 28, 2013, by and between ARE-SAN FRANCISCO NO. 17, LLC , a Delaware limited liability company (“ Landlord ”), and ACHAOGEN, INC. , a Delaware corporation (“ Tenant ”). Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.

1. General Requirements.

(a) Tenant’s Authorized Representative . Tenant designates Dennis Hom (“ Tenant’s Representative ”) as the only person authorized to act for Tenant pursuant to this Work Letter. Landlord shall not be obligated to respond to or act upon any request, approval, inquiry or other communication (“Communication”) from or on behalf of Tenant in connection with this Work Letter unless such Communication is in writing from Tenant’s Representative. Tenant may change Tenant’s Representative at any time upon not less than 5 business days advance written notice to Landlord.

(b) Landlord’s Authorized Representative . Landlord designates Todd Miller and Terezia Nemeth (either such individual acting alone, “ Landlord’s Representative ”) as the only persons authorized to act for Landlord pursuant to this Work Letter. Tenant shall not be obligated to respond to or act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in connection with this Work Letter unless such Communication is in writing from Landlord’s Representative. Landlord may change either Landlord’s Representative at any time upon not less than 5 business days advance written notice to Tenant.

(c) Architects, Consultants and Contractors . Landlord and Tenant hereby acknowledge and agree that the architect (the “ TI Architect ”) for the Tenant Improvements (as defined in Section 2(a) below), the general contractor and any subcontractors for the Tenant Improvements shall be selected by Tenant, subject to Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall be named a third party beneficiary of any contract entered into by Tenant with the TI Architect, any consultant, any contractor or any subcontractor, and of any warranty made by any contractor or any subcontractor.

2. Tenant Improvements .

(a) Tenant Improvements Defined . As used herein, “ Tenant Improvements ” shall mean all improvements to the Remaining Premises desired by Tenant of a fixed and permanent nature. Other than funding the TI Allowance (as defined below) as provided herein, Landlord shall not have any obligation whatsoever with respect to the finishing of the Remaining Premises for Tenant’s use and occupancy.

(b) Tenant’s Space Plans . Tenant shall deliver to Landlord schematic drawings and outline specifications (the “ TI Design Drawings ”) detailing Tenant’s requirements for the Tenant Improvements. Not more than ten (10) business days thereafter, Landlord shall deliver to Tenant the written objections, questions or comments of Landlord and the TI Architect with regard to the TI Design Drawings. Tenant shall cause the TI Design Drawings to be revised to address such written comments and shall resubmit said drawings to Landlord for approval within ten (10) business days thereafter. Such process shall continue until Landlord has approved the TI Design Drawings.

 

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(c) Working Drawings . Following the approval of the TI Design Drawings by Landlord, Tenant shall cause the TI Architect to prepare and deliver to Landlord for review and comment construction plans, specifications and drawings for the Tenant Improvements (“ TI Construction Drawings ”), which TI Construction Drawings shall be prepared substantially in accordance with the TI Design Drawings. Tenant shall be solely responsible for ensuring that the TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements. Landlord shall deliver its written comments on the TI Construction Drawings to Tenant not later than 10 business days after Landlord’s receipt of the same; provided, however, that Landlord may not disapprove any matter that is consistent with the TI Design Drawings. Tenant and the TI Architect shall consider all such comments in good faith and shall, within 10 business days after receipt, notify Landlord how Tenant proposes to respond to such comments. Any disputes in connection with such comments shall be resolved in accordance with Section 2(d) hereof. Provided that the design reflected in the TI Construction Drawings is consistent with the TI Design Drawings, Landlord shall approve the TI Construction Drawings submitted by Tenant. Once approved by Landlord, subject to the provisions of Section 4 below, Tenant shall not materially modify the TI Construction Drawings except as may be reasonably required in connection with the issuance of the TI Permit (as defined in Section 3(a) below).

(d) Approval and Completion . If any dispute regarding the design of the Tenant Improvements is not settled within 10 business days after notice of such dispute is delivered by one party to the other, Tenant may make the final decision regarding the design of the Tenant Improvements, provided (i) Tenant acts reasonably and such final decision is either consistent with or a compromise between Landlord’s and Tenant’s positions with respect to such dispute, (ii) that all costs and expenses resulting from any such decision by Tenant shall be payable out of the TI Fund (as defined in Section 5(d) below), and (iii) Tenant’s decision will not affect the base Building, structural components of the Building or any Building systems (in which case Landlord shall make the final decision). Any changes to the TI Construction Drawings following Landlord’s and Tenant’s approval of same requested by Tenant shall be processed as provided in Section 4 hereof.

3. Performance of the Tenant Improvements .

(a) Commencement and Permitting of the Tenant Improvements . Tenant shall commence construction of the Tenant Improvements upon obtaining and delivering to Landlord a building permit (the “ TI Permit ”) authorizing the construction of the Tenant Improvements consistent with the TI Construction Drawings approved by Landlord. The cost of obtaining the TI Permit shall be payable from the TI Fund. Landlord shall assist Tenant in obtaining the TI Permit. Prior to the commencement of the Tenant Improvements, Tenant shall deliver to Landlord a copy of any contract with Tenant’s contractors (including the TI Architect), and certificates of insurance from any contractor performing any part of the Tenant Improvement evidencing industry standard commercial general liability, automotive liability, “builder’s risk”, and workers’ compensation insurance. Tenant shall cause the general contractor to provide a certificate of insurance naming Landlord, Alexandria Real Estate Equities, Inc., and Landlord’s lender (if any) as additional insureds for the general contractor’s liability coverages required above.

 

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(b) Selection of Materials, Etc . Where more than one type of material or structure is indicated on the TI Construction Drawings approved by Tenant and Landlord, the option will be within Tenant’s reasonable discretion if the matter concerns the Tenant Improvements, and within Landlord’s sole and absolute subjective discretion if the matter concerns the structural components of the Building or any Building system.

(c) Tenant Liability . Tenant shall be responsible for correcting any deficiencies or defects in the Tenant Improvements.

(d) Substantial Completion . Tenant shall substantially complete or cause to be substantially completed the Tenant Improvements in a good and workmanlike manner, in accordance with the TI Permit subject, in each case, to Minor Variations and normal “punch list” items of a non-material nature which do not interfere with the use of the Remaining Premises (“ Substantial Completion ” or “ Substantially Complete ”). Upon Substantial Completion of the Tenant Improvements, Tenant shall require the TI Architect and the general contractor to execute and deliver, for the benefit of Tenant and Landlord, a Certificate of Substantial Completion in the form of the American Institute of Architects (“ AIA ”) document G704. For purposes of this Work Letter, “ Minor Variations ” shall mean any modifications reasonably required: (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with any required permit (including the TI Permit); (ii) to comport with good design, engineering, and construction practices which are not material; or (iii) to make reasonable adjustments for field deviations or conditions encountered during the construction of the Tenant Improvements.

4. Changes . Any changes requested by Tenant to the Tenant Improvements after the delivery and approval by Landlord of the TI Design Drawings, shall be requested and instituted in accordance with the provisions of this Section 4 and shall be subject to the written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.

(a) Tenant’s Right to Request Changes . If Tenant shall request changes (“ Changes ”), Tenant shall request such Changes by notifying Landlord in writing in substantially the same form as the AIA standard change order form (a “ Change Request ”), which Change Request shall detail the nature and extent of any such Change. Such Change Request must be signed by Tenant’s Representative. Landlord shall review and approve or disapprove such Change Request within 10 business days thereafter, provided that Landlord’s approval shall not be unreasonably withheld, conditioned or delayed.

(b) Implementation of Changes . If Landlord approves such Change and Tenant deposits with Landlord any Excess TI Costs (as defined in Section 5(d) below) required in connection with such Change, Tenant may cause the approved Change to be instituted. If any TI Permit modification or change is required as a result of such Change, Tenant shall promptly provide Landlord with a copy of such TI Permit modification or change.

5. Costs .

(a) Budget For Tenant Improvements . Before the commencement of construction of the Tenant Improvements, Tenant shall obtain a detailed breakdown, by trade, of the costs incurred or that will be incurred, in connection with the design and construction of The Tenant Improvements (the “ Budget ”), and deliver a copy of the Budget to Landlord for Landlord’s approval, which shall not be unreasonably withheld or delayed. The Budget shall be based upon the TI Construction Drawings approved by Landlord and shall include a payment to Landlord of administrative rent (“ Administrative Rent ”) equal to 3% of the TI Costs (as hereinafter defined) for monitoring and inspecting the construction

 

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of the Tenant Improvements, which sum shall be payable from the TI Fund. Such Administrative Rent shall include, without limitation, all out-of-pocket costs, expenses and fees incurred by or on behalf of Landlord arising from, out of, or in connection with, such monitoring of the construction of the Tenant Improvements, and shall be payable out of the TI Fund. If the Budget is greater than the TI Allowance, Tenant shall deposit with Landlord the difference, in cash, prior to the commencement of construction of the Tenant Improvements, for disbursement by Landlord as described in Section 5(d) .

(b) TI Allowance . Landlord shall provide to Tenant a tenant improvement allowance (“ TI Allowance ”) of $10.00 per rentable square foot of the Remaining Premises, or $162,340 in the aggregate. On or before the earlier of (i) August 1, 2014, or (ii) the date that is 5 business days after receipt of notice of Landlord’s approval of the Budget, Tenant shall notify Landlord how much of the TI Allowance Tenant has elected to apply toward the design and construction of the Tenant Improvements (“ Improvements Allowance ”). The portion of the TI Allowance not elected by Tenant to be applied to the design and construction of the Tenant Improvements (not to exceed $5.00 per rentable square foot of the Premises) shall be applied to reduce Base Rent pursuant to the paragraph immediately following. Such election shall be final and binding on Tenant, and may not thereafter be modified without Landlord’s consent, which may be granted or withheld in Landlord’s sole and absolute subjective discretion. The TI Allowance shall be disbursed in accordance with this Work Letter.

Tenant shall have no right to the use or benefit (including any reduction to Base Rent) of any portion of the TI Allowance not required for the design and construction of (i) the Tenant Improvements described in the TI Construction Drawings approved pursuant to Section 2(d) or (ii) any Changes pursuant to Section 4 , except as follows: The portion of the TI Allowance elected by Tenant to be applied to reduce Base Rent pursuant to the immediately preceding paragraph (which shall not exceed $5.00 per rentable square foot of the Remaining Premises), shall be applied to reduce the Base Rent first coming due from and after August 15, 2014. Tenant shall have no right to any portion of the Improvements Allowance that is not disbursed for the design and construction of the Tenant Improvements before March 31, 2015.

(c) Costs Includable in TI Fund . The TI Fund shall be used solely for the payment of design, permits and construction costs in connection with the construction of the Tenant Improvements, including, without limitation, the cost of electrical power and other utilities used in connection with the construction of the Tenant Improvements, the cost of preparing the TI Design Drawings and the TI Construction Drawings, all costs set forth in the Budget, including Landlord’s Administrative Rent, and the cost of Changes (collectively, “ TI Costs ”). Notwithstanding anything to the contrary contained herein, the TI Fund shall not be used to purchase any furniture, personal property or other non-Building system materials or equipment, including, but not be limited to, Tenant’s voice or data cabling, non-ducted biological safety cabinets and other scientific equipment not incorporated into the Tenant Improvements

(d) Excess TI Costs . Landlord shall have no obligation to bear any portion of the cost of any of the Tenant Improvements except to the extent of the Improvements Allowance. If at any time and from time-to-time, the remaining TI Costs under the Budget exceed the remaining unexpended Improvements Allowance, Tenant shall deposit with Landlord, as a condition precedent to Landlord’s obligation to fund the Improvements Allowance, 100% of the then current TI Cost in excess of the remaining Improvements Allowance (“ Excess TI Costs ”). If Tenant fails to deposit, or is late in depositing any Excess TI Costs with Landlord, Landlord shall have all of the rights and remedies set forth in the Lease for nonpayment of Rent (including, but not limited to, the right to interest at the Default Rate and the right to assess a late charge). For purposes of any litigation instituted with regard to such

 

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RIGHT RESERVED. Confidential and Proprietary – Do Not

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amounts, those amounts will be deemed Rent under the Lease. The Improvements Allowance and Excess TI Costs are herein referred to as the “ TI Fund .” Funds deposited by Tenant shall be the first thereafter disbursed to pay TI Costs. Notwithstanding anything to the contrary set forth in this Section 5(d ), Tenant shall be fully and solely liable for TI Costs and the cost of Minor Variations in excess of the TI Allowance. If upon Substantial Completion of the Tenant Improvements and the payment of all sums due in connection therewith there remains any undisbursed portion of the TI Fund, Tenant shall be entitled to such undisbursed TI Fund solely to the extent of any Excess TI Costs deposit Tenant has actually made with Landlord.

(e) Payment for TI Costs . During the course of design and construction of the Tenant Improvements, Landlord shall reimburse Tenant for TI Costs once a month against a draw request in Landlord’s standard form, containing evidence of payment of such TI Costs by Tenant and such certifications, lien waivers (including a conditional lien release for each progress payment and unconditional lien releases for the prior month’s progress payments), inspection reports and other matters as Landlord customarily obtains, to the extent of Landlord’s approval thereof for payment, no later than 30 days following receipt of such draw request. Upon completion of the Tenant Improvements (and prior to any final disbursement of the TI Fund), Tenant shall deliver to Landlord: (i) sworn statements setting forth the names of all contractors and first tier subcontractors who did the work and final, unconditional lien waivers from all such contractors and first tier subcontractors; (ii) as-built plans (one copy in print format and two copies in electronic CAD format) for such Tenant Improvements; (iii) a certification of substantial completion in Form AIA G704, (iv) a certificate of occupancy for the Remaining Premises; and (v) copies of all operation and maintenance manuals and warranties affecting the Remaining Premises.

6. Miscellaneous .

(a) Consents . Whenever consent or approval of either party is required under this Work Letter, that party shall not unreasonably withhold, condition or delay such consent or approval, except as may be expressly set forth herein to the contrary.

(b) Modification . No modification, waiver or amendment of this Work Letter or of any of its conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by Landlord and Tenant.

 

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Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

RIGHT RESERVED. Confidential and Proprietary – Do Not

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registered trademark of Alexandria Real Estate Equities, Inc.


EXHIBIT C

Expansion Space

 

LOGO

 

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Copyright © 2005, Alexandria Real Estate Equities, Inc. ALL

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registered trademark of Alexandria Real Estate Equities, Inc.

Exhibit 10.10

ACHAOGEN

7000 Shoreline Court, 3 rd Floor

South San Francisco, CA 94080

(t) 650.266.1120

(f) 650.266.1130

www.achaogen.com

January 24, 2011

Kenneth J. Hillan, MB ChB, FRCS, FRCPath

Dear Kenneth:

I am pleased to offer you a position with Achaogen, Inc. (the “ Company ”), as Chief Medical Officer reporting to J. Kevin Judice, Chief Executive Officer. Your position with the Company pursuant to the terms and conditions of this letter will commence on April 18, 2011 (the “ Start Date ”). You will have duties and responsibilities, consistent with your position within the Company, as will reasonably be assigned to you by the Company’s Board of Directors (the “ Board ”). You agree to perform your duties faithfully and to the best of your abilities and to devote your full business efforts and time to the Company. Furthermore, while employed by the Company, you agree to not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without prior approval of the Board.

The Company reserves the right to conduct background and credit investigations and reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and reference check.

Salary. While employed by the Company, you will receive as compensation for your services a base salary at the annualized rate of three hundred and twenty-five thousand dollars ($325,000). Your salary will be paid periodically in accordance with that Company’s normal payroll practices and will be subject to annual review (to determine potential merit increases) and the usual, required withholding.

Bonus. In addition to your base salary, you will be eligible to receive an annual discretionary bonus of up to 25% of your base salary (pro-rated for 2011). The amount will be based upon the Company’s performance and your performance, as determined by the Company, against specific milestones to be defined by the Company and agreed to by you, during the applicable calendar year.

Relocation Reimbursement. If your current employer will not cover the cost or relocating you back to the United States, and upon appropriate proof and verification of the amounts paid by you, the Company shall reimburse you for your relocation expenses (to include travel and


shipment of household goods) from China to the United States, up to a maximum of seventy-five thousand dollars ($75,000.00).

Stock Option. If you decide to join the Company, it will be recommended at the first meeting of the Board following the Start Date that the Company grant you options to purchase a total of 2,195,000 shares of the Company’s common stock (the “ Stock Option Grants ”) comprised of three separate grants of 1,460,000, 490,000, and 245,000 shares, with different vesting schedules. 1/4th (25%) of the Stock Option Grant of 1,460,000 shares will vest on the one (1) year anniversary (“ Vesting Commencement Date ”) of your Start Date, and 1/48 th of the shares will vest each month thereafter on the same day of the month as the Vesting Commencement Date. The Stock Option Grant of 490,000 shares will vest in full on the four (4) year anniversary of your Start Date. The Stock Option Grant of 245,000 shares will vest in full on the six (6) year anniversary of your Start Date. All vesting will be subject to your continued service with the Company. The Stock Option Grants may be exercised prior to vesting, subject to you entering into a standard form of restricted stock purchase agreement with the Company that will, among other things, provide that in the event you cease to provide services to the Company for any reason, the Company will be permitted to repurchase any unvested shares at the time of such termination at the price you paid for such shares.

All three Stock Option Grants will be granted at an exercise price equal to the fair market value per share on the date of grant, as determined by the Board and will be subject to the terms and conditions of the Company’s 2003 Stock Plan and the applicable stock option agreement between you and the Company, both of which will be provided upon approval of the options.

Employee Benefit Plans. As a Company executive, you will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other executives of the Company. You should note that the Company reserves the right to cancel or change the benefit plans and programs it offers at any time. In addition, you will be entitled to paid time off (PTO) of twenty-two (22) days per year in accordance with the Company’s PTO policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

At-Will Employment. You should understand that your employment with the Company is “at-will” and is for no specified period. As a result, you are free to resign at any time, for any reason, or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. We request that, in the event of your resignation, you give the Company substantial notice.

Severance. If earlier than three (3) months prior to a Change of Control (as defined below) or after twelve (12) months following a Change of Control, the Company or its successor terminates your employment other than for Cause (as defined below), death or disability, and you sign and do not revoke the Company’s standard release of claims, then you shall be entitled to receive: (A) continuing payments of severance pay (less applicable withholding taxes) at a rate equal to your base salary rate, as then in effect, for a period of six {6) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) 25% of the then unvested portion of the Stock Option Grants shall immediately vest and become exercisable.

 

2


Change of Control Severance. If within, three (3) months prior to or, twelve (12) months following a Change of Control (i) you resign from your employment with the Company or its successor for Good Reason (as defined below), or (ii) the Company or its successor terminates your employment other than for Cause, death or disability, and you sign and do not revoke the Company’s standard release of claims, then you shall be entitled to receive: (A) continuing payments of severance pay (less applicable withholding taxes) at a rate equal to your base salary rate, as then in effect, for a period of twelve (12) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; and (B) 50% of the then unvested portion of the Stock Option Grants shall immediately vest and become exercisable.

If your employment with the Company terminates voluntarily by you (except upon resignation for Good Reason), for Cause by the Company or due to your death or disability, then (i) all vesting of the then unvested portion of the Stock Option Grants will terminate immediately and all payments of compensation by the Company to you hereunder will terminate immediately (except as to amounts already earned), and (ii) you will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

For purposes of this offer letter, “ Cause ” is defined as (i) an act of dishonesty made by you in connection with your responsibilities as an employee, (ii) your conviction of, or plea of nolo contendere to, a felony, (iii) your gross misconduct, or (iv) your continued substantial violations of your employment duties after you have received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that you have not substantially performed your duties.

For purposes of this offer letter, “ Change of Control ” of the Company is defined as: (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity or its parent), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent, as applicable, outstanding immediately after such transaction or series of transactions; (ii) a sale, lease or other conveyance of all or substantially all of the assets of the Company; or (iii) any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary.

For purposes of this offer letter, “ Good Reason ” is defined as your resignation within thirty (30) days following the expiration of the Company cure period (discussed below) following the occurrence of one or more of the following, without your express written consent: (i) a material reduction in your annual base salary unless such reduction is part of a Company-wide reduction for similarly situated persons where the reduction applied to you is substantially similar to the reduction for the other similarly situated employees; (ii) the significant reduction of your duties or responsibilities relative to your duties or responsibilities in effect immediately prior to such reduction; provided, however, that a reduction in duties or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief

 

3


Medical Officer of the Company remains as such for the operations of the Company following a Change of Control and is not made the Chief Medical Officer of the acquiring corporation) shall not constitute “Good Reason”; or (iii) a material change in the geographic location at which you must perform services (it being understood that a relocation more than fifty (50) miles is material). Before you may resign for Good Reason, (A) you must provide the Company with written notice within ninety (90) days of the event that you believe constitutes Good Reason specifically identifying the acts or omissions constituting the grounds for Good Reason and (B) the Company must have an opportunity within thirty (30) days following delivery of such notice to cure the Good Reason condition.

Section 409A. Notwithstanding anything to the contrary in this Agreement, if you are a “specified employee” within the meaning of Section 409A of the Code and the final regulations and any guidance promulgated thereunder (“ Section 409A ”) at the time of your termination, then only that portion of the severance and benefits payable to you pursuant to this letter (other than due to death), if any, and any other severance payments or separation benefits which may be considered deferred compensation under Section 409A (together, the “ Deferred Compensation Separation Benefits ”), which (when considered together) do not exceed the Section 409A Limit (as defined below) may be made within the first six (6) months following your termination of employment in accordance with the payment schedule applicable to each payment or benefit. Any portion of the Deferred Compensation Separation Benefits in excess of the Section 409A Limit otherwise due to you on or within the six (6) month period following your termination will accrue during such six (6) month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of your termination of employment. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.

Section 409A Limit. For purposes of this letter, “ Section 409A Limit ” shall mean the lesser of two (2) times: (i) your annualized compensation based upon the annual rate of pay paid to you during the Company’s taxable year preceding the Company’s taxable year of your termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which your employment is terminated.

Confidential Information/Arbitration. You will be required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “ Confidentiality Agreement ”) as a condition of your employment. The Confidentiality Agreement requires, among other things, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of Company proprietary information. We also ask that you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. You further agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

 

4


Federal Immigration. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

Assignment. The terms and conditions set forth in this offer letter will be binding and inure to the benefit of (i) your heirs, executors and legal representatives upon your death, and (ii) any successor of the Company. In the event any of the terms and conditions set forth in this offer letter becomes, or is determined to be illegal, unenforceable, or void, all other terms and conditions will continue in full force and effect.

Governing Laws. This letter will be governed by the laws of the state of California, with the exception of its conflict of laws provisions.

This offer letter, the Confidentiality Agreement or existing confidential information agreement, as applicable, between you and the Company, as well as the Company’s 2003 Stock Plan and stock option agreement related to the Option, represent the entire agreement and understanding between you and the Company concerning your employment relationship with the Company, and supersede in their entirety any and all prior representations or agreements and any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the Board (or its authorized designee) and you.

To indicate your acceptance and agreement to the terms set forth in this offer letter, please sign and date this letter and fax a copy to me at (650) 243-4927. Please call me at (650) 823-2656 if you have any questions. This offer of employment will terminate if it is not accepted, signed and returned by January 31, 2011 .

I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.

Sincerely,

/s/ J. Kevin Judice

J. Kevin Judice, PhD

President and CEO

Achaogen, Inc.

Accepted and agreed to this

 

28 th day of January, 2011   

/s/ Kenneth J. Hillan

   Kenneth J. Hillan

 

5

Exhibit 10.11

 

LOGO

7000 Shoreline Court, 3 rd Floor

South San Francisco, CA 94080

(t) 650.266.1120

(f) 650.266.1130

May 2, 2011

Becki Filice

Dear Becki:

I am pleased to offer you a position with Achaogen, Inc. (the “ Company ”), as Vice President, Development Operations and Portfolio Management reporting to Kenneth Hillan, Chief Medical Officer. Your position with the Company pursuant to the terms and conditions of this letter will commence on May 23, 2011 (the “ Start Date ”). You will have duties and responsibilities, consistent with your position within the Company, as will reasonably be assigned to you by the Company’s Board of Directors (the “ Board ”). You agree to perform your duties faithfully and to the best of your abilities and to devote your full business efforts and time to the Company. Furthermore, while employed by the Company, you agree to not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without prior approval of the Board.

The Company reserves the right to conduct background and credit investigations and reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and reference check.

Salary . While employed by the Company, you will receive as compensation for your services a base salary at the annualized rate of two hundred fifty thousand dollars ($250,000). Your salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to annual review (to determine potential merit increases) and the usual, required withholding.

Bonus . In addition to your base salary, you will be eligible to receive an annual discretionary bonus of up to 20% of your base salary (pro-rated for 2011). The amount will be based upon the Company’s performance and your performance, as determined by the Company, against specific milestones to be defined by the Company and agreed to by you, during the applicable calendar year.

Stock Option Subject to approval by the Board of Directors, you will be granted a stock option to purchase three hundred thousand (300,000) shares of the Company’s common stock at an exercise price equal to the fair market value per share on the date of grant (the “ Option ”). Subject to your continued service with the Company through each vesting date, the Option will vest in accordance with the following vesting schedule:

 

    1/4 th of the shares subject to the Option will vest on the first anniversary of your employment start date (such start date, the “Vesting Commencement Date”); and

 

    1/48th of the shares subject to the Option will vest on each of the next 36 months thereafter on the same day of the month as the Vesting Commencement Date.


The Option will be subject to the terms and conditions of the Company’s 2003 Stock Plan and the applicable option agreement between you and the Company, both of which are incorporated herein by reference.

Employee Benefit Plans . As a Company executive, you will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other executives of the Company. You should note that the Company reserves the right to cancel or change the benefit plans and programs it offers at any time. In addition, you will be entitled to paid time off (PTO) of twenty-two (22) days per year in accordance with the Company’s PTO policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.

At-Will Employment . You should understand that your employment with the Company is “at-will” and is for no specified period. As a result, you are free to resign at any time, for any reason, or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice. We request that, in the event of your resignation, you give the Company substantial notice.

Confidential Information/Arbitration . You will be required to sign and comply with an At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “ Confidentiality Agreement ”) as a condition of your employment. The Confidentiality Agreement requires, among other things, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of Company proprietary information. We also ask that you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. You further agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

Federal Immigration . For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

Assignment . The terms and conditions set forth in this offer letter will be binding and inure to the benefit of (i) your heirs, executors and legal representatives upon your death, and (ii) any successor of the Company. In the event any of the terms and conditions set forth in this offer letter becomes, or is determined to be illegal, unenforceable, or void, all other terms and conditions will continue in full force and effect.

Governing Laws . This letter will be governed by the laws of the state of California, with the exception of its conflict of laws provisions.

This offer letter, the Confidentiality Agreement or existing confidential information agreement, as applicable, between you and the Company, as well as the Company’ s 2003 Stock Plan and stock option agreement related to the Option, represent the entire agreement and understanding between you and the Company concerning your employment relationship with the Company, and supersede in their entirety any and all prior representations or agreements and any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the Board (or its authorized designee) and you.

 

2


To indicate your acceptance and agreement to the terms set forth in this offer letter, please sign and date this letter and return a copy to me. Please call me if you have any questions. This offer of employment will terminate if it is not accepted, signed and returned by May 9, 2011.

I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.

Sincerely,

/s/ Kenneth J. Hillan

Kenneth J. Hillan, MB ChB, FRCS, FRCPath

Chief Medical Officer

Achaogen, Inc.

Accepted and agreed to this

 

 

5th  day of  May , 2011   

/s/ Becki Filice

  
   Becki Filice   

Enclosures: Duplicate Original Letter

At-Will Employment, Confidential Information, Invention Assign

 

3

Exhibit 10.12

 

LOGO

7000 Shoreline Court, Suite 371

South San Francisco, CA 94080

(t) 650.266.1120

(f) 650.266.1130

www.achaogen.com

July 27, 2011

Christine Welch

Dear Christine:

I am pleased to offer you a position with Achaogen, Inc. (the “Company”), as Senior Director, Regulatory reporting directly to me. Your position with the Company pursuant to the terms and conditions of this letter will commence no later than September 1, 2011 (the “Start Date”). You will have duties and responsibilities, consistent with your position within the Company, as will reasonably be assigned to you by me. You agree to perform your duties faithfully and to the best of your abilities and to devote your full business efforts and time to the Company. Furthermore, while employed by the Company, you agree to not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without prior approval of the CEO and Board of Directors.

The Company reserves the right to conduct background and credit investigations and reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and reference check.

Salary . While employed by the Company, you will receive as compensation for your services a base salary at the annualized rate of two-hundred twenty five thousand dollars ($225,000). Your salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to annual review and the usual, required withholding.

Sign-on Bonus .

If you remain employed with the Company through August 31, 2012 you become entitled to a one-time payment in the amount of $45,000. The Company will advance this amount to you within your first 30 days of employment. The payment will be processed through our payroll department, with all appropriate taxes withheld. If you voluntarily terminate your employment before August 31, 2012, you will owe Company the entire amount advanced to you, and by signing this agreement, you agree to repay any unpaid advanced amounts within 10 business days following employment termination.

Stock Option . Subject to approval by the Board of Directors, you will be granted a stock option to purchase one hundred twenty-nine thousand (129,000) shares of the Company’s common stock at an exercise price equal to the fair market value per share on the date of grant (the “Option”). Subject to your continued service with the Company through each vesting date, the Option will vest in accordance with the following vesting schedule:

 

    1/4 th of the shares subject to the Option will vest on the first anniversary of your employment start date (such start date, the “Vesting Commencement Date”); and


    1/48 th of the shares subject to the Option will vest on each of the next 36 months thereafter on the same day of the month as the Vesting Commencement Date.

The Option will be subject to the terms and conditions of the Company’s 2003 Stock Plan and the applicable option agreement between you and the Company, both of which are incorporated herein by reference.

Employee Benefit Plans . As a Company employee, you are also eligible to receive certain employee benefits pursuant to the terms of Company benefit plans as they may exist from time to time.

At-Will Employment . You should understand that your employment with the Company is “at-will” and is for no specified period. As a result, you are free to resign at any time, for any reason, with or without cause. Similarly, the Company is free to conclude its employment relationship with you at any time, for any reason, with or without cause. This is the full and complete agreement between us on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time-to-time, the “at-will” nature of your employment may only be changed in an express writing signed by you and [the CEO.].

Confidential Information/Arbitration . You will be required to sign and comply with the attached At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidentiality Agreement”) as a condition of your employment. The Confidentiality Agreement requires, among other things, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of Company proprietary information. We also ask that you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any such agreements will not prevent you from performing the duties of your position and you represent that such is the case. You further agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

Federal Immigration . For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

Arbitration of Disputes . In the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that (i) any and all disputes between you and the Company shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall be responsible for the arbitrator’s fees and costs to the extent they exceed any fee or cost that the Company would be required to bear if the action were brought in an applicable federal or state court. Please note that we must receive your signed Agreement before your first day of employment.

Governing Laws . This letter will be governed by the laws of the state of California, with the exception of its conflict of laws provisions.

This offer letter, the Confidentiality Agreement or existing confidential information agreement, as applicable, between you and the Company, as well as the Company’s 2003 Stock Plan and stock option agreement related to the Option, represent the entire agreement and understanding between you and the Company concerning your employment relationship with the Company, and supersede in their entirety

 

2


any and all prior representations or agreements and any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the Board (or its authorized designee) and you.

To confirm your acceptance and agreement to the terms set forth in this offer letter please sign, date, and return this letter to me. Please call me at (650) 243-4937 if you have any questions.

I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.

Sincerely,

/s/ Kenneth Hillan

Kenneth Hillan

Chief Medical Officer

Achaogen, Inc.

Accepted and agreed to this 29 day of July, 2011

 

/s/ Christine Welch
Applicant Signature

 

Enclosures:    Duplicate Original Letter
   At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement

 

3

Exhibit 10.13

 

LOGO

7000 Shoreline Court, Suite 371

South San Francisco, CA 94080

(t) 650.266.1120

(f) 650.266.1130

www.achaogen.com

December 29, 2012

Dennis Hom

Dear Dennis:

I am pleased to offer you a position with Achaogen, Inc. (the “Company”), as VP, Finance and Corporate Development reporting directly to me. Your position with the Company pursuant to the terms and conditions of this letter will commence no later than January 3, 2013 (the “Start Date”). You will have duties and responsibilities, consistent with your position within the Company, as will reasonably be assigned to you by me. You agree to perform your duties faithfully and to the best of your abilities and to devote your full business efforts and time to the Company. Furthermore, while employed by the Company, you agree to not actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without prior approval of the CEO and Board of Directors.

The Company reserves the right to conduct background and credit investigations and reference checks on all of its potential employees. Your job offer, therefore, is contingent upon a clearance of such a background investigation and reference check.

Salary. While employed by the Company, you will receive as compensation for your services a base salary at the annualized rate of two hundred fifty thousand dollars ($250.000). Your salary will be paid periodically in accordance with the Company’s normal payroll practices and will be subject to annual review and the usual, required withholding.

Performance Bonus . In addition to your base salary, you will be eligible to receive a discretionary 2013 bonus of up to 25% of base salary (pro-rated for your 2013 tenure) based upon your performance, as determined by the Company, against specific milestones to be defined by the Company. We do not have a formal bonus plan in place at the present time, but anticipate implementing one in future years.

Stock Option . Subject to approval by the Board of Directors, you will be granted options purchase a total of 1,045,900 shares of the Company’s common stock (the “Stock Option Grants”) comprised of two separate grants to purchase 784,425 shares (the “Time-Based Option”) and 261.475 shares (the “Performance-Based Option”), with different vesting schedules as described below.

The Time-Based Option will have an exercise price equal to the fair market value per share on the date of grant, as determined by the Board of Directors, and, subject to your continued service with the Company through each vesting date, the Option will vest in accordance with the following vesting schedule:


    1/4 th of the total number of shares initially subject to the Option will vest on the first anniversary of your employment start date (such start date, the “Vesting Commencement Date”); and

 

    1/48 th of the total number of shares initially subject to the Option will vest on each or the next 36 months thereafter on the same day of the month as the Vesting Commencement Date.

The Performance-Based Option will also have an exercise price equal to the fair market per share on the date of grant, as determined by the Board of Directors, and, subject to your continued service with the Company through each vesting date, the Performance Option will vest in accordance with the following vesting schedule:

 

    1/3 of the total number of shares initially subject to the Performance-Based Option shall vest on the first date the fair market value of the Company’s common stock is first $3 (33 1/3% of the Performance-Based Option), $5 (33 1/3% of the Performance-Based Option), and $7 (33 1/3% of the Performance-Based Option), respectively. So long as the Company’s common stock is not publicly traded, the fair market value of the common stock will be determined by the Board of Directors. In the event the Company’s common stock becomes publicly traded, the fair market value of the common stock will be determined based on the closing trading price of the stock.

Each Stock Option Grant will be subject to the terms and conditions of the Company’s 2003 Stock Plan and the applicable option agreement between you and the Company, both of which are incorporated herein by reference.

Employee Benefit Plans . As a Company employee, you are also eligible to receive certain employee benefits pursuant to the terms of Company benefit plans as they may exist from time to time.

At-Will Employment . You should understand that your employment with the Company is “at-will” and is for no specified period. As a result, you are free to resign at any time, for any reason, with or without cause. Similarly, the Company is free to conclude its employment relationship with you at any time, for any reason, with or without cause. This is the full and complete agreement between us on this term.

Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time-to-time, the “at-will” nature of your employment may only be changed in an express writing signed by you and the CEO.

Confidential Information/Arbitration . You will be required to sign and comply with the attached At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement (the “Confidentiality Agreement”) as a condition of your employment. The Confidentiality Agreement requires, among other things, the assignment of patent rights to any invention made during your employment at the Company and non-disclosure of Company proprietary information. We also ask that you disclose to the Company any and all agreements relating to your prior employment that may affect your eligibility to be employed by the Company or limit the manner in which you may be employed. It is the Company’s understanding that any, such agreements will not prevent you from performing the duties of your position and you represent that such is the case. You further agree not to bring any third party confidential information to the Company, including that of your former employer, and that in performing your duties for the Company you will not in any way utilize any such information.

Federal Immigration . For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

 

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Arbitration of Disputes . In the event of any dispute or claim relating to or arising out of our employment relationship, you and the Company agree that (i) any and all disputes between you and the Company shall be fully and finally resolved by binding arbitration, (ii) you are waiving any and all rights to a jury trial but all court remedies will be available in arbitration, (iii) all disputes shall be resolved by a neutral arbitrator who shall issue a written opinion, (iv) the arbitration shall provide for adequate discovery, and (v) the Company shall be responsible for the arbitrator’s fees and costs to the extent they exceed any fee or cost that the Company would be required to bear if the action were brought in an applicable federal or state court. Please note that we must receive your signed Agreement before your first day of employment

Governing Laws . This letter will be governed by the laws of the state of California. with the exception of its conflict of laws provisions.

This offer letter, the Confidentiality Agreement or existing confidential information agreement, as applicable, between you and the Company, as well as the Company’s 2003 Stock Plan and stock option agreements evidencing the Stock Option Grants, represent the entire agreement and understanding between you and the Company concerning your employment relationship with the Company, and supersede in their entirety any and all prior representations or agreements and any representations made during your recruitment, interviews or pre-employment negotiations, whether written or oral. This letter, including, but not limited to, its at-will employment provision, may not be modified or amended except by a written agreement signed by the Board (or its authorized designee) and you.

To confirm your acceptance and agreement to the terms set forth in this offer letter please sign, date, and return this letter to me.

I am excited to welcome you to the Company, and I look forward to your participation in the Company’s future success.

Sincerely,

/s/ Kenneth Hillan

Kenneth Hillan

CEO & CMO

Achaogen, Inc

Accepted and agreed to this 2nd day of January , 2013

/s/ Dennis Hom

 

                    Applicant Signature

 

Enclosures:   

Duplicate Original Letter

At-Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement

 

3

Exhibit 10.14

A CHAOGEN , I NC .

C HANGE IN C ONTROL P LAN

E FFECTIVE M ARCH  8, 2012

This Achaogen, Inc. Change in Control Plan (this “ Plan ”) sets forth certain accelerated vesting benefits available to the Covered Employees (as defined below) of Achaogen, Inc. (the “ Company ”) in the event of the consummation of a Change in Control (as defined below) of the Company pursuant to a definitive agreement entered into by the Company or its stockholders on or prior to December 31, 2014 (an “ Acquisition Agreement ”).

1. General Eligibility . You will only be eligible to participate in this Plan if you are employed on a full-time basis by the Company immediately prior to the Company’s entry into an Acquisition Agreement (a “ Covered Employee ”).

2. Accelerated Vesting Benefit . If you are a Covered Employee and the Company consummates a Change in Control pursuant to an Acquisition Agreement, then subject to you delivering a general release of all claims against the Company in a form acceptable to the Company (a “ Release ”) that becomes effective and irrevocable within sixty (60) days following the consummation of such Change in Control, then the vesting, exercisability and/or lapsing of restrictions with respect to each Equity Award (as defined below) held by you shall accelerate in full with respect to one hundred percent (100%) of the shares of Company common stock subject thereto, such acceleration to be effective as of immediately prior to the consummation of such Change in Control.

3. Definitions . For the purposes of this Plan, the following terms shall have the following meanings:

a. Change in Control . “ Change in Control ” means (i) any acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company or its stockholders is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such transaction or series of transactions, or (ii) a sale, lease, exclusive license or other conveyance of all or substantially all of the assets of the Company.

b. Equity Award . “ Equity Award ” means a stock option, restricted stock, restricted stock unit, stock appreciation right or other equity-based award held by a Covered Employee as of immediately prior to a Change in Control.

c. Plan Administrator . “ Plan Administrator ” means the Board of Directors of the Company.

4. Effective Date of Plan/Amendment . This Plan shall be effective as of March 8, 2012 (the “ Effective Date ”) and shall automatically terminate on December 31, 2014 in the event an Acquisition Agreement is not entered into on or prior to such date. Otherwise, the Plan Administrator shall have the power to amend or terminate this Plan from time to time in its discretion and for any reason (or no reason), provided , that no amendment or termination of the Plan shall impair any rights of or obligations to any Covered Employee under this Plan unless such Covered Employee expressly consents to such amendment or termination.

 

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5. Plan Administration . The Plan Administrator is responsible for the general administration and management of this Plan and shall have all powers and duties necessary to fulfill its responsibilities, including, but not limited to, the discretion to interpret and apply this Plan and to determine all questions relating to eligibility for benefits. This Plan shall be interpreted in accordance with its terms and their intended meanings. However, the Plan Administrator shall have the discretion to interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion it deems to be appropriate in its sole discretion, and to make any findings of fact needed in the administration of this Plan. The validity of any such interpretation, construction, decision, or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious. All actions taken and all determinations made in good faith by the Plan Administrator will be final and binding on all persons claiming any interest in or under this Plan.

6. Successors . Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under the Plan and agree expressly to perform any of the Company’s obligations under the Plan. For all purposes under the Plan, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers an assumption agreement or which becomes bound by the terms of the Plan by operation of law and shall include any successor by merger, consolidation or stock purchase. All of your rights hereunder shall inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7. Limitation On Employee Rights; At-Will Employment . This Plan shall not give any employee the right to be retained in the service of the Company or interfere with or restrict the right of the Company to discharge or retire the employee. All employees of the Company are employed at will.

8. No Third-Party Beneficiaries . This Plan shall not give any rights or remedies to any person other than covered employees and the Company.

9. Governing Law . This Plan shall be interpreted, administered, and enforced in accordance with the statutes and common law of the State of California, excluding any that mandate the use of another jurisdiction’s laws.

10. No Assignment of Benefits . The rights of any person to payments or benefits under this Plan shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any action in violation of this subsection shall be void.

 

2

Exhibit 10.15

 

 

 

ACHAOGEN, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS

AGREEMENT

March 6, 2013

 

 

 


TABLE OF CONTENTS

 

         Page  

Section 1 Definitions

     2   

1.1.

 

Certain Definitions

     2   

Section 2 Registration Rights

     5   

2.1.

 

Requested Registration; Restrictions on Transfer

     5   

2.2.

 

Company Registration

     7   

2.3.

 

Registration on Form S-3

     8   

2.4.

 

Expenses of Registration

     9   

2.5.

 

Registration Procedures

     9   

2.6.

 

Indemnification

     10   

2.7.

 

Information by Holder

     12   

2.8.

 

Restrictions on Transfer

     12   

2.9.

 

Rule 144 Reporting

     14   

2.10.

 

Market Stand-Off Agreement

     15   

2.11.

 

Delay of Registration

     15   

2.12.

 

Transfer or Assignment of Registration Rights

     15   

2.13.

 

Limitations on Subsequent Registration Rights

     16   

2.14.

 

Termination of Registration Rights

     16   

Section 3 Covenants of the Company

     16   

3.1.

 

Basic Financial Information and Inspection Rights

     16   

3.2.

 

Confidentiality

     17   

3.3.

 

Proprietary Information and Inventions Agreement

     18   

3.4.

 

Director Expenses

     18   

3.5.

 

Director and Officer Insurance

     18   

3.6.

 

Termination of Covenants

     18   

Section 4 Right of First Refusal

     18   

4.1.

 

Right of First Refusal to Significant Holders

     18   

Section 5 Miscellaneous

     20   

5.1.

 

Amendment

     20   

5.2.

 

Notices

     21   

5.3.

 

Governing Law

     21   

5.4.

 

Successors and Assigns

     21   

5.5.

 

Entire Agreement

     22   

5.6.

 

Delays or Omissions

     22   

5.7.

 

Severability

     22   

5.8.

 

Titles and Subtitles

     22   

 

i


5.9.

 

Counterparts

     22   

5.10.

 

Telecopy Execution and Delivery

     22   

5.11.

 

Jurisdiction; Venue

     23   

5.12.

 

Further Assurances

     23   

5.13.

 

Aggregation

     23   

5.14.

 

Termination Upon Change of Control

     23   

5.15.

 

The Wellcome Trust

     23   

 

ii


ACHAOGEN, INC.

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

This Third Amended and Restated Investors’ Rights Agreement (this “ Agreement ”) is made as of March 6, 2013, by and among Achaogen, Inc., a Delaware corporation (the “ Company ”), and the persons and entities (each, an “ Investor ” and collectively, the “ Investors ”) listed on Exhibit A hereto. Unless otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to them in Section 1.1.

RECITALS

A. The Company and the certain of the Investors are parties to the Series D Preferred Stock Purchase Agreement of even date herewith (the “ Purchase Agreement ”), whereby the Company will sell, and such Investors will purchase, Series D Preferred Stock of the Company.

B. The obligations of the Company and such Investors under the Purchase Agreement are conditioned upon, among other things, the execution and delivery of this Agreement by the Company and such Investors.

C. In connection with the Company’s Series C Preferred Stock financing, the Company and certain of the Investors entered into that certain Second Amended and Restated Investors’ Rights Agreement dated as of April 6, 2010, as amended November 20, 2012 (the “ Prior Agreement ”).

D. Pursuant to Section 6.1 of the Prior Agreement no term of the Prior Agreement may be amended other than by a written instrument referencing the Prior Agreement and signed by the Company and the Holders (as defined in the Prior Agreement) holding a majority of the Registrable Securities (as defined in the Prior Agreement).

E. Each Holder (as defined in the Prior Agreement) shall be bound by any amendment effected in accordance with Section 6.1 of the Prior Agreement, whether or not such Holder has consented to such amendment.

F. The Company and Holders (as defined in the Prior Agreement) holding a majority of the Registrable Securities (as defined in the Prior Agreement) now desire to amend and restate the Prior Agreement as set forth below and further desire that this Agreement supersede and replace the Prior Agreement in its entirety.

In consideration of the mutual promises and covenants set forth herein, and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:


Section 1

Definitions

1.1. Certain Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

(a) “ Commission ” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act (as defined below).

(b) “ Common Stock ” shall mean the Common Stock of the Company.

(c) “ Conversion Stock ” shall mean shares of Common Stock issued or issuable upon conversion of any Shares, provided , however , that for purposes of Section 3.1 of this Agreement, Conversion Stock shall not include any shares of Common Stock issued upon the conversion of any Shares pursuant to a Mandatory Conversion as defined in ARTICLE V of the Company’s Amended and Restated Certificate of Incorporation as then in effect.

(d) “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

(e) “ Holder ” shall mean (i) any Investor who holds Registrable Securities, (ii) for the purposes of Sections 2.2, 2.3 and 2.8, and any other portions of Section 2 (specifically including Section 2.6) to the extent they relate to rights of registration under Section 2.2 or Section 2.3, any Series A Warrant Holder who holds Registrable Securities; (iii) for the purposes of Sections 2.2, 2.3, 2.8 and 2.10, and any other portions of Section 2 (specifically including Section 2.6) to the extent they relate to rights of registration under Section 2.2, any Series C Warrant Holder who holds Registrable Securities; and (iv) any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been duly and validly transferred in accordance with Section 2.12 of this Agreement.

(f) “ Indemnified Party ” shall have the meaning set forth in Section 2.6(c) hereto.

(g) “ Indemnifying Party ” shall have the meaning set forth in Section 2.6(c) hereto.

(h) “ Initial Public Offering ” shall mean the closing of the Company’s first firm commitment underwritten public offering of the Company’s Common Stock registered under the Securities Act.

(i) “ Initiating Holders ” shall mean any Holder or Holders who in the aggregate hold not less than a majority of the outstanding Registrable Securities.

(j) “ New Securities ” shall have the meaning set forth in Section 4.1(a) hereto.

 

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(k) “ New Series Preferred ” shall have the meaning set forth in the Purchase Agreement.

(l) “ Purchase Agreement ” shall have the meaning set forth in the Recitals hereto.

(m) “ Registrable Securities ” shall mean (i) any shares of Common Stock issued or issuable pursuant to conversion of the Shares; (ii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; (iii) for the purposes of Section 2.2 and Section 2.3, and any other portions of Section 2 (specifically including Section 2.6), to the extent they relate to rights of registration under Section 2.2 or Section 2.3, (A) any shares of Common Stock issued or issuable pursuant to conversion of the Series A Warrant Shares and (B) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (iii)(A) above; and (iv) for the purposes of Section 2.2, and any other portions of Section 2 (specifically including Section 2.6), to the extent they relate to rights of registration under Section 2.2, (A) any shares of Common Stock issued or issuable pursuant to conversion of the Series C Warrant Shares and (B) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (iv)(A) above; provided , however , that Registrable Securities shall not include any shares of Common Stock described in clause (i), (ii) or (iii) above which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights and obligations under this Agreement are not validly assigned in accordance with this Agreement.

(n) The terms “ register ,” “ registered ” and “ registration ” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (as defined below) and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

(o) “ Registration Expenses ” shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, reasonable documented fees and disbursements of one counsel for the Holders not to exceed $25,000, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

(p) “ Restricted Securities ” shall mean any Registrable Securities required to bear the first legend set forth in Section 2.8(c) hereof.

(q) “ Rule 144 ” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

 

3


(r) “ Rule 145 ” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission

(s) “ Securities Act ” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

(t) “ Selling Expenses ” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities.

(u) “ Series A Warrant Shares ” shall mean any shares of the Company’s Series A Preferred Stock issued upon exercise or conversion of the warrants (each, a “ Series A Warrant ”) to purchase shares of the Company’s Series A Preferred Stock issued to Silicon Valley Bank and Gold Hill Venture Lending 03, L.P. (either, together with its respective permitted transferees, a “ Series A Warrant Holder ”), pursuant to that certain Loan and Security Agreement dated as of March 16, 2005 among the Company, Silicon Valley Bank and Gold Hill Venture Lending 03, L.P.

(v) “ Series C Warrant Shares ” shall mean any shares of the Company’s Series C Preferred Stock (or, if applicable, New Series Preferred) issued upon exercise or conversion of the warrants (each, a “ Series C Warrant ,” and together with the Series A Warrants, the “ Warrants ” ) to purchase shares of the Company’s Series C Preferred Stock (or, if applicable, New Series Preferred) issued to Silicon Valley Bank and Oxford Finance LLC (either, together with its respective permitted transferees, a “ Series C Warrant Holder ,” and together with the Series A Warrant Holders, the “ Warrant Holders ”), pursuant to that certain Loan and Security Agreement dated as of November 1, 2011 among the Company, Oxford Finance LLC and Silicon Valley Bank.

(w) “ Shares ” shall mean (i) the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, (ii) the Company’s Series D Preferred Stock outstanding as of the date hereof and that the Company may issue and sell from time to time pursuant to the terms and conditions of the Purchase Agreement and (iii) shares of the New Series Preferred issued after the date hereof from time to time by the Company pursuant to the terms and conditions of the Purchase Agreement.

(x) “ Significant Holders ” shall have the meaning set forth in Section 4.1 hereof.

(y) “ Warrant Shares ” shall mean Series A Warrant Shares and Series C Warrant Shares.

 

4


Section 2

Registration Rights

2.1. Requested Registration; Restrictions on Transfer .

(a) Request for Registration . Subject to the conditions set forth in this Section 2.1, if the Company shall receive from Initiating Holders a written request signed by such Initiating Holders that the Company effect any registration with respect to all or a part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of by such Initiating Holders), the Company will:

(i) promptly give written notice of the proposed registration to all other Holders; and

(ii) as soon as practicable, file and use its commercially reasonable efforts to effect such registration (including, without limitation, filing post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act) and to permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within twenty (20) days after such written notice from the Company is mailed or delivered.

(b) Limitations on Requested Registration . The Company shall not be obligated to effect, or to take any action to effect, any such registration pursuant to this Section 2.1:

(i) Prior to one hundred eighty (180) days following the effective date of the first registration statement filed by the Company covering an underwritten offering of any of its securities to the general public;

(ii) If the Initiating Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration statement, propose to sell Registrable Securities and such other securities (if any) the aggregate gross proceeds of which (before deduction for underwriter’s discounts and expenses related to the issuance) are less than $5,000,000;

(iii) In any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification, or compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(iv) After the Company has effected two such registrations pursuant to this Section 2.1 (and such registrations have been declared or ordered effective);

(v) During the period starting with the date forty-five (45) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company-initiated registration; provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or

 

5


(vi) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 2.3 hereof.

(c) Deferral . If (i) in the good faith judgment of the Board of Directors of the Company, the filing of a registration statement covering the Registrable Securities would be materially detrimental to the Company and the Board of Directors of the Company concludes, as a result, that it is in the best interests of the Company to defer the filing of such registration statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by the Chairman of the Board of Directors of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be materially detrimental to the Company for such registration statement to be filed in the near future and that it is, therefore, in the best interests of the Company to defer the filing of such registration statement, then (in addition to the limitations set forth in Section 2.1(b) above) the Company shall have the right to defer such filing for a period of not more than sixty (60) days after receipt of the request of the Initiating Holders, and, provided further, that the Company shall not defer its obligation in this manner more than twice in any twelve-month period.

(d) Underwriting . If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.1 and the Company shall include such information in the written notice given pursuant to 2.1(a)(i). In such event, the right of any Holder to include all or any portion of its Registrable Securities in such registration pursuant to this Section 2.1 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided herein. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Company, which underwriters are reasonably acceptable to a majority-in­ interest of the Initiating Holders.

Notwithstanding any other provision of this Section 2.1, if the underwriters advise the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the number of Registrable Securities that may be so included shall be allocated among all Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion.

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders. The securities so excluded shall also be withdrawn from registration. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall also be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 2.1(d), then the Company shall then offer to all Holders who have retained rights to include securities in the registration the right to include additional Registrable Securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among such Holders requesting additional inclusion, as set forth above.

 

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2.2. Company Registration .

(a) Company Registration . If the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders, other than a registration pursuant to Sections 2.1 or 2.3, a registration relating solely to employee benefit plans, a registration relating to the offer and sale of debt securities, a registration relating to a corporate reorganization or other Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will:

(i) promptly give written notice of the proposed registration to all Holders; and

(ii) use its commercially reasonable efforts to include in such registration (and any related qualification under blue sky laws or other compliance), except as set forth in Section 2.2(b) below, and in any underwriting involved therein, all of such Registrable Securities as are specified in a written request or requests made by any Holder or Holders received by the Company within ten (10) days after such written notice from the Company is mailed or delivered. Such written request may specify all or a part of a Holder’s Registrable Securities.

Notwithstanding the above, the Company agrees that each Warrant Holder (who holds of record either a Warrant or Warrant Shares at the time the Company proposes to commence a registration) shall be given notice of any registration commenced pursuant to the provisions of Section 2.1 of this Agreement, and shall be entitled to participate in such registration, in accordance with the provisions of Section 2.1.

(b) Underwriting . If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to 2.2(a)(i). In such event, the right of any Holder to registration pursuant to this Section 2.2 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company.

Notwithstanding any other provision of this Section 2.2, if the underwriters advise the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included in, the registration and underwriting. The Company shall so advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated, as follows: (i) first, to the Company for

 

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securities being sold for its own account, (ii) second, to the Holders requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities held by such Holders, assuming conversion and (iii) third, to other stockholders requesting to include shares in such registration statement based on the pro rata percentage of shares held by such other stockholders (on an as-converted-to-Common-Stock basis). Provided that such registration does not include shares of any other selling stockholders, any or all of the Registrable Securities of the Holders may be excluded with respect to such registration pursuant to this Section 2.2.

If a person who has requested inclusion in such registration as provided above does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the Company or the underwriter. The Registrable Securities or other securities so excluded shall also be withdrawn from such registration. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 2.2(b), the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion, in the manner set forth in the immediately preceding paragraph.

(c) Right to Terminate Registration . The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of any such terminated or withdrawn registration shall be borne by the Company.

2.3. Registration on Form S-3 .

(a) Request for Form S-3 Registration . After its initial public offering, the Company shall use its commercially reasonable efforts to qualify for registration on Form S-3 or any comparable or successor form or forms. After the Company has qualified for the use of Form S-3, in addition to the rights contained in the foregoing provisions of this Section 2 and subject to the conditions set forth in this Section 2.3, if the Company shall receive from a Holder or Holders of Registrable Securities a written request that the Company effect any registration on Form S-3 or any similar short form registration statement with respect to all or part of the Registrable Securities (such request shall state the number of shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Holder or Holders), the Company will take all such action with respect to such Registrable Securities as required by Sections 2.1(a)(i) and 2.1(a)(ii).

(b) Limitations on Form S-3 Registration . The Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 2.3:

(i) In the circumstances described in either Sections 2.1(b)(i), 2.1(b)(iii), or 2.1(b)(v);

 

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(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) on Form S-3 at an aggregate price to the public, net of discounts and commissions, of less than $2,000,000; or

(iii) If, in a given twelve-month period, the Company has effected one (1) such registration in such period.

(c) Deferral . The provisions of Section 2.1(c) shall apply to any registration pursuant to this Section.

(d) Underwriting . If the Holders of Registrable Securities requesting registration under this Section 2.3 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Section 2.1(d) shall apply to such registration. Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this Section 2.3 shall not be counted as requests for registration or registrations effected pursuant to Section 2.1.

2.4. Expenses of Registration . All Registration Expenses incurred in connection with registrations pursuant to Sections 2.1, 2.2 and 2.3 hereof shall be borne by the Company; provided , however , that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered or because a sufficient number of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1 and 2.3 are no longer satisfied (in which case all participating Holders shall bear such expenses pro rata among each other based on the number of Registrable Securities requested to be so registered), unless (i) the Holders of a majority of the Registrable Securities agree to forfeit their right to a demand registration pursuant to Section 2.1 and (ii) such withdrawal is based on adverse information concerning the Company of which the Holders were not aware at the time of the registration request.

2.5. Registration Procedures . Whenever required to effect the registration of any Registrable Securities hereunder, the Company shall, as expeditiously as reasonably possible, prepare and file with the Commission a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective. The Company also shall keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof, and at its expense, use its commercially reasonable efforts to:

(a) Keep such registration effective for a period ending on the earlier of the date which is sixty (60) days from the effective date of the registration statement or such time as the Holder or Holders have completed the distribution described in the registration statement relating thereto;

(b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above;

 

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(c) Furnish such number of prospectuses, including any preliminary prospectuses, and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request;

(d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdiction as shall be reasonably requested by the Holders; provided , that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(e) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; and

(f) In connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 2.1 hereof, enter into an underwriting agreement in a form reasonably necessary to effect the offer and sale of Common Stock, provided such underwriting agreement contains reasonable and customary provisions, and provided further, that each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

2.6. Indemnification .

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, each of its officers, directors, members and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 2, and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any prospectus, offering circular, or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance, (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation (or alleged violation) by the Company of the Securities Act, any state securities laws or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any offering covered by such registration, qualification, or compliance, and the Company will reimburse each such Holder, each of its officers, directors, members and partners, and each person controlling such Holder, each such underwriter, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action; provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any untrue

 

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statement or omission based upon written information furnished to the Company by such Holder, any of such Holder’s officers, directors, members and partners, any person controlling such Holder, such underwriter or any person who controls any such underwriter and stated to be specifically for use therein; and provided , further that, the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

(b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification, or compliance is being effected, indemnify and hold harmless the Company, each of its directors, officers, partners, and each underwriter, if any, of the Company’s securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder, and each of their officers, directors, and partners, and each person controlling such Holder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by reference in any such registration statement, prospectus, offering circular, or other document, or (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, directors, officers, partners, persons, underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided , however , that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld); and provided that in no event shall any indemnity by Holder under this Section 2.6(b) when taken together with any contribution by such Holder under Section 2.6(d), exceed the net proceeds from the offering received by such Holder.

(c) Each party entitled to indemnification under this Section 2.6 (the “ Indemnified Party ”) shall give notice to the party required to provide indemnification (the “ Indemnifying Party ”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense; and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2.6, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof

 

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the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

(d) If the indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this Section 2.6(d) when taken together with any indemnity by such Holder under Section 2.6(b), exceed the net proceeds from the offering received by such Holder. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control; provided, however, that the failure of the underwriting agreement to address or provide for a matter provided for or addressed by the foregoing provisions shall not be a conflict between the underwriting agreement and the foregoing provisions, and in such case, the foregoing provisions shall prevail.

2.7. Information by Holder . Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 2.

2.8. Restrictions on Transfer .

(a) The holder of each certificate representing Registrable Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 2.8. Each Holder agrees not to make any sale, assignment, transfer, pledge or other disposition of all or any portion of the Restricted Securities, or any beneficial interest therein, unless and until (x) the transferee thereof has agreed in writing for the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound by, the terms and conditions set forth in this Agreement, including, without limitation, this Section 2.8 and Section 2.10, except for transfers permitted under 2.8(b), and (y):

(i) There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

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(ii) Such Holder shall have given prior written notice to the Company of such Holder’s intention to make such disposition and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition, and, if requested by the Company, such Holder shall have furnished the Company, at its expense, with (i) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such disposition will not require registration of such Restricted Securities under the Securities Act or (ii) a “no action” letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company.

(b) Permitted transfers include (i) a transfer not involving a change in beneficial ownership, or (ii) transactions involving the distribution without consideration of Restricted Securities by any Holder to (x) a parent, subsidiary or other affiliate of Holder that is a corporation, or (y) any of its partners, members or other equity owners, or retired partners, retired members or other equity owners, or to the estate of any of its partners, members or other equity owners or retired partners, retired members or other equity owners, or (iii) transfers in compliance with Rule 144, as long as the Company is furnished with satisfactory evidence of compliance with such Rule; provided, in each case, that the Holder thereof shall give written notice to the Company of such Holder’s intention to effect such disposition and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition.

(c) Each certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF

 

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THE INITIAL PUBLIC OFFERING OF THE COMPANY, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

The Holders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Section 2.8.

(d) The first legend referring to federal and state securities laws identified in Section 2.8(c) hereof stamped on a certificate evidencing the Restricted Securities and the stock transfer instructions and record notations with respect to such Restricted Securities shall be removed and the Company shall issue a certificate without such legend to the holder of such Restricted Securities if (i) such securities are registered under the Securities Act, or (ii) such holder provides the Company with an opinion of counsel reasonably acceptable to the Company to the effect that a public sale or transfer of such securities may be made without registration under the Securities Act, or (iii) such holder provides the Company with reasonable assurances, which may, at the option of the Company, include an opinion of counsel satisfactory to the Company, that such securities can be sold pursuant to Rule 144 under the Securities Act.

(e) Notwithstanding anything in this Section 2.8, with respect to each Warrant Holder, to the extent that any provision in this Section 2.8 conflicts or is inconsistent with any provision in such Warrant Holder’s Warrant, the provision in such Warrant shall control with respect to the transferability of such Warrant. The transferability of any Warrant Shares shall be governed by this Agreement without regard to the related Warrant.

2.9. Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

(a) Make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after ninety (90) days following the effective date of the Company’s Initial Public Offering;

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements; and

(c) So long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

 

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2.10. Market Stand-Off Agreement . Each Holder and transferee thereof hereby agrees that such Holder or transferee shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Common Stock (or other securities) of the Company held by such Holder or transferee (other than those included in the registration) during a period of at least one hundred eighty (180) days (subject to reduction by consent of the Company’s underwriters) following the effective date of the Company’s Initial Public Offering (or such other period following the effective date of a registration statement of the Company filed under the Securities Act as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto; provided that in no event will such period exceed thirty-four (34) days), provided, further, that (i) all of the Company’s officers and directors, and Holders of at least one-percent (1%) of the Company’s capital stock (on an as-converted basis), are bound by and have entered into similar agreements and (ii) provided, all stockholders, officers and directors are treated similarly with respect to any release prior to the termination of the lock-up period (including any extension thereof) such that if any such persons are released all stockholders shall also be released to the same extent on a pro rata basis. The obligations described in this Section 2.10 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp each such certificate with the second legend set forth in Section 2.8(c) hereof with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such one hundred eighty (180) day period. Each Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 2.10.

2.11. Delay of Registration . No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.12. Transfer or Assignment of Registration Rights . The rights to cause the Company to register securities granted to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder only to (i) a transferee or assignee of not less than 500,000 shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like) and (ii) any subsidiary, parent, general partner, limited partner, member or retired partner or member of any Holder; provided that (x) such transfer or assignment of Registrable Securities is effected in accordance with the terms of Section 2.8 hereof, the Right of First Refusal and Co-Sale Agreement and applicable securities laws, (ii) the Company is given written notice prior to said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are intended to be transferred or assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement, including without limitation the obligations set forth in Section 2.10.

 

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2.13. Limitations on Subsequent Registration Rights . From and after the date of this Agreement, the Company shall not, without the prior written consent of a majority in interest of the Holders, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder (i) rights to demand the registration of shares or to include such holder or prospective holder’s shares in a registration statement that would reduce the number of shares includable by the Holders in any registration effected hereunder, or (ii) any registration rights the terms of which are senior to or on a parity with the registration rights granted to the Holders hereunder.

2.14. Termination of Registration Rights . The right of any Holder to request registration or inclusion in any registration pursuant to Section 2.1, 2.2 or 2.3 shall terminate on the earlier of (i) such date, on or after the closing of the Company’s first registered underwritten public offering of Common Stock, on which all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any ninety (90)-day period, and (ii) four (4) years after the closing of the Company’s Initial Public Offering.

Section 3

Covenants of the Company

The Company hereby covenants and agrees, as follows:

3.1. Basic Financial Information and Inspection Rights .

(a) Basic Financial Information . So long as an Investor continues to hold any Shares or Conversion Stock, the Company will furnish the following reports to each such Investor:

(i) As soon as practicable after the end of each fiscal year of the Company, and in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries, if any, as at the end of such fiscal year, and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such year, prepared in accordance with U.S. generally accepted accounting principles consistently applied, certified by independent public accountants of recognized national standing selected by the Company;

(ii) 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 after the end of the first, second, and third quarterly accounting periods in each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of each such quarterly period, and unaudited consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such period, prepared in accordance with U.S. generally accepted accounting principles consistently applied, subject to changes resulting from normal year-end audit adjustments;

 

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(iii) at least thirty (30) days prior to the beginning of each fiscal year an operating plan and budget for such fiscal year approved by the Board of Directors; and

(iv) As soon as practicable at the end of each month, and in any event within thirty (30) days after the end of each month, an unaudited balance sheet and statements of income and cash flows, which also set forth applicable plan figures and variances from plan.

(b) Inspection Rights . So long as an Investor continues to hold any Shares or Conversion Stock, the Company will afford to each such Investor and to such Investor’s accountants and counsel, reasonable access during normal business hours to all of the Company’s respective properties, books and records. Each such Investor shall have such other access to management and information as is necessary for it to comply with applicable laws and regulations and reporting obligations. The Company shall not be required to disclose details of contracts with or work performed for specific customers and other business partners where to do so would violate confidentiality obligations to those parties. Notwithstanding anything to the contrary in this Agreement, Isis Pharmaceuticals, Inc. (“ Isis ”) shall not be deemed to be a party to this Agreement for purposes of this Section 3.1(b); provided , however , that so long as Isis beneficially owns any Registrable Securities, the Company shall agree to cooperate in providing to Isis such information that is reasonably requested by Isis (or its representatives) and that is necessary for Isis to comply with applicable laws, regulations and reporting requirements.

(c) Investors may exercise their rights under this Section 3 for purposes reasonably related to their interests in the Company. The rights granted pursuant to this Section 3 may not be assigned or otherwise conveyed by the Investors or by any subsequent transferee of any such rights (other than assignments, transfers or conveyances by an Investor or subsequent transferee to (x) a parent, subsidiary or other affiliate of Investor or subsequent transferee that is a corporation, or (y) any of its partners, members or other equity owners, or retired partners, retired members or other equity owners, or to the estate of any of its partners, members or other equity owners or retired partners, retired members or other equity owners) without the prior written consent of the Company, except as authorized in this Section 3.1(c).

3.2. Confidentiality . Each Holder acknowledges that the information received by it pursuant to Section 3 of this Agreement may be confidential and, to the extent such information is confidential information of the Company, such Holder shall not disclose such information to individuals or entities (other than individuals or entities with a need to know such confidential information and that are subject to fiduciary duties to the Company or otherwise affiliated with the Company or such Holder, including, but not limited to, any partner, member, subsidiary or parent of such Holder), unless such individuals or entities are subject to written confidentiality agreements with the Holder (or one of its affiliates) or with the Company that impose restrictions on disclosure of such confidential information no less restrictive than the terms of this Section 3.2. Information shall not be deemed confidential information subject to this Section 3.2 if such information (a) was in the public domain prior to the time it was furnished to the Holder, (b) is or becomes (other than as a result of the improper action or inaction of such Holder) generally available to the public, (c) was rightfully disclosed to such Holder by a third party without restriction or (d) was independently developed without any use of the Company’s confidential information.

 

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3.3. Proprietary Information and Inventions Agreement . The Company shall require all employees and exclusive consultants of the Company to execute and deliver a proprietary information and inventions agreement substantially similar to the form approved by the Company’s counsel and provided to Investors’ counsel. Such agreement will contain provisions prohibiting each such employee or exclusive consultant from (i) soliciting Company employees for twelve (12) months following termination and (ii) engaging in a competitive business activity with the Company during such employee or exclusive consultant’s period of employment with the Company.

3.4. Director Expenses . The Company shall reimburse the customary expenses incurred by directors, as well as observers who were previously directors, in the course of business conducted on behalf of the Company.

3.5. Director and Officer Insurance . The Company shall maintain D&O insurance in the amount approved by the Board.

3.6. Termination of Covenants . The covenants set forth in this Section 3 shall terminate and be of no further force and effect upon the earlier to occur of: (i) the closing of the Company’s Initial Public Offering, and (ii) the termination of this Agreement pursuant to Section 5.14 below.

Section 4

Right of First Refusal

4.1. Right of First Refusal to Significant Holders . The Company hereby grants to each Holder who owns at least (i) fifty percent (50%) of the Shares purchased by such Holder from the Company (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits and the like) or (ii) five percent (5%) of the then outstanding Shares (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits and the like) (the “ Significant Holders ”), the right of first refusal to purchase its pro rata share of New Securities (as defined in Section 4.1(a)) which the Company may, from time to time, propose to sell and issue after the date of this Agreement. A Significant Holder’s pro rata share, for purposes of this right of first refusal, is equal to the ratio of (a) the number of shares of Common Stock owned by such Significant Holder immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise and/or conversion of all outstanding convertible securities, rights, options and warrants, directly or indirectly, into Common Stock held by said Significant Holder) to (b) the total number of shares of Common Stock outstanding immediately prior to the issuance of New Securities (assuming full conversion of the Shares and exercise and/or conversion of all outstanding convertible securities, rights, options and warrants, directly or indirectly, into Common Stock). Each Significant Holder shall have a right of over-allotment such that if any Significant Holder fails to exercise its right hereunder to purchase its pro rata share of New Securities, the other Significant Holders may purchase the non-purchasing Significant Holder’s portion on a pro rata basis. This right of first refusal shall be subject to the following provisions:

(a) “ New Securities ” shall mean any capital stock (including Common Stock and/or Preferred Stock) of the Company whether now authorized or not, and rights, convertible

 

18


securities, options or warrants to purchase such capital stock, and securities of any type whatsoever that are, or may become, exercisable or convertible into capital stock; provided that the term “ New Securities ” does not include:

(i) the Shares and the Conversion Stock;

(ii) securities issued or issuable to officers, directors and employees of, or consultants to, the Company pursuant to stock grants, option plans, purchase plans or other employee stock incentive programs or arrangements approved by the Board of Directors of the Company, or upon exercise of options or warrants granted to such parties pursuant to any such plan or arrangement;

(iii) securities issued upon the exercise or conversion of options or convertible securities outstanding as of the date of this Agreement;

(iv) securities issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment is made pursuant to paragraph 4(e), 4(f) or 4(g) of the Certificate of Incorporation of the Company as then in effect;

(v) securities issued in a registered public offering under the Securities Act provided that the fully diluted valuation of the Company is not less than $200,000,000 and the aggregate gross proceeds to the Corporation (before deduction of underwriter’s commissions and expenses) are not less than $40,000,000;

(vi) securities issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the Board of Directors of the Company;

(vii) securities issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or commercial leasing transaction approved by the Board of Directors of the Company;

(viii) securities issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors of the Company;

(ix) securities issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Company;

(x) securities issued or issuable to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Company;

(xi) any other securities issued or issuable if the holders of a majority of the then outstanding shares of Preferred Stock agree in writing that such shares shall not constitute New Securities; and

 

19


(xii) any right, option or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to subsections (i) through (xi) above.

(b) In the event the Company proposes to undertake an issuance of New Securities, it shall give each Significant Holder written notice of its intention, describing the type of New Securities, and their price and the general terms upon which the Company proposes to issue the same. Each Significant Holder shall have ten (10) days after any such notice is mailed or delivered to agree to purchase such Holder’s pro rata share of such New Securities and to indicate whether such Holder desires to exercise its over-allotment option to purchase a portion or any available shares for the price and upon the terms specified in the notice by giving written notice to the Company, and stating therein the quantity of New Securities to be purchased.

(c) In the event the Holders fail to exercise fully the right of first refusal and over-allotment rights, if any within said ten (10) day period (the “ Election Period ”), the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within ninety (90) days from the date of said agreement) to sell that portion of the New Securities with respect to which the Significant Holders’ right of first refusal option set forth in this Section 4.1 was not exercised, at a price and upon terms no more favorable to the purchasers thereof than specified in the Company’s notice to Significant Holders delivered pursuant to Section 4.1(b). In the event the Company has not sold within such ninety (90) day period following the Election Period, or such ninety (90) day period following the date of said agreement, the Company shall not thereafter issue or sell any New Securities, without first again offering such securities to the Significant Holders in the manner provided in this Section 4.1.

(d) The right of first refusal granted under this Agreement shall expire upon, and shall not be applicable to the first to occur of (i) the Company’s Initial Public Offering, or (y) a liquidation, dissolution or winding up of the Corporation as set forth in Article V, Section 3(d) of the Company’s Certificate of Incorporation as then in effect.

(e) Notwithstanding anything to the contrary in this Agreement, Isis shall not be deemed to be a party to this Agreement for purposes of this Section 4; provided , however , that if there occurs a Qualifying Financing (as defined below), Isis shall be deemed a “Holder” for purposes of this Section 4 and shall have the rights of a Holder under this Section 4 with respect to such Qualifying Financing. For purposes of this Section 4, a Qualifying Financing means an equity financing of the Company involving the issuance of New Securities in the form of any series of Preferred Stock at a price per share of $0.70 or less (as adjusted for stock splits, combinations and the like).

Section 5

Miscellaneous

5.1. Amendment . Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Holders holding a

 

20


majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144). Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Holder and each future holder of all such securities of Holder. Each Holder acknowledges that by the operation of this paragraph, the holders of a majority of the Registrable Securities (excluding any of such shares that have been sold to the public or pursuant to Rule 144) will have the right and power to diminish or eliminate all rights of such Holder under this Agreement. Notwithstanding the foregoing, any purchaser of shares of Series D Preferred Stock of the Company pursuant to the Purchase Agreement at a Supplemental Closing, the Second Closing or a Subsequent Closing (as each term is defined in the Purchase Agreement) shall be made party to this Agreement as an “Investor” hereunder by delivery of an executed counterpart signature page hereto, and Exhibit A shall be deemed amended to include the name and address information of such Investor.

5.2. Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger addressed:

(a) if to an Investor, at the Investor’s address, facsimile number or electronic mail address as shown in the Company’s records, as may be updated upon notice in accordance with the provisions hereof;

(b) if to any Holder, at such address, facsimile number or electronic mail address as shown in the Company’s records, or, until any such holder so furnishes an address, facsimile number or electronic mail address to the Company, then to and at the address of the last holder of such shares for which the Company has contact information in its records; or

(c) if to the Company, one copy should be sent to 7000 Shoreline Court, Suite 371, South San Francisco, CA 94080, Attn: Chief Executive Officer, or at such other address as the Company shall have furnished to the Investors, with a copy to Mark V. Roeder, Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025.

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address set forth on Exhibit A attached hereto, as such electronic mail address may be updated upon notice in accordance with the provisions hereof.

5.3. Governing Law . This Agreement shall be governed in all respects by the internal laws of the State of California as applied to agreements entered into among California residents to be performed entirely within California, without regard to principles of conflicts of law.

5.4. Successors and Assigns . This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company. Any attempt by an Investor without

 

21


such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

5.5. Entire Agreement . This Agreement, which has been executed by the Company and the Holders (as defined in the Prior Agreement) holding a majority of the Registrable Securities (as defined in the Prior Agreement), and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof, and amend and restate, supersede and replace in its entirety the Prior Agreement, which shall have no further force and effect. No party hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

5.6. Delays or Omissions . Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

5.7. Severability . If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.

5.8. Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

5.9. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument.

5.10. Telecopy Execution and Delivery . A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on

 

22


behalf of such party can be seen (including without limitation transmission of .pdf files). Such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

5.11. Jurisdiction; Venue . With respect to any disputes arising out of or related to this Agreement, the parties consent to the exclusive jurisdiction of, and venue in, the state courts in Santa Clara County in the State of California (or in the event of exclusive federal jurisdiction, the courts of the Northern District of California).

5.12. Further Assurances . Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

5.13. Aggregation . All shares of Preferred Stock of the Company held or acquired by affiliated entities or persons of an Investor (including but not limited to: (i) a constituent partner or a retired partner of an Investor that is a partnership; (ii) a parent, subsidiary or other affiliate of an Investor that is a corporation; (iii) an immediate family member living in the same household, a descendant, or a trust therefor, in the case of an Investor who is an individual; or (iv) a member of an Investor that is a limited liability company) shall be aggregated together for the purpose of determining the availability of any rights under this Agreement which are triggered by the beneficial ownership of a threshold number of shares of the Company’s capital stock.

5.14. Termination Upon Change of Control . Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing obligations) shall terminate upon (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such transaction or series of transactions; or (b) a sale, lease or other conveyance of all substantially all of the assets of the Company.

5.15. The Wellcome Trust . The parties acknowledge that The Wellcome Trust Limited has executed this Agreement directly or indirectly through its agents in its capacity as the trustee for the time being of The Wellcome Trust. The obligations incurred by The Wellcome Trust Limited under or in consequence of this Agreement or any related agreement shall be enforceable against it or the other trustees of The Wellcome Trust from time to time and the liabilities of The Wellcome Trust Limited (or such other trustees) in respect of such obligations shall be limited to such liabilities as can, and may lawfully and properly, be met out of the assets of The Wellcome Trust for the time being in the hands or under control of The Wellcome Trust Limited or such other trustees.

 

23


(Remainder of Page Intentionally Left Blank)

 

24


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

 

“COMPANY”

ACHAOGEN, INC.

a Delaware corporation

By:  

/s/ Kenneth J. Hillan

  Kenneth J. Hillan
  Chief Executive Officer

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
FRAZIER HEALTHCARE VI, L.P.
By:   FHM VI, L.P., its general partner
By:   FHM VI, L.L.C., its general partner
By:  

/s/ Robert J. More

  Robert J. More, Authorized Representative

 

Address:   601 Union Street
  Two Union Square, Suite 3200
  Seattle, WA 98101

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
ALTA PARTNERS VIII, L.P.
By:  

Alta Partners Management VIII, LLC,
Its General Partner

 
By:  

/s/ Hilary Strain

  Hilary Strain, CFO

 

Address:   One Embarcadero Center
  37 th Floor
  San Francisco, CA 94111

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
Domain Partners VII, L.P.
By:   One Palmer Square Associates VII, L.L.C.,
its General Partner
By:  

/s/ Kathleen K. Schoemaker

Kathleen K. Schoemaker
Managing Member
DP VII Associates, L.P.
By:   One Palmer Square Associates VII, L.L.C.,
its General Partner
By:  

/s/ Kathleen K. Schoemaker

Kathleen K. Schoemaker
Managing Member

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
Altitude Life Science Ventures, L.P.
By:   Altitude Life Science Management, LLC
Its:   General Partner
By:  

/s/ David Maki

Name:   David Maki
Title:   Member

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”

VENROCK PARTNERS, L.P.

by its General Partner, Venrock Partners Management, LLC

VENROCK ASSOCIATES IV, L.P.

by its General Partner, Venrock Management IV, LLC

VENROCK ENTREPRENEURS FUND IV, L.P.

by its General Partner, VEF Management IV, LLC

By:  

/s/ Bryan Roberts

Name:   Bryan Roberts
Title:   Member

 

Address:   3340 Hillview Avenue
  Palo Alto, CA 94304

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
Versant Venture Capital II, L.P.
Versant Affiliates Fund II-A, L.P.
Versant Side Fund II, L.P.
By:   Versant Ventures II, L.L.C.
  Its General Partner
By:  

/s/ Robin L. Praeger

Name:   Robin L. Praeger
Title:   CFO

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
ARCH Venture Fund VI, L.P.
By:   ARCH Venture Partners VI, L.P.
Its:   General Partner
By:   ARCH Venture Partners VI, LLC
Its:   General Partner

/s/ ILLEGIBLE

Managing Director

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
5AM Ventures LLC
By:   5AM Partners LLC
Its:   Manager
By:  

/s/ Andrew J. Schwab

Name:   Andrew J. Schwab
Title:   Managing Director
5AM Co-Investors LLC
By:   5AM Partners LLC
Its:   Manager
By:  

/s/ Andrew J. Schwab

Name:   Andrew J. Schwab
Title:   Managing Director

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


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

 

“INVESTOR”
THE WELLCOME TRUST LIMITED AS TRUSTEE OF THE WELLCOME TRUST
By:  

/s/ Peter Gray

Name:   Peter Perera Gray
Title:   Managing Director, Investments

 

[Signature Page to Third Amended and Restated Investors’ Rights Agreement]


EXHIBIT A

(To Third Amended and Restated Investors’ Rights Agreement)

INVESTORS

Name and Address

 

Frazier Healthcare VI, L.P.

70 Willow Road, Suite 200

Menlo Park, CA 94025

Attn: Robert J. More

bob.more@frazierhealthcare.com

Alta Partners VIII, L.P.

One Embarcadero Center

Suite 3700

San Francisco, CA 94111

Attn: Hilary Strain

farahc@altapartners.com

Domain Partners VII, L.P.

c/o Domain Associates, L.L.C.

One Palmer Square, Suite 515

Princeton, NJ 08542

Attn: Kathleen K. Schoemaker

Kamdar@domainvc.com

DP VII Associates, L.P.

c/o Domain Associates, L.L.C.

One Palmer Square, Suite 515

Princeton, NJ 08542

Attn: Kathleen K. Schoemaker

Kamdar@domainvc.com

Altitude Life Science Ventures, L.P.

701 Fifth Avenue, Suite 6300

Seattle, WA 98104

dmaki@altitudelsv.com

Venrock Partners, L.P.

3340 Hillview Avenue

Palo Alto, CA 94304

broberts@venrock.com

Venrock Associates IV, L.P.

3340 Hillview Avenue

Palo Alto, CA 94304

broberts@venrock.com


Venrock Entrepreneurs Fund IV, L.P.

3340 Hillview Avenue

Palo Alto, CA 94304

broberts@venrock.com

Versant Venture Capital II, L.P.

3000 Sand Hill Road

Building 4, Suite 210

Menlo Park, CA 94025

camille@versantventures.com

Versant Affiliates Fund II-A, L.P.

3000 Sand Hill Road

Building 4, Suite 210

Menlo Park, CA 94025

camille@versantventures.com

Versant Side Fund II, L.P.

3000 Sand Hill Road

Building 4, Suite 210

Menlo Park, CA 94025

camille@versantventures.com

ARCH Venture Fund VI, L.P.

8725 West Higgins Road

Suite 290

Chicago, IL 60631

rn@archventure.com

5AM Ventures LLC

2200 Sand Hill Road

Suite 110

Menlo Park, CA 94025

scott@5amventures.com

5AM Co-Investors LLC

2200 Sand Hill Road

Suite 110

Menlo Park, CA 94025

scott@5amventures.com

The Wellcome Trust Limited as trustee of the Wellcome Trust

215 Euston Road

London NW1 2BE

United Kingdom

Attention: Head of Investment Services

investments@wellcome.ac.uk

Brock Little


Isis Pharmaceuticals, Inc.

1896 Rutherford Road

Carlsbad, CA 92008

WS Investment Company, LLC (2010A)

650 Page Mill Road

Palo Alto, CA 94304

Attn: James Terranova

Omega Fund IV, L.P.

c/o Omega Fund Management US Inc.

545 Boylston Street

Boston MA 02116

OS@OmegaFunds.Net

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated December 17, 2013, in the Registration Statement (Form S-1) and related Prospectus of Achaogen, Inc. for the registration of shares of its common stock.

/s/ Ernst & Young LLP

Redwood City, California

January 24, 2014